1

You just won a state lottery! The lottery offers you a choice: you may choose a lump sum today, or $89 million in 26 equal annual installments at the end of each year. Assume the funds can be invested (yield) at an annual rate of 7.65%. What is the lump sum that would equal the present value of the annual installments? :

		$89,000,000
		$38,163,612
		$41,083,128
		$13,092,576

2

When a bank borrows in the federal funds market, this means:

		it is borrowing from the Federal Reserve
		it is lending to the Federal Reserve
		it is borrowing from another bank
		it is borrowing from the US Treasury

3

What does an increase in the tax rate on corporate profits do to a firms coverage ratio?

		increases it
		decreases it
		nothing

4

Two firms, A and B, have positive profit margins. Bs fixed costs as a percentage of total costs exceeds As percentage. Assume both firms experience an equal percentage increase in revenue. Which firm will enjoy a greater percentage increase in profit as a result?

		A
		B
		They will be equal