Question
Your car dealer has a 0% financing promotion. Hes willing to give you an additional $500 discount off the list price if you finance the
- Your car dealer has a 0% financing promotion. Hes willing to give you an additional $500 discount off the list price if you finance the car over 36 months instead of 48 months. Which key principle in finance does this illustrate?
a. | Higher risk requires higher return |
b. | Time value of money |
c. | Cash is king |
d. | Leverage increases financial risk |
- Conflicts of interest in financial markets are unethical because
- They create perception of unfairness and sap investor confidence in markets
- They inevitably lead to fraudulent activities
- They do not conduce to economic prosperity
- They produce social injustice and inequality of wealth
3. Finance is different from accounting in that
a. | Finance is mostly concerned with stock and bonds and accounting does not |
b. | Finance is forward-looking and is concerned with how accounting information (which is mostly backward-looking) is being used to predict the future |
c. | Finance is about trading and accounting is much broader than that |
d. | Finance is about money management and accounting is about transaction reporting |
- A contract which binds two parties to a customized agreement to exchange certain goods/services at some future date at a price determined today is called a(n)
a. | Option |
b. | Future |
c. | Convertible |
d. | Forward |
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- Which of the following is a type of debt?
a. | A mutual fund account |
b. | A certificate of deposit |
c. | A stock option |
d. | A preferred stock |
6. You just sold 100 shares of ABC Co. stock for $1,050 which you bought 18 months ago for $1,400. During this holding period you also received $200 in dividends from the company. What is your Holding Period Return (HPR)?
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7. Assume that expected rates of inflation over the next 5 years are 3 percent, 3 percent, 4 percent, 5 percent, and 5 percent, respectively. What is the expected rate of a 5-year Treasury note if the real risk-free rate is 1% and all other risk premiums are zero?
a. | 5.0% |
b. | 4.0% |
c. | 4.2% |
d. | 4.5% |
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