| Which of the following situations is best described by the timeline shown below? | You make payments of $250 per month for six months. |
| If an arbitrage opportunity exists, an investor can act quickly in the hope of making a risk – free profit. | True |
| Dollar amounts received at different points in time cannot be compared in absolute terms. | True |
| Which of the following is the overarching principle that a financial manager should follow when making decisions? | Decisions should increase the value of the firm to its investors. |
| Why are arbitrage opportunities short – lived? | Once investors take advantage of the opportunity, prices will respond so that the buying and selling price becomes equal. |
| To calculate a cash flow’s present value (PV), you must compound it. | False |
| You are scheduled to receive $10,000 in one year. What will be the effect of an increase in the interest rate on the future value of this cash flow? | It will have no effect on the future value. |
| The Law of One Price states that if equivalent goods or securities are traded simultaneously in different competitive markets, they will trade for the same price in each market. | True |
| Whenever a good trades in a competitive market, the ________ determines the value of the good. | price |
