Given an interest rate r, the Rule of 72 states that the time it will take for an investment to double in value equals approx. 72/r, where r is expressed as a percentage. | True |

Converting an annuity to an annuity due decreases the present value. | False |

If a project’s value is less than its required investment, then the project is attractive financially. | False |

Any sequence of equally spaced, level cash flows is called an annuity. An annuity is also known as a perpetuity. | False |

You should never compare cash flows occurring at different times without first discounting them to a common date. | True |

To calculate present value, we discount the future value by some interest rate r, the discount rate? | True |

For a given amount, the lower the discount rate, the less the present value. | False |

Financial markets and intermediaries allow investors and businesses to reduce and reallocate risks. | True |

The opportunity cost of capital is the expected rate of return that shareholders can obtain in the financial markets on investments with the same risk as the firm’s capital investments. | True |

The primary goal on any company should be to maximize current period profits. | False |

The liability of sole proprietors is limited to the amount of their investment in the company. | False |

Financial assets have value because they have claims on the firm’s real assets and that cash that those assets will produce. | True |

A successful investment is one that increases the value of the firm. | True |

Capital budgeting decisions are used to determine how to raise the cash necessary for investments. | False |

Assume the total expense for your current year in college equals 20,000. Approx. how much would your parents have needed to invest 21 years ago in an account paying 8% compounded annually to cover this amount? | $3,973 |

What is the minimum nominal rate of return you should accept, if you require a 4% real rate of return and the rate of inflation is expected to average 3.5% during the investment period? | 7.64% |

What is the present value of your trust fund if it promises to pay you a one-time payment of $50,000 on your 30th birthday (7 years from today) and earns 8.51 % compounded annually? | $28,228.10 |

What is the effective annual interest rate on an account with an APR of 11% and quarterly compounding? | 11.46% |

In 5 years you will receive $1,000, what is it worth to you next year? r= 5%. | $823 |

Approximately, what is the present value of the following set of cash flows at an interest rate of 5%, $3,000 today, $2,500 at the end of year one, and $4,500 at the end of year two? | $9,500 |

Calculate the interest rate (graph). | 22.45% |

What is the present value of 4,000 to be received 9 years from now? r=5% | $2,578 |

Today you want to invest $350 in a UNL hedge fund that promises an annual return of 15%. What do you expect the value of your investment to be 10 years from today? | $1,416 |

The concept of compound interest refers to: | payment of interest on previously earned interest and the principal amount. |

Long-term financing decisions commonly occur in the: | capital markets |

Short-term financing decisions commonly occur in the: | money markets |

When Patricia sells her General Motors common stock at the same time that Brian purchases the same amount of GM stock, GM receives: | Nothing |

A primary market would be utilized when: | securities are initially issued. |

Which of the following would be considered an advantage of the sole proprietorship form of organization? | Profits taxed at only one level. |

Which of the following would NOT be considered a real asset? | A corporate bond. |

Unlimited liability is faced by the owners of: | sole proprietorship and partnerships. |

The cost of capital: | is the expected rate of return that shareholders can obtain in the financial markets on investments with the same risk as the firm’s capital. |

Agency problems can best be characterized as: | differing incentives between managers and owners. |

Double taxation refers to: | paying taxes on profits at the corporate level and dividends at the personal level. |

Which of the following would be considered a capital budgeting decision? | Deciding to expand into a new line of products, at a cost of $5 million. |

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