If the interest rate is 7.5 percent, what is the present value of $4,000 to be received in 6 years()
A. $2,420.68
B. $2,591.85
C. $2,996.33
D. $3,040.63
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Other things the same, when the interest rate rises, the present value of future revenues from investment projects()
A. rises, so investment spending rises.
B. falls, so investment spending rises.
C. rises, so investment spending falls.
D. falls, so investment spending falls.
If a person is risk averse, then she has()
A. diminishing marginal utility of wealth, implying that her utility function gets flatter as wealth increases.
B. diminishing marginal utility of wealth, implying that her utility function gets steeper as wealth increases.
C. increasing marginal utility of wealth, implying that her utility function gets flatter as wealth increases.
D. increasing marginal utility of wealth, implying that her utility function gets steeper as wealth increases.
Which of the following is correct?()
A. Risk-averse people will not hold stock.
B. Diversification cannot reduce firm-specific risk.
C. The larger the percentage of stock in a portfolio, the greater the risk, but the greater the average return.
D. Stock prices are determined by fundamental analysis rather than by supply and demand.
You may be unwilling to buy a used car because you suspect the last owner found out the car was a lemon. You may treat a car you rented with a little less care than you'd use on your own car.()
A. Both examples primarily illustrate adverse selection.
Both examples primarily illustrate moral hazard
C. The first example primarily illustrates adverse selection; the second primarily illustrates moral hazard.
D. The first example primarily illustrates moral hazard; the second primarily illustrates adverse selection.