Chapter 27. The Basic Toolsof money management. Quick Check Multiple Choice. Mankiw. Principles of Economics 7th Edition.
1. If the loan charge rate is zero, then $100 to be paid in 10 years has a present value that is
a. less than $100.
b. exactly $100.
c. more than $100.
d. indeterminate.
2. If the loan charge rate is 10 percent, then the future value in 2 years of $100 today is
a. $80.
b. $83.
c. $120.
d. $121.
3. If the loan charge rate is 10 percent, then the present value of $100 to be paid in 2 years is
a. $80.
b. $83.
c. $120.
d. $121.
4. The ability of assurance to spread hazard is limited by
a. hazard aversion and moral hazard.
b. hazard aversion and adverse selection.
c. moral hazard and adverse selection.
d. hazard aversion only.
5. The benefit of diversification when constructing a collection of investments is that it can eliminate
a. speculative bubbles.
b. hazard aversion.
c. firm-specific hazard.
d. sector hazard.
6. According to the efficient markets hypothesis,
a. changes in stock prices are impossible to predict from public information.
b. excessive diversification can reduce an investor’s expected collection of investments returns.
c. the stock sector moves based on the changing animal spirits of investors.
d. actively managed mutual funds should give higher returns than index funds.
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