Answer the following statements true (T) or false (F)
1. You believe that a certain asset, like a business or shop, is going to be worth $100 million in five years. If the interest rate is 5%, then that asset will be worth $75 million today.
2. Other factors constant, if the interest rate is higher, the present value of a certain future amount will be smaller.
3. Joseph is considering purchasing a condo. He has the option of buying one in Midtown with a present value of $150,000 or one in downtown with a future value of $200,000. If the current market interest rate is 5 percent and he wants to buy the home with the highest future value in 5 years, he should buy the condo in downtown.
4. The current price of an asset is equal to the future value of its expected returns or income streams.
5. Stockholders of a company can benefit from either capital gains or dividends when the company is profitable
1. FALSE
2. TRUE
3. TRUE
4. FALSE
5. TRUE
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________ the owners of the factors of production, while ________ what amounts of those factors to hire
A) Households are; firms determine B) Households are; the government determines C) The government is; firms determine D) Firms are; households determine E) Firms are; the government determines
The fact that individual productive resources are NOT equally useful in all activities
A) implies that a production possibilities frontier will be bowed outward. B) implies that gain from specialization and trade is unlikely. C) follows from the law of demand. D) implies a linear production possibilities frontier.