A manager in an investment center is offered a potential investment that would have an ROA of 15 percent. After the investment, it would make up 20 percent of his total portfolio. Currently, he makes 20 percent on his portfolio, though the company requires only 12 percent. Which of the following is true?
A. He will not make the investment because the company prefers 12 percent.
B. He will make the investment because a larger portfolio is always better than a smaller portfolio.
C. He will not make the investment because it lowers his overall return to 19 percent.
D. He will make the investment since it is 3 percent greater than the company's required return.
Answer: C
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Suppose that the federal government had a budget deficit of $80 billion in year 1 and $90 billion in year 2, but that it experiences budget surpluses of $40 billion in year 3 and $20 billion in year 4
Also assume that the government uses any budget surpluses to pay down the public debt. At the end of these four years, the Federal government's public debt would have A) increased by $110 billion. B) decreased by $57.5 billion. C) increased by $230 billion. D) decreased by $110 billion.
Suppose the Busy Bee Café is the monopoly producer of hamburgers in Hugo, Oklahoma. The above figure represents the demand, marginal revenue, and marginal cost curves for this establishment. If the Busy Bee produces 40 hamburgers per hour, then
A) marginal revenue will exceed marginal cost. B) profit will be maximized. C) marginal revenue will be negative. D) marginal revenue will be maximized. E) both the marginal revenue and the price will be negative.