1. Most financial decisions involve two related elements a. advice and consent.
ID: 1131013 • Letter: 1
Question
1. Most financial decisions involve two related elements a. advice and consent. b. investment and taxes. c. time and risk. d. saving and consumption. 2. If the interest rate is 7.5 percent, then 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 3. What is the future value of $450 at an interest rate of 9 percent two years from today? a. $534.65 b. $546.35 c. $565.18 d. $574.13 4. Tax cut Plan is an example of a. fiscal policy instrument b. monetary policy instrument c. trade policy instrument d. income policy instrument 5. The aggregate demand curve is downward-sloping because: a. higher prices make business more profitable and thus output expands b. lower prices makes business conditions more attractive so that quantity expands c. lower prices make some people feel wealthier and they therefore demand more d. lower prices cause higher interest rates that increase the quantity demandedExplanation / Answer
1.Finanacial decisions could be of three types:investment, sourcing and distributing profit. All these decisions mostly concern time and risk. THe time value of money and risk associated with choices.
Option c is correct.
2. Present value = future value / (1+r)n)
= 4000/(1+0.75)6 = $2591.84
option b is correct.
3. future value = Present value * (1+r)n
= 450*(1+0.09)2
= 534.645
option a is correct.
4. Tax is a part of fiscal revenue for government hence any change (either a cut or raise) in tax is a kind of fiscal policy. option a is correct.
5. Downward slopping curve implies with moe of one thing the other thing reduces. AD measures quantitites of goods against various price level and according to law of demand there is negative relationship between price and quantity demanded. Thus option c is correct.
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