Ch 14

Chapter 14
The Basic Tools of Finance

1. The field of finance studies how a. society manages its scarce resources. b. people make decisions regarding resource allocation over time and how to handle risk c. people decide whether or not to become risk averse. d. society can reduce aggregate risk.
ANSWER: b. how people make decisions regarding resource allocation over time and how to handle risk
TYPE: M DIFFICULTY: 1 SECTION: 14.0

2. If you put $300 in an account paying 2 percent interest, what is the future value of this account in two years? a. $310 b. $312 c. $312.12 d. $314.24
ANSWER: c. $312.12
TYPE: M DIFFICULTY: 1 SECTION: 14.1

3. What is the future value of $500 one year from today if the interest rate is 6 percent? a. $503 b. $515 c. $530 d. None of the above are correct.
ANSWER: c. $530
TYPE: M DIFFICULTY: 1 SECTION: 14.1

4. What is the future value of $750 one year from today if the interest rate is 3 percent? a. 772.73 b. 772.50 c. 773.33 d. None of the above are correct to the nearest penny.
ANSWER: b. 772.50
TYPE: M DIFFICULTY: 1 SECTION: 14.1

5. What is the future value of $800 one year from today if the interest rate is 7 percent? a. $747.66 b. $756.00 c. $856.00 d. None of the above are correct to the nearest penny.
ANSWER: c. $856.00
TYPE: M DIFFICULTY: 1 SECTION: 14.1

6. What is the future value of $333 at an interest rate of 3 percent one year from today? a. $337.39 b. $342.99 c. $343.09 d. None of the above are correct to the nearest penny.
ANSWER: b. $342.99
TYPE: M DIFFICULTY: 1 SECTION: 14.1

7. What is the future value of $450 at an interest rate of 11 percent one year from today? a. $495.00 b. $495.40 c. $494.50 d. $499.50
ANSWER: d. $499.50
TYPE: M DIFFICULTY: 1 SECTION: 14.1

8. Two