1. True or false (a) Time and risk are the most important factors in any investm
ID: 2540942 • Letter: 1
Question
1. True or false (a) Time and risk are the most important factors in any investment evaluation. (b) Marginal revenue must exceed marginal cost. 2. Circle the correct answer (a) If you invest $2,000 today in a savings account at an interest rate of 12%, compounded annually, how much principal and interest would you accumulate in 7 years? a) $4,422 b) $2,300 c) $4,242 d) $1,400 (b) Under the continuous compounding principle, which of the following expressions would allow you to determine the nominal interest rate (r) when the effective annual interest rate is known to be 12%? a) r=e^ 1.12 b) r=Log e( 1.12) c) r=e^0.12 d) r= Log e(0.12) (c) You have been offered a credit card by a department store that charges interest at 1.8% per month. compounded monthly. What is the effective annual interest rate for this credit card? a) 18.00% b) 21.60% c) 22.34% d) 23.87% 3. What value of F3 would be equivalent to the payments shown in the cash flow diagram below? Assume that the interest .dic is IU%, compounded annually 2 3 $50 $50 $50 S100 S100 S100Explanation / Answer
Solution 1:
a. This is very true time and risk are most important factors in any investment evaluation. organization always see that how much return is providing by an investment and what is associated risk to that investment. We should not go for investment if investment is providing low return with higher risk. Further time of investment matters a lot, generally in recession time, we should avoid doing investment while in time of boom, we prefer to do investment.
from above given statment hold true.
b. Marginal revenue is the revenue for addtional unit of product sold while marginal cost is the cost of additional unit product produced and sold. Therefore in order to increase overall profitability or considering in special order to be undertaken, marginal reveneue must exceed marginal cost to accept the proposal otherwise proposal should be rejected.
Hence statement holds true.
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