9Q1. Vega research has been conducting investor polls for Third State Bank. They have found the most investors are not willing to tie up their money in a 1-year (2-year) CD unless they receive at least 1.0% (1.5%) more than they would on an ordinary savings account. If the savings account rate is 3%, and the bank wants to raise funds with 2-year CDs, the yield must be at least:

A) 4.5%, and this represents a required rate of return.

B) 4.0%, and this represents a required rate of return.

C) 4.5%, and this represents a discount rate.

Q2. Selmer Jones has just inherited some money and wants to set some of it aside for a vacation in Hawaii one year from today. His bank will pay him 5% interest on any funds he deposits. In order to determine how much of the money must be set aside and held for the trip, he should use the 5% as a:

A)   required rate of return.

B)   opportunity cost.

C)   discount rate.

Q3. Wei Zhang has funds on deposit with Iron
    Range bank. The funds are currently earning 6% interest. If he withdraws $15,000 to purchase an automobile, the 6% interest rate can be best thought of as a(n):

A)   opportunity cost.

B)   financing cost.

C)   discount rate.

[此贴子已经被作者于2008-12-29 16:59:39编辑过]

答案和详解如下：

Q1. Vega research has been conducting investor polls for Third State Bank. They have found the most investors are not willing to tie up their money in a 1-year (2-year) CD unless they receive at least 1.0% (1.5%) more than they would on an ordinary savings account. If the savings account rate is 3%, and the bank wants to raise funds with 2-year CDs, the yield must be at least:

A) 4.5%, and this represents a required rate of return.

B) 4.0%, and this represents a required rate of return.

C) 4.5%, and this represents a discount rate.

Correct answer is A)

Since we are taking the view of the minimum amount required to induce investors to lend funds to the bank, this is best described as a required rate of return. Based upon the numerical information, the rate must be 4.5% (= 3.0 + 1.5).

Q2. Selmer Jones has just inherited some money and wants to set some of it aside for a vacation in Hawaii one year from today. His bank will pay him 5% interest on any funds he deposits. In order to determine how much of the money must be set aside and held for the trip, he should use the 5% as a:

A)   required rate of return.

B)   opportunity cost.

C)   discount rate.

Correct answer is C)

He needs to figure out how much the trip will cost in one year, and use the 5% as a discount rate to convert the future cost to a present value. Thus, in this context the rate is best viewed as a discount rate.

Q3. Wei Zhang has funds on deposit with Iron Range bank. The funds are currently earning 6% interest. If he withdraws $15,000 to purchase an automobile, the 6% interest rate can be best thought of as a(n):

A)   opportunity cost.

B)   financing cost.

C)   discount rate.

Correct answer is A)

Since Wei will be foregoing interest on the withdrawn funds, the 6% interest can be best characterized as an opportunity cost — the return he foregoes by postponing his auto purchase until the future.

Thanks a lot!

thanks

[此贴子已经被作者于2009-7-13 11:22:27编辑过]

[此贴子已经被作者于2009-9-7 0:06:48编辑过]

thanks

great

thx

Thanks a lot!

great

thx