8-7 - Testlet 1 - 83% Flashcards
In a flexible or floating foreign currency exchange rate system, the equilibrium rate of exchange between currencies is determined by ___________________
Market supply of and demand for each currency
If a country’s import of goods is rising rapidly, that countries demand for foreign currencies will __________
Increase
When a country’s imports are declining, demand for foreign currencies are ____________
Decreasing
When a country A’s relative demand for country B’s currency increases, the value of country A’s currency ___________
Declines relative to country B.
This is because it takes more units of country A’s currency to buy each unit of country B’s currency
Vindaloo Corporation wants data storage for a large volume of data that is unlikely to change often. They should consider using
CD-ROM is the best choice of the available answers. It can handle a large volume of data and is suited to data that changes infrequently.
Hard disk
suited to data that changes frequently
A put is an option that gives its owner the right to do which of the following?
A put is an option that gives its owner the right to sell a specific security at fixed conditions of price and time. A put option is a contract that gives the owner the right, but not the obligation, to sell a specified amount of an underlying asset (e.g., security) at a specified price within a specified time.
Source code comparison program
used to compare an archived version of the program to the program actually in use.
Internal disk labels are physically read by
Software
Residual income =
operating income - imputed charge for cost of capital
The demand curve facing a firm in monopolistic competition is
negatively sloped–the lower the price, the greater the quantity demanded.
The management of changes to applications is part of the
Source Program Library Management System (SPLMS)
IRR
PV inflows = PV outflows
the IRR is not a preset rate, it is the rate that equates PV inflows to PV outflows
Tam Co. is negotiating for the purchase of equipment that would cost $100,000, with the expectation that $20,000 per year could be saved in after-tax cash costs if the equipment is acquired. The equipment’s estimated useful life is 10 years, with no residual value, and it would be depreciated by the straight-line method. Tam’s predetermined minimum desired rate of return is 12%. Present value of an annuity of 1 at 12% for 10 periods is 5.65. Present value of 1 due in 10 periods at 12% is .322.
In estimating the internal rate of return, the factors in the table of present values of an annuity should be taken from the columns closest to
5.00
The IRR is the rate of return that equates the present value of inflows with the present value of outflows. Expressed mathematically it is: Present value of inflows using IRR = present value of outflows using IRR. The calculation for the facts given would be:
$20,000 x (PV of annuity factor for 10 years at IRR percent) = $100,000
Rearranged: (PV of annuity factor for 10 years at IRR percent) = $100,000/$20,000 = 5.00
Using the present value of an annuity table, for n = 10, the factors nearest to 5.00 would be used to determine the IRR.
Which one of the following methods of evaluating investment projects is most likely to be used to rank projects competing for limited capital investment funds?
A. Payback period method. B. Net present value method. C. Internal rate of return method. D. Profitability index method.
D. Profitability index method.
The profitability index method is specifically designed to rank projects by taking into account both the time value of money and the initial cost of the project.
Although the net present value method can be used to rank projects, it is not the most likely method to be used because it does not incorporate the initial cost of the project.
