Chapter 5 Practice Problems
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Because the future value is not typically a random variable, we use its expected value.
false
Corporations some times issue Treasury bills when they lever up.
false
The opportunity cost of capital captures the rate of return on the next best investment of higher risk.
false
The opportunity cost of capital captures the rate of return on the next best investment of lower risk.
false
The rate of return is an economic bad. All else equal, you want it to be higher.
false
From the fundamental equation of finance, r = (FV/PV)1/t - 1.
true
Simple interest is a function of the initial principal.
true
When applying the rule of 72, the error increases when you use a rate progressively higher than eight percent.
true
