103. One study of successful entrepreneurs indicated that a majority felt that the most important factor in the long-term success of their ventures was:
a.
being greedy
b.
having high ethical standards
c.
working hard
d.
taking frequent vacations
ANSWER:
b
104. Financial markets where customized contracts or securities are negotiated, created, and held with restrictions on how they can be transferred are called:
a.
private financial markets
b.
public financial markets
c.
domestic financial markets
d.
international financial markets
ANSWER:
a
Supplementary Questions (may require basic knowledge of probability and/or prior introductory accounting and business concepts)
105. You have the opportunity of making a $5,000 investment. The outcomes one year from now will be either $4,500 or $6,000, with an equal chance of either outcome occurring. What is the expected outcome?
a.
$4,500
b.
$6,000
c.
$5,250
d.
$5,750
ANSWER:
c
106. You have the opportunity of making a $5,000 investment. The outcomes one year from now will be either $5,000 or $6,000, with an equal chance of either outcome occurring. What is the expected rate of return?
a.
10%
b.
15%
c.
20%
d.
25%
ANSWER:
a
107. A project requires an initial investment of $1,000,000. In one year, there is a 40% chance of a $950,000 return; a 50% chance of a $1,200,000 return; and a 10% chance of a $2,000,000 return. What is the project's expected return one year from now?
a.
12.8%
b.
15.5%
c.
18.0%
d.
38.3%
ANSWER:
c
108. Lindsey and Tobias have the opportunity to invest in a project that requires an investment of $3,000. In one year, there is a 35% chance of a $2,900 return; a 40% chance of a $3,400 return; and a 25% chance of a $4,500 return. Lindsey requires a 15% return on the project after the first year, but Tobias requires a return of only 12%. Using the expected rate of return:
a.
Lindsey and Tobias should both invest in the project
b.
Only Tobias should invest in the project
c.
Only Lindsey should invest in the project
d.
Lindsey and Tobias should both reject the project
ANSWER:
a
109. You are considering investing in two independent projects: A and B. Project A requires an initial investment of $12,000. In one year, there is a 30% chance of a $10,500 return; a 50% chance of a $12,500 return; and a 20% chance of a $14,500 return. Project B requires an initial investment of $1,000. In one year, there is a 25% chance of a $950 return; a 25% chance of a $1,000 return; and a 50% chance of a $1,200 return. If you require a 7% return on your investment after one year, you should:
a.
accept Project A and reject Project B
b.
accept Project B and reject Project A
c.
accept both projects
d.
reject both projects
ANSWER:
b
110. Assume that you can sell a new product at $5.00 per unit. Variable costs are $3.00 per unit, and fixed costs are $20,000. What is the breakeven point in sales units?
a.
5,000
b.
7,500
c.
10,000
d.
12,500
ANSWER:
c
111. Assume that you can sell a new product at $5.00 per unit. Variable costs are $3.00 per unit, and fixed costs are $20,000. What will be the profit before taxes if you sell 12,000 units next year?
a.
$0
b.
$2,000
c.
$4,000
d.
$8,000
ANSWER: