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1. A firm needs to raise money for a project. Which of the following is not a source of financing? a) Commercial paper b) Long-term loan c) Preferred stock d) Intangible asset 2. Which is not an example of consumption smoothing/ the primary role of the modern financial system? a) Taking out a student loan to go to university b) Saving for retirement c) Comparing prices at the grocery store d) Spending more after you sign a job offer but before graduating in your final year of university 3. Your income in period 0 is $90,000 and in period 1 is $35,000. The interest rate is 7%. You want your consumption this year and your consumption next year to be the same. How much should you save (or borrow) this year to accomplish this consumption pattern? a) You should save $26,570 this year. b) You should save $27,500 this year. c) You should borrow $26,570 this year. d) You should borrow $27,500 this year. 4. Dorianne has been presented two investment opportunities by her bank. She can invest her savings either in a Compound Machine account which offers 6.88% compounding monthly or in a SuperSaver account which offers 6.92% compounding quarterly. If she has total savings of $273,000 and her investment horizon is 5 years, which investment should she choose and why? a) She should choose the Compounding Machine account because it brings in $13.78 more in five years. b) She should choose the SuperSaver account because it brings in $713.02 more in five years. c) She should choose the Compounding Machine account because it brings in $713.02 more in five years. d) She should choose the Compounding Machine account because it brings in $9.06 more in five years.

1. A firm needs to raise money for a project. Which of the following is not a source of financing? a) Commercial paper b) Long-term loan c) Preferred stock d) Intangible asset 2. Which is not an example of consumption smoothing / the primary role of the modern financial system? a) Taking out a student loan to go to university b) Saving for retirement c) Comparing prices at the grocery store d) Spending more after you sign a job offer but before graduating in your final year of university 3. Your income in period 0 is $90,000 and in period 1 is $35,000. The interest rate is 7%. You want your consumption this year and your consumption next year to be the same. How much should you save (or borrow) this year to accomplish this consumption pattern? a) You should save $26,570 this year. b) You should save $27,500 this year. c) You should borrow $26,570 this year. d) You should borrow $27,500 this year. 4. Dorianne has been presented two investment opportunities by her bank. She can invest her savings either in a Compound Machine account which offers 6.88% compounding monthly or in a SuperSaver account which offers 6.92% compounding quarterly. If she has total savings of $273,000 and her investment horizon is 5 years, which investment should she choose and why? a) She should choose the Compounding Machine account because it brings in $13.78 more in five years. b) She should choose the SuperSaver account because it brings in $713.02 more in five years. c) She should choose the Compounding Machine account because it brings in $713.02 more in five years. d) She should choose the Compounding Machine account because it brings in $9.06 more in five years

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