兹维博迪金融学第二版试题库5TB

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1、兹维博迪金融学第二版试题库5TBChapter Five Household Savings and Investment Decisions This chapter contains 28 multiple choice questions, 10 short problems, and 9 longer problems.Multiple Choice1. Getting a professional degree can be evaluated as.a) a social security decisionb an investment in human capitalc) an

2、investment in a consumer durabled) a tax exempt decision Answer: (b)2. Suppose you will face a tax rate of 20% before and after retirement. The interest rate is 8%. You are 30 years before your retirement date and invest $10,000 to a tax deferred retirement plan. If you choose to withdraw the total

3、accumulated amount at retirement, what will you be left with after paying taxes?a) $51,445b) $64,000c) $80,501d) $100,627 Answer: (c)3. Suppose you will face a tax rate of 20% before and after retirement. The interest rate is 8%. You are 30 years before your retirement date and have $10,000 to inves

4、t. If you invest this in an ordinary savings plan instead of a tax deferred retirement plan, what amount will you have accumulated at retirement?a) $51,445b) $64,000c) $80,501d) $100,627Answer: (a)4. When your tax rate remains unchanged, the benefit of tax deferral can be summarized in the rule,“def

5、erral earns you.a) the after-tax rate of return before taxb) the pretax rate of return after taxc) the after-tax rate of return after taxd) the pretax rate of return before tax Answer: (b)5. From an economic perspective, professional training should be undertaken if the exceeds the.a) future value o

6、f the benefit; present value of the costsb) present value of the benefits; future value of the costsc) future value of the benefits; future value of the costsd) present value of the benefits; future value of the costsAnswer: (d)6. Suppose you will face a tax rate of 30% before and after retirement.

7、The interest rate is 6%.You are 35 years before your retirement date and $2,000 to a tax deferred retirement plan.If you choose to withdraw the total accumulated amount at retirement, what will you be left with after paying taxes?a) $7,532b) $10,760c) $12,298d) $15,372 Answer: (b)7. Kecia is current

8、ly thirty years old and she plans to retire at age sixty. She is expected to live to age eighty-five. Her labor income is $45,000 per year and she intends to maintain a constant level of real consumption spending over the next fifty-five years.Assuming a real interest rate of 4% per year, no taxes,

9、and no growth in real labor income, what is the value of Kecia s human capital?a) $31,797b) $35,196c) $778,141d) $994,888 Answer: (c)8. Kecia is currently thirty years old and she plans to retire at age sixty. She is expected to live to age eighty-five. Her labor income is $45,000 per year and she i

10、ntends to maintain a constant level of real consumption spending over the next fifty-five years. Assuming a real interest rate of 4% per year, no taxes, and no growth in real labor income, what is the value of Kecia s permanent income?a) $31,797b) $35,196c) $778,141d) $994,888 Answer: (b)9. Oscar is

11、 currently thirty-five year old, plans to retire at age sixty-five, and to live to age eighty-five. His labor income is $40,000 per year, and he intends to maintain a constant level of real consumption spending over the next fifty years. Assuming a real interest rate of 4% per year, no taxes, and no

12、 growth in real labor income, what is the value of Osc ar s human capital?a) $884,344b) $691,681c) $39,999d) $32,198Answer: (b)10. Oscar is currently thirty-five year old, plans to retire at age sixty-five, and to live to age eighty-five. His labor income is $40,000 per year, and he intends to maint

13、ain a constant level of real consumption spending over the next fifty years. Assuming a real interest rate of 4% per year, no taxes, and no growth in real labor income, what is the value of Oscar s permanent income?a) $884,344b) $691,681c) $39,999d) $32,198 Answer: (d)11. You are currently renting a

14、 house for $12,000 per year, and you also have an option to buy it for $240,000. Maintenance and property taxes are estimated to be $4,320, and these costs are included in your rent. Property taxes ($2,880 of the $4,320) are deductible for income tax purposes. Your tax rate is 35%. You wish to provi

15、de yourself with housing at the lowest present value of cost. If the real after-tax rate is 2.52%, should you rent or buy?a) rent the house; the PV cost of renting is $476,190b) rent the house; the PV cost of renting is $309,524c) buy the house; the PV cost of owning is $442,198d) buy the house; the

16、 PV cost of owning is $371,429Answer: (d)12. You are currently renting a house for $12,000 per year and you also have an option to buy it for $240,000. Maintenance and property taxes are estimated to be $4,320, and these costs are included in your rent. Property taxes ($2,880 of the $4,320) are dedu

17、ctible for income tax purposes. Your tax rate is 35%. You wish to provide yourself with housing at the lowest present value of cost. The real aftertax rate is 2.52%. What is the break-even rent?a) $6,048b) $9,360c) $10,128d) $12,302Answer: (b)13. As one gets older, the declines, sofalls steadily unt

18、il it reaches zeroat age 65.a) future value of remaining labor income; human capitalb) future value of remaining labor income; initial wealthc) present value of remaining labor income; human capitald) present value of initial wealth; optimizationAnswer: (c)14. Any lifetime consumption spending plan

19、that satisfies your budget constraint is:a) an optimal modelb) a feasible planc) a model benefitd) a target replacementAnswer: (b)15. There is an advantage to tax deferred retirement savings plans for those when the money is withdrawn.a) who will be in a lower tax bracketb) who will be in the same t

20、ax bracketc) both (a) and (b)d) neither (a) nor (b)Answer: (c)16. In the United States, individual retirement accounts (IRAs) are called ratherthan because any amounts withdrawnfrom the plan are taxed at the time of withdrawal.a) tax advantaged; tax deferredb) tax deferred; tax exemptc) tax advantag

21、ed; tax loopholesd) tax exempt; tax deferredAnswer: (b)17. The present value of one s future labor income is called and the constantlevel of consumption spending that has a present value eq ual to one s human capital is called.a) human income; taxable incomeb) human capital; permanent incomec) perma

22、nent capital; taxable incomed) permanent income; human capitalAnswer: (b)18. The the interest rate, thethe value of human capital, but the higher the level of permanent income.a) lower; lowerb) higher; lowerc) higher; higherd) lower; higherAnswer: (b)19. The states that the present value ofone s lif

23、etime consumption spending and bequests equals the present value of one s initial wealth and future labor income.a) consumption budget constraintb spending constraintc) intertemporal budget constraintd) income and spending constraint Answer: (c)20. According to the text, many experts recommend that

24、in making a savings plan one should aim for a replacement rate of of preretirement income.a) 100%b) 25%c) 50%d) 75%Answer: (d)21. Economic costs that are said to be explicit costs include items such as.a) tuitionb) foregone rentc) foregone earningsd) all of the aboveAnswer: (a)22. Economic costs tha

25、t are said to be implicit costs include items such as.a) tuitionb) administrative fees while undertaking a professional degreec) foregone earningsd) all of the aboveAnswer: (c)23. In making lifetime saving/consumption decisions it is considered simpler to do the analysis.a) in nominal termsb) in inf

26、lationary termsc) in perpetual termsd) in real termsAnswer: (d)24. In terms of a lifetime saving/consumption decision such as buying or renting an apartment or a consumer durable, the alternative you should choose is.a) the one with the lower present value of benefitsb) the one with the lower presen

27、t value of costsc) the one with the higher present value of costsd) the one with the lower present value of benefits and the higher present costsAnswer: (b)25. Among the approaches you can use for saving for your retirement is/are.a) aiming to maintain the same level of consumption spending before a

28、nd after retirementb) aiming for a target replacement rate of incomec) bypassing graduate school and continuing to consume at the same leveld) (a) and (b)Answer: (d)26. In the equation known as the intertemporal budget constraint,.a) the present value of lifetime consumption spending equals the pres

29、ent value of bequestsb) the present value of lifetime consumption spending and bequests equals the present value of lifetime resourcesc) the present value of lifetime consumption spending equals the future value of labor incomed) the future value of lifetime consumption spending equals the present v

30、alue of labor incomeAnswer: (b)27. Salman is currently twenty-five years old and plans to live to age eighty. His labor income is $75,000 per year and he plans to maintain a constant level of real consumption spending over the next fifty-five years. Salman plans to retire at age 60. Assume the real

31、interest rate is 5% per year and there are no taxes and no growth in real labor income. What is the value of Salman s permanent income?a) $75,000b) $65,906c) $85,348d) $1,228,064 Answer: (b)28. You are currently renting a house for $25,800 a year and you have an option to buy it for $350,000. Mainte

32、nance and property taxes are $6,150 per year and these costs are included in your rent. Property taxes ($4,150 of the $6,150) are deductible for income tax purposes. Your tax rate is 35%. The real after-tax rate is 3.5%. What is the break-even rent?a) $16,770.00b) $16,947.50c) $21,102.46d) $24,927.5

33、4Answer: (b)Short Problems1. You are currently renting a house for $17,000 a year and you also have an option to buy it for $300,000. Maintenance and property taxes are $5,040 per year and these costs are included in your rent. Property taxes ($3,360 of the $5,040) are deductible for income tax purp

34、oses. Your tax rate is 40%. You wish to provide yourself with housing at the lowest present value of cost. The real after-tax rate is 3.1% per year. Should you rent or buy? What is the break-even rent?Answer:After-tax outflow for property taxes each year is 0.6 x $3,360 = $2,016Cash outflow in year

35、t = $1,680 + $2,016 =$3,696PV cost of owning = $300,000 + $3,696/i =$300,000 + $3696/0.031 =$419,226PV cost of renting = $17,000/i =$17,000/0.031 =$548,387You would be better off buying the house. Break-even rent:X/0.031 = $300,000+$3,696/0.031X = $12,996The break-even rent is $12,996.So if the rent

36、 is less than $12,996 per year, you would prefer to keep renting.2. You are currently renting a house for $16,000 a year and you also have an option to buy it for $250,000. Property taxes and maintenance care is $5,000 per year, and these costs are included in your rent. Property taxes ($3,200 of th

37、e $5,000) are deductible for income tax purposes. Your tax rate is 40%. You wish to provide yourself with housing at the lowest present value of cost. The real before-tax discount rate is 3.5% per year. Should you rent or buy? What is the break-even rate?Answer:Real after-tax rate = 0.6 x 0.035=0.02

38、1After-tax cash outflow for property taxes each year is 0.6 x $3,200 = $1,920 Cash outflow for year t = $1,800 + $1,920 =$3,720PV cost of owning = $250,000 + $3,720/i =$250,000 + $3,720/0.021 =$427,143PV cost of renting = $16,000/i=$16,000/0.021=$761,905You would be better off buying the house. To f

39、ind the break-even rent:X/0.021 = $250,000 + $3,720/0.021X = $8,970So if the rent is less than $8,970 per year, you would be better off renting.3. Kieran is currently twenty-five years old, plans to retire at age sixty, and to live to age eighty. His labor income is $45,000 per year, and he intends

40、to maintain a constant level of real consumption spending over the next fifty-five years. Assuming a real interest rate of 3%, no taxes, and no growth in real labor income, what is the value of Kieran s human capital? What is the value of Kieran s permanent income?Answer:n i PV FV PMT Result35 3?045

41、,000 PV =$966,925 n i PV FV PMT Result55 3$966,925$36,114The value of Kieran $966,925.The value of Kieran $36,114.0? PMT=s human capital iss permanent income is4.5.Mariana is currently thirty years old, plans to retire at age seventy and to live to age ninety. Her labor income is $60,000 per year, a

42、nd she intends to maintain a constant level of real consumption spending over the next sixty years. Assuming a real interest rate of 4% per year, no taxes and no growth in real labor income, w hat is the value of Mariana s human capital? What is the value of Mariana s permanent income?Answer: n i PV

43、 FV PMT Result 40 4?060,000 PV =$1,187,566 n I PV FV PMT Result 60 4$1,187,566 0? PMT =$52,493The value of Mariana s human captal is $1,187,566.The value of Mariana s permanent income is $52,493.Your employer, Novocastrian Films, has agreed to make 60 quarterly payments of $1,000 each into a trust a

44、ccount to fund your early retirement. The first payment will be made 3 months from now. At the end of 15 years (60 payments), you will be paid 15 equal annualpayments, with the first receipt to be made at the beginning of Year 16 (or the end of Year 15). The funds will be invested at a nominal rate

45、of 10.0%, quarterly compounding, during both the accumulation and the distribution periods. How large will each of your 15 receipts be?Answer:First determine the effective annual rate:EFF = (1 + 0.10/4) 4 - 1=10.38%Next, determine amount at end of year 15 N I PMT Result1510.38$4000 FV =$130,983.39At

46、 the end of year 15, there will be $130,983.39 in your retirement account.Since you will be making withdrawals at the beginning of each year, PV = $130,983/(1 + i), or $118,625.10.N I PV Result1510.38-$118,625.10 PMT =$15,935.89Each of the receipts will be $15,935.896. Mr. Palin has received a job o

47、ffer from a large investment bank as an assistant to the vice president and Mr. Palin s base salary will be $90,000. In addition, he will receive his first annual salary payment one year from the day he begins work. He will also get an immediate $45,000 bonus for joining the company and his salary w

48、ill grow at 8 percent each year. Mr. Palin is expected to work for 20 years. What is the present value of the offer if the appropriate discount rate is 11 percent?Answer:Simplest approach is to set up a spreadsheet like:Year PMT045,00045,000190,00081,081.08297,20078,889.7019 359,641.75 49,514.6320 3

49、88,413.10 $48,176.39Total:$1,310,649.82The present value of the offer is $1,310,649.827. Natalia will face a tax rate of 25% before and after retirement. The interest rate is 9%. She is 35 years from her retirement date andinvests $5,000 to a tax deferred retirement plan. If she chooses to withdraw

50、the total accumulated amount at retirement, what will she be left with after paying taxes?Answer:$5,000 x 1.09 35 = $102,069After taxes this leaves $102,069 x 0.75 = $76,5528. Damian is currently twenty-five years old and plans to live to age eighty. His labor income is $80,000 per year, and he plan

51、s to maintain a constant level of real consumption spending over the next fifty-five years. Damian plans to retire at age 60. Assume the real interest rate is 5% per year and there are no taxes and no growth in real labor income. What is the value of Damian s human capital? What is the value of Dami

52、an s permanent income?Answer:N I PV FV PMTPV =PMTResult35 5?0$80,000$1,309,936NIPVFVPMTResult55 5$1,309,936 0?=$70,300Damian s human capital is $1,309,936. Damian s permanent income is $70,300.9. You are currently renting a house for $25,800 a year and you have an option to buy it for $350,000. Main

53、tenance and property taxes are $6,150 per year, and these costs are included in your rent. Property taxes ($4,150 of the $6,150) are deductible for tax purposes. Your tax rate is 35%. The real after tax rate is3.5%. What is the NPV of the investment in the house?Answer:After-tax outflow for property

54、 taxes each year is 0.65 x $4,150 = $2,697.50Cash outflow in year t = $2,697.50 + $2,000=$4,697.50PV cost of owning = $350,000 + $4,697/0.035 =$350,000 + $134,214 =$484,214PV cost of renting = $25,800/0.035=$737,143So the NPV of investing in the house instead of renting is $737,143- $484,214 = $252,

55、929.10. Carson will face a tax rate of 30% before and after retirement. The interest rate is 6%. He is 32 years from his retirement date and invests $3,000 to a tax deferred retirementplan. If he chooses to withdraw the total accumulated amount at retirement, what will he be left with after paying t

56、axes? Show how to find the answer using the rule, “Defe rral earns you the pretax rate of return after tax. ”Answer:If Carson paid the initial tax he would have $3,000 x 0.7 = $2,100 to invest.Investing $2,100 at the pretax rate of 6% would result in $2,100 x 1.0632 = $13,552Longer Problems1. Tamara

57、 is currently twenty-eight years old, plans to retire at age seventy and to live to age ninety. Her labor income is $50,000 per year, and she intends to maintain a constant level of real consumption spending over the next sixty-two years. Assume no taxes, no growth in real labor income and a real in

58、terest rate of 4% per year.(a) What is the value of Tamara s human capital?(b) What is the value of Tamara s permanent income?Answer:(a) N IPV FVPMT Result424?0$50,000PV = $1,009,281(c) N IPVFVPMTResult62 0?The value of Tamara $1,009,281 The value of Tamara $44,261$1,009,281PMT = $44,261s human capi

59、tal iss permanent income is2. You have just turned twenty-eight years of age and feel it is necessary to upgrade your qualifications. After some consideration, you feel that undertaking full-time study for an MBA degree is one alternative. For the two years of full-time study, tuition and living exp

60、enses will be $25,000 per year. In addition, you will have to give up your current job with a salary of $35,000 per year. Assume all cash flows occur at the end of the year. Assume a real interest rate of 4% per year, ignoring taxes. Also assume that the salary increase is at a constant real amount

61、that starts after you complete your degree (at the end of the year following graduation) and lasts until retirement at age sixty-five. In order to justify the investment, by how much does your salary have to increase as a result of getting the MBA degree?Answer:Find the FV of tuition and foregone sa

62、lary at the end of two years:NiPVFVPMTFV =Result240?60,000$122,400Find the increase in salary that has this amount as its PV:n i PV FV PMTResult35 4$122,4000? PMT=$6,5583. At the age of thirty Terry was earning $30,000 and decided to undertake an MBA to increase his earning potential. Two years late

63、r Terry has his degree and has achieved a constant real increase of $5,898 in his annual salary that will last until he retires at age sixty. If Terry lives to the age of ninety, what will be the value of his human capital and permanent income? Assume a real interest rate of 2.52% per year, no taxes

64、, and no growth in real labor income.Answer:New base salary = $30,000 + $5,898 = $35,898 n i PV FV PMTResult28 2.52?0$35,898PV = $714,899n i PV FV PMT Result58 2.52$714,8990?PMT = $23,584The value of Terry s human capital is $714,899.The value of Terry s permanent income is $23,584.4. Juliet currently rents an apartment but has the option to buy it for $185,000. Property taxes are $2,000 per year and