An oil company is considering drilling in the Gulf at a current cost of $300,000 with an expected profit of $500,000 in three years. The current market rate is 10 percent. Should the company make the investment?
A. Yes, the future value of the profit is greater than the present value of the cost
B. No, the future value of the profit is less than the present value of the cost
C. Yes, the present value of the profit is greater than the present value of the cost
D. No, the present value of the profit is less than the present value of the cost
C. Yes, the present value of the profit is greater than the present value of the cost
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In a democratic setting, debt financing is attractive to elected political officials because
a. it makes it possible for them to spend on current projects favored by their constituents without having to levy current taxes. b. it drives up interest rates, which encourages saving. c. it leads to higher taxes in the future, which will tend to slow economic growth. d. it makes the cost of government more visible, which will help voters allocate government spending more efficiently.
Some of the systematic mistakes that people make include
a. being overconfident. b. placing too much weight on events that are more vivid compared to those with greater statistical probability. c. being generally unwilling to change their minds. d. All of the above are correct.
Direct controls often require long legal proceedings before they can be effective.
Answer the following statement true (T) or false (F)
At the expiration the premium of an option is equal to the option intrinsic value.
a. true b. false