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1) Recycle America Inc

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1) Recycle America Inc. has the opportunity to trade 8,000 pounds of plastic pellets made from recycled soda bottles for 5,000 pounds of aluminum cans.  If the current market price of scrap aluminum is $0.83 per pound and the current market price for plastic pellets is $0.57 per pound, then the added benefit (cost) of making this trade is:

A) ($410)

B) $410

C) ($780)

D) $780

 

2)Suppose you have $1,000 today and the risk-free rate of interest (rf) is 3.5%.  The equivalent value in one year is closest to:

A) $965.00 today.

B) $966.18 today.

C) $1000.00 today.

D) $1035.00 today.

 

3)A project that you are considering today is expected to provide benefits worth $168,000 in one year.  If the risk-free rate of interest (rf) is 4.5%, then the value of the benefits of this project today are closest to:

A) $160,440

B) $160,766

C) $168,000

D) $175,560

 

4)If the risk-free rate of interest (rf) is 6%, then you should be indifferent between receiving $250 in one year or

A) $235.85 today.

B) $250.00 today.

C) $265.00 today.

D) None of the above

5)If the risk-free rate of interest (rf) is 6%, then you should be indifferent between receiving $250 today or

A) $235.85 in one year.

B) $250.00 in one year.

C) $265.00 in one year.

D) None of the above

 

6) A project you are considering is expected to provide benefits worth $225,000 in one year.  If the risk-free rate of interest (rf) is 8%, then the value of the benefits of this project today are closest to:

A) $190,333

B) $208,333

C) $225,000

D) $243,000

 

7)Suppose a security with a risk-free cash flow of $1000 in one year trades for $909 today.  If there are no arbitrage opportunities, then the current risk-free interest rate is closest to:

A) 8%

B) 10%

C) 11%

D) 12%