兹维博迪金融学第二版精彩试题库5TB

Chapter Five

Household Savings and Investment Decisions

This chapter contains 28 multiple choice questions, 10 short problems, and 9 longer problems.

Multiple Choice

1. Getting a professional degree can be evaluated as ________.

a) a social security decision

b) an investment in human capital

c) an investment in a consumer durable d) 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 accumulated amount at retirement, what will you be left with after paying taxes?

a) $51,445 b) $64,000 c) $80,501 d) $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 invest. 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) $51,445 b) $64,000 c) $80,501 d) $100,627

Answer: (a)

4. When your tax rate remains unchanged, the benefit of tax deferral can be summarized in the

rule, “deferral earns you ________.”

a) the after-tax rate of return before tax b) the pretax rate of return after tax c) the after-tax rate of return after tax d) 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 of the benefit; present value of the costs b) present value of the benefits; future value of the costs c) future value of the benefits; future value of the costs d) present value of the benefits; future value of the costs

Answer: (d)

6. Suppose you will face a tax rate of 30% before and after retirement. 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) $7,532 b) $10,760 c) $12,298 d) $15,372

Answer: (b)

7. 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 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, and no growth in real labor income, what is the value of Kecia’s human capital?

a) $31,797 b) $35,

c) $778,141 d) $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 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, and no growth in real labor income, what is the value of Kecia’s permanent income?

a) $31,797 b) $35,

c) $778,141 d) $994,888

Answer: (b)

9. 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 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 growth in real labor income, what is the value of Oscar’s human capital?

a) $884,344 b) $691,681 c) $39,999 d) $32,

Answer: (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 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 growth in real labor income, what is the value of Oscar’s permanent income?

a) $884,344 b) $691,681 c) $39,999 d) $32,

Answer: (d)

11. 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 deductible for income tax purposes. Your tax rate is 35%. You wish to provide 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 $476,190 b) rent the house; the PV cost of renting is $309,524 c) buy the house; the PV cost of owning is $442, d) buy the house; the PV cost of owning is $371,429

Answer: (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 deductible 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 after-tax rate is 2.52%. What is the break-even rent?

a) $6, b) $9,360 c) $10,128 d) $12,302

Answer: (b)

13. As one gets older, the ________ declines, so ________ falls steadily until it reaches zero at

age 65.

a) future value of remaining labor income; human capital b) future value of remaining labor income; initial wealth c) present value of remaining labor income; human capital d) present value of initial wealth; optimization

Answer: (c)

14. Any lifetime consumption spending plan that satisfies your budget constraint is:

a) an optimal model b) a feasible plan c) a model benefit d) a target replacement

Answer: (b)