1. Inflation is really a measure of:
a) The size of the exponent in a future worth equation
b) The blue book value of a depreciable asset
c) The time it takes to recover an initial investment in equipment
d) The change in the value of a country's currency
2) For a market interest rate of 12% per year and an inflation rate of 7% per year, the real interest rate per year is closest to:
a) 4.7%
b) 7%
c) 12%
d) 19.8%
3) An asset with a first cost of $50,000 is to be depreciated by the straight line method over a 5 year period. The asset will have annual operating costs of $35,000 and a salvage value of $10,000. According to the straight line method, the book value at the end of year 3 will be closest to:
a) $8,000
b) $20,000
c) $24,000
d) $26,000
4) All of the following assets can be depreciated, except:
a) A bulldozer
b) A copper mine
c) A surgical robot
d) A conveyor belt
5) For a real interest rate of 18% per year and an inflation rate of 3% per year, the market interest rate per year is closets to:
a) 20%
b) 22%
c) 24%
d) 26%