PTA Level 2

Question 1

A government issues a security that guarantees to pay $100 each year eternally. How much is it worth if the needed rate of return is...

Accepted Answer

$2,500

Answer

The value of a perpetuity is calculated by dividing the annual payment by the required rate of return. In this case, the annual payment is $100. If we assume a required rate of return of 4% (0.04), then the value of the perpetuity is $100 / 0.04 = $2,500. This formula determines the present value of an infinite stream of equal payments.

Question 2

Which of the following represents a reflationary monetary policy?

Accepted Answer

Lowering interest rates helps stimulate the economy during a recession

Answer

A reflationary monetary policy aims to stimulate economic growth and combat deflation or recession. Lowering interest rates makes borrowing cheaper for businesses and consumers, encouraging investment and spending. This increase in aggregate demand helps to boost economic activity and move the economy out of a downturn.

Question 3

Which of the following is correct in terms of organizations?

Organizations accomplish more than individuals can do alone because they empower others to

(1) Share skills and information
(2) Maximize people' interests
(3) Specialise
(4) Pool resources

Accepted Answer

(1), (3) and (4)

Answer

Organizations enable individuals to achieve more by facilitating the sharing of skills and information, allowing for specialization of tasks, and pooling resources. These factors lead to increased efficiency, innovation, and the ability to undertake larger, more complex projects than individuals could manage alone. Maximizing individual interests is a goal, but not the direct mechanism for collective accomplishment.

Question 4

In the short term, when an organization's income is less than its spending, it is an example of:

Accepted Answer

absence of financial synchronization

Answer

When an organization's income is less than its spending in the short term, it indicates a cash flow problem or a budget deficit. This situation is best described as an 'absence of financial synchronization,' meaning that the timing and amount of cash inflows and outflows are not aligned, leading to a temporary shortfall or liquidity issue.

Question 5

According to a study of 100 university students, the correlation coefficient between attendance and final accounting test grade is 0.7. Which of the following statements is accurate?

Accepted Answer

If we analyze the same sample of 100 students, the correlation between attendance at economics courses and their final econ will likewise be positive.

Answer

A correlation coefficient of 0.7 indicates a strong positive linear relationship between attendance and final accounting test grades. This means that as one variable (attendance) increases, the other variable (grades) also tends to increase. Therefore, students who attended more lectures generally received higher grades, demonstrating a clear association between the two factors.

(PTA) Practice Tests Academy Practice Test

(PTA) Practice Tests Academy Practice Test

PTA Level 2