FIN202 Chapter 5
42. The process of converting future cash flows to what its present value is A) time value of money. B) discounting. C) compounding. D) none of the above.
B
47. Using higher interest rates will A) not affect the future value of the investment. B) increase the future value of any investment. C) decrease the future value of any investment. D) None of the above.
B
38. Which one of the following statements is NOT true? A) The value of a dollar invested at a positive interest rate grows over time. B) The further in the future you receive a dollar, the less it is worth today. C) A dollar in hand today is worth more than a dollar to be received in the future. D) The further in the future you receive a dollar, the more it is worth today.
D
43. Which one of the following statements is NOT true? A) Present value calculations involve bringing a future amount back to the present. B) The present value (PV) is often called the discounted value of future cash payments. C) The present value factor is more commonly called the discount factor. D) All of the above are true statements.
D
36. The time value of money refers to the issue of A) what the value of the stream of future cash flows is today. B) why a dollar received tomorrow is worth more than a dollar received today. C) why a dollar received tomorrow is worth the same as a dollar received today. D) None of the above.
A
39. Future value measures A) what one or more cash flows are worth at the end of a specified period. B) what one or more cash flows that is to be received in the future will be worth today. C) both a and b D) None of the above
A
40. Which one of the following statements is true? A) Individuals prefer to consume goods right away rather than in the future. B) Individuals prefer to consume goods in the future rather than right away. C) The time of consumption is irrelevant to individuals. D) None of the above.
A
45. The Rule of 72 A) can be used to determine the amount of time it takes to double an investment. B) is fairly accurate for interest rates between 25 and 50 percent. C) states that the time to double your money (TDM) approximately equals 72/i, where 72 represents the years it takes to double your investment. D) None of the above describe the Rule of 72.
A
49. Using lower interest rates will A) decrease the future value of any investment. B) increase the future value of any investment. C) not affect the future value of the investment. D) None of the above.
A
44. Which one of the following statements is NOT true? A) Present value calculations involve bringing a future amount back to the present. B) The future value is often called the discounted value of future cash payments. C) The present value factor is more commonly called the discount factor. D) The higher the discount rate, the lower the present value of a dollar.
B
48. Using lower discount rates will A) not affect the present value of the future cash flow. B) increase the present value of any future cash flow. C) decrease the present value of any future cash flow. D) None of the above.
B
41. The process of converting an amount given at the present time into a future value is called A) time value of money. B) discounting. C) compounding. D) None of the above.
C
46. Using higher discount rates will A) not affect the present value of the future cash flow. B) increase the present value of any future cash flow. C) decrease the present value of any future cash flow. D) None of the above.
C
94. Which of the following statements is false with respect to the present value of a future amount? A) The higher the discount rate, the lower the present value of a single sum for a given time period. B) The relation between present value and time is exponential. C) The greater the time period, the lower the present value of a single sum for a given interest rate. D) The lower the discount rate, the lower the present value of a single sum for a given time period.
D
92. Which of the following statements is true? A) The longer the time period that funds are invested, the greater the future value, regardless of investment rate. B) The lower the discount rate that funds are invested at, the greater the future value. C) The shorter the time period that funds are invested, the greater the future value, regardless of investment rate. D) The higher the interest rate, the slower the value of an investment will grow.
A
91. Which of the following statements is true? A) A dollar received today is worth more than a dollar to be received in the future because future dollars are not affected by inflation. B) A dollar to be received in the future is worth more than a dollar received today because of the positive impact of rates of return. C) A dollar received today is worth more than a dollar to be received in the future because funds received today can be invested to earn a return. D) A dollar to be received in the future is worth more than a dollar received today because it would have less risk associated with it.
C
37. Which one of the following statements is NOT true? A) The time value money refers to what the value of the stream of future cash flows today is. B) A dollar received today is worth more than a dollar received tomorrow. C) A dollar received tomorrow is worth less than a dollar received today. D) A dollar received today is worth less than a dollar received tomorrow.
D
50. Your aunt is looking to invest a certain amount today. Which of the following choices should she opt for? A) three-year CD at 6.5% annual rate B) three-year CD at 6.75% annual rate C) three-year CD at 6.25% annual rate D) three-year CD at 7% annual rate
D