Question 1

When money earns interest on interest,it is said to be compounding.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following it not an annuity?

Accepted Answer

A) Equal monthly payments to your investment account 
B) Lottery winnings of $100 per month for life 
C) Mortgage payments for a fixed rate loan 
D) Monthly utility bills 
A) Equal monthly payments to your investment account 
B) Lottery winnings of $100 per month for life 
C) Mortgage payments for a fixed rate loan 
D) Monthly utility bills

Question 3

Time value concepts can be applied to lottery winnings.The winner can usually choose an annuity or a lump sum.

Accepted Answer

A) True 
 B)False

Question 4

An ordinary annuity can be defined as

Accepted Answer

A) a series of unequal payments at the beginning of each period. 
B) a series of equal payments at the end of each period. 
C) a lump sum. 
D) intermittent payments for ordinary expenses. 
A) a series of unequal payments at the beginning of each period. 
B) a series of equal payments at the end of each period. 
C) a lump sum. 
D) intermittent payments for ordinary expenses.

Question 5

The cash flows of an annuity due occur at the beginning of each period.

Accepted Answer

A) True 
 B)False

Question 6

The process of obtaining present values is also called discounting.

Accepted Answer

A) True 
 B)False

Question 7

The process of obtaining ________ values is referred to as compounding.

Accepted Answer

A) present 
B) future 
C) current 
D) inflated 
A) present 
B) future 
C) current 
D) inflated

Question 8

Everything else being equal,the ________ the interest rate,the ________ the final accumulation of money.

Accepted Answer

A) higher; higher 
B) lower; lower 
C) higher; lower 
D) A and B are both correct. 
A) higher; higher 
B) lower; lower 
C) higher; lower 
D) A and B are both correct.

Question 9

At what annual rate would $500 grow to $1,948 in 12 years? (Note-Solve as a Present Value problem.)
(a)12.0 percent
(b)13.0 percent
(c)12.5 percent
(d)11.0 percent

Accepted Answer

Note-This problem can be solved using ei

Question 10

The time value of money implies that a dollar received today is worth ________ a dollar received tomorrow.

Accepted Answer

A) more than 
B) less than 
C) the same as 
D) Insufficient data to answer. 
A) more than 
B) less than 
C) the same as 
D) Insufficient data to answer.

Question 11

If you are presented with an offer to accept payment now or a greater amount in the future,you would use (assuming you can invest the money at a known rate)

Accepted Answer

A) Present Value of $1. 
B) Future Value of $1. 
C) Present Value of an annuity. 
D) Future Value of an annuity. 
A) Present Value of $1. 
B) Future Value of $1. 
C) Present Value of an annuity. 
D) Future Value of an annuity.

Question 12

Your utility bill which varies each month is an example of an annuity.

Accepted Answer

A) True 
 B)False

Question 13

Byron is investigating a mutual fund that claims that $1,000 today will be worth $5,000 in five years.What is he solving for?

Accepted Answer

A) Present value 
B) Future value 
C) Interest rate 
D) Payment 
A) Present value 
B) Future value 
C) Interest rate 
D) Payment

Question 14

It is better to spend your money today than wait a year because you will be able to buy more with it today than in one year.

Accepted Answer

A) True 
 B)False

Question 15

Describe how present and future values concepts apply to your income and expenses and ultimately your personal budget,income statement,and balance sheet.

Accepted Answer

This is basically a subjective answer.Pr

Question 16

In the tables for the future value of a single sum,the future value factors are all less than one.

Accepted Answer

A) True 
 B)False

Question 17

Money received today is worth more than the same amount of money received in the future.This is true because

Accepted Answer

A) money received today can grow at a compounded rate. 
B) future inflation will devalue your current investments. 
C) all goods and services are likely to cost more in the future. 
D) unique investment opportunities exist today,which may not be available in the future. 
A) money received today can grow at a compounded rate. 
B) future inflation will devalue your current investments. 
C) all goods and services are likely to cost more in the future. 
D) unique investment opportunities exist today,which may not be available in the future.

Question 18

If you had just won $5,000,000 from a lottery,describe the advantages and disadvantages of receiving a lump sum today or a ten-year annuity.Discuss other factors that are relevant or needed to make this decision.No interest rate is given,however different interest rates can be assumed if necessary to answer this problem.

Accepted Answer

A lump sum would incur a large tax liabi

Question 19

There are two sets of present and future tables: one for lump sums and one for annuities.

Accepted Answer

A) True 
 B)False

Question 20

The difference between an ordinary annuity and an annuity due is with an annuity due the payments occur at the ________ of each period.

Accepted Answer

The answer of The difference between an ordinary annuity and...

When money earns interest on interest,it is said to be compounding.

Which of the following it not an annuity?

Time value concepts can be applied to lottery winnings.The winner can usually choose an annuity or a lump sum.

An ordinary annuity can be defined as

The cash flows of an annuity due occur at the beginning of each period.

The process of obtaining present values is also called discounting.

The process of obtaining ________ values is referred to as compounding.

Everything else being equal,the the interest rate,the the final accumulation of money.

At what annual rate would $500 grow to $1,948 in 12 years? (Note-Solve as a Present Value problem.) (a)12.0 percent (b)13.0 percent (c)12.5 percent (d)11.0 percent

The time value of money implies that a dollar received today is worth ________ a dollar received tomorrow.

If you are presented with an offer to accept payment now or a greater amount in the future,you would use (assuming you can invest the money at a known rate)

Your utility bill which varies each month is an example of an annuity.

Byron is investigating a mutual fund that claims that $1,000 today will be worth $5,000 in five years.What is he solving for?

It is better to spend your money today than wait a year because you will be able to buy more with it today than in one year.

Describe how present and future values concepts apply to your income and expenses and ultimately your personal budget,income statement,and balance sheet.

In the tables for the future value of a single sum,the future value factors are all less than one.

Money received today is worth more than the same amount of money received in the future.This is true because

There are two sets of present and future tables: one for lump sums and one for annuities.

The difference between an ordinary annuity and an annuity due is with an annuity due the payments occur at the ________ of each period.

Overview of a Financial Plan

Planning With Personal Financial Statements

Using Tax Concepts for Planning

Banking and Interest Rates

Managing Your Money

Assessing and Securing Your Credit

Managing Your Credit

Personal Loans

Purchasing and Financing a Home

Auto and Homeowners Insurance

Health and Disability Insurance

Life Insurance

Investing Fundamentals

Investing in Stocks

Investing in Bonds

Investing in Mutual Funds

Asset Allocation

Retirement Planning

Estate Planning

Integrating the Components of a Financial Plan

Filters

Exam 3: Applying Time Value Concepts

When money earns interest on interest,it is said to be compounding.

Which of the following it not an annuity?

Time value concepts can be applied to lottery winnings.The winner can usually choose an annuity or a lump sum.

An ordinary annuity can be defined as

The cash flows of an annuity due occur at the beginning of each period.

The process of obtaining present values is also called discounting.

The process of obtaining ________ values is referred to as compounding.

Everything else being equal,the ________ the interest rate,the ________ the final accumulation of money.

At what annual rate would $500 grow to $1,948 in 12 years? (Note-Solve as a Present Value problem.) (a)12.0 percent (b)13.0 percent (c)12.5 percent (d)11.0 percent

The time value of money implies that a dollar received today is worth ________ a dollar received tomorrow.

If you are presented with an offer to accept payment now or a greater amount in the future,you would use (assuming you can invest the money at a known rate)

Your utility bill which varies each month is an example of an annuity.

Byron is investigating a mutual fund that claims that $1,000 today will be worth $5,000 in five years.What is he solving for?

It is better to spend your money today than wait a year because you will be able to buy more with it today than in one year.

Describe how present and future values concepts apply to your income and expenses and ultimately your personal budget,income statement,and balance sheet.

In the tables for the future value of a single sum,the future value factors are all less than one.

Money received today is worth more than the same amount of money received in the future.This is true because

There are two sets of present and future tables: one for lump sums and one for annuities.

The difference between an ordinary annuity and an annuity due is with an annuity due the payments occur at the ________ of each period.

Overview of a Financial Plan

Planning With Personal Financial Statements

Using Tax Concepts for Planning

Banking and Interest Rates

Managing Your Money

Assessing and Securing Your Credit

Managing Your Credit

Personal Loans

Purchasing and Financing a Home

Auto and Homeowners Insurance

Health and Disability Insurance

Life Insurance

Investing Fundamentals

Investing in Stocks

Investing in Bonds

Investing in Mutual Funds

Asset Allocation

Retirement Planning

Estate Planning

Integrating the Components of a Financial Plan

Filters

Everything else being equal,the the interest rate,the the final accumulation of money.