Question 1

Which of the following properly describes the future value of an ordinary annuity?

Accepted Answer

A) The first payment is one period after the present value. 
B) The last payment is one period after the future value. 
C) The first payment is on the same date as the present value. 
D) The last payment is on the same date as the future value. 
A) The first payment is one period after the present value. 
B) The last payment is one period after the future value. 
C) The first payment is on the same date as the present value. 
D) The last payment is on the same date as the future value.

Question 2

A loan amortization schedule shows how much of the principal balance is paid off with each loan payment.

Accepted Answer

A) True 
 B)False

Question 3

The difference between an ordinary annuity and an annuity due is the

Accepted Answer

A) interest rate. 
B) timing of the payments. 
C) amount of the payments. 
D) number of periods. 
A) interest rate. 
B) timing of the payments. 
C) amount of the payments. 
D) number of periods.

Question 4

The interest paid on an amortized loan decreases with each payment.

Accepted Answer

A) True 
 B)False

Question 5

Everything else being the same, the more frequent the compounding, the higher the future value.

Accepted Answer

A) True 
 B)False

Question 6

You plan to invest $2,000 at the end of each of the next 25 years. If the investment earns 7% annually, what is the investment worth at the end of 25 years?

Accepted Answer

A) $132,748.33 
B) $23,307.17 
C) 10,854.87 
D) $126,498.08 
A) $132,748.33 
B) $23,307.17 
C) 10,854.87 
D) $126,498.08

Question 7

What happens to the future value of an annuity as the interest rate increases?

Accepted Answer

A) It decreases. 
B) It stays the same. 
C) It increases. 
D) None of the above. 
A) It decreases. 
B) It stays the same. 
C) It increases. 
D) None of the above.

Question 8

The first payment of a deferred annuity is deferred more than one period into the future.

Accepted Answer

A) True 
 B)False

Question 9

You plan to borrow $20,000 and repay the loan with 48 equal monthly payments. Which of the following best describes this?

Accepted Answer

A) present value of a perpetuity 
B) future value of an annuity 
C) present value of an annuity 
D) present value of a series of non-constant cash flows 
A) present value of a perpetuity 
B) future value of an annuity 
C) present value of an annuity 
D) present value of a series of non-constant cash flows

Question 10

Suppose you are investing money at a 10% annual nominal interest rate. To earn as much as possible, which one of the following compounding periods should you prefer?

Accepted Answer

A) daily 
B) weekly 
C) monthly 
D) annually 
A) daily 
B) weekly 
C) monthly 
D) annually

Which of the following properly describes the future value of an ordinary annuity?

A loan amortization schedule shows how much of the principal balance is paid off with each loan payment.

The difference between an ordinary annuity and an annuity due is the

The interest paid on an amortized loan decreases with each payment.

Everything else being the same, the more frequent the compounding, the higher the future value.

You plan to invest $2,000 at the end of each of the next 25 years. If the investment earns 7% annually, what is the investment worth at the end of 25 years?

What happens to the future value of an annuity as the interest rate increases?

The first payment of a deferred annuity is deferred more than one period into the future.

You plan to borrow $20,000 and repay the loan with 48 equal monthly payments. Which of the following best describes this?

Suppose you are investing money at a 10% annual nominal interest rate. To earn as much as possible, which one of the following compounding periods should you prefer?

Introduction

Financial Markets and Financial Instruments

Review of Financial Statements and Selected Ratios

The Relationship Between Risk and Return

Fixed Income Securities: Bonds and Preferred Stock

Common Stock

Cost of Capital

Introduction to Capital Budgeting and Cash Flow Estimation

Capital Budgeting Decision Methods

An Introduction to Hotel Valuation

Capital Structure

Filters

Exam 5: Time Value of Money

Which of the following properly describes the future value of an ordinary annuity?

A loan amortization schedule shows how much of the principal balance is paid off with each loan payment.

The difference between an ordinary annuity and an annuity due is the

The interest paid on an amortized loan decreases with each payment.

Everything else being the same, the more frequent the compounding, the higher the future value.

You plan to invest $2,000 at the end of each of the next 25 years. If the investment earns 7% annually, what is the investment worth at the end of 25 years?

What happens to the future value of an annuity as the interest rate increases?

The first payment of a deferred annuity is deferred more than one period into the future.

You plan to borrow $20,000 and repay the loan with 48 equal monthly payments. Which of the following best describes this?

Suppose you are investing money at a 10% annual nominal interest rate. To earn as much as possible, which one of the following compounding periods should you prefer?

Introduction

Financial Markets and Financial Instruments

Review of Financial Statements and Selected Ratios

The Relationship Between Risk and Return

Fixed Income Securities: Bonds and Preferred Stock

Common Stock

Cost of Capital

Introduction to Capital Budgeting and Cash Flow Estimation

Capital Budgeting Decision Methods

An Introduction to Hotel Valuation

Capital Structure

Filters