Question 1

Compound growth rate is calculated:

Accepted Answer

A)   By loan amortization
B)   Through any given interest level and time period
C)   Using an ordinary annuity table
D)   Using numerical data using revenues, expenses and earnings D

Question 2

Future Value Table is used :

Accepted Answer

A)   As an alternative to calculating the future vale using the formula
B)   An alternative to calculating the present value
C)   An alternative to calculating the time value of money
D)   B&C A

Question 3

Present value (PV) refers to:

Accepted Answer

A)   Worth in future of an amount invested today
B)   Worth today of future payment
C)   Worth in the future of a series of payments over time
D)   None of the above B

Question 4

To find future value discount.....

Accepted Answer

A) True 
 B)False

Question 5

The time value of money refers to:

Accepted Answer

A)   Factors that show future value
B)   Factors that show past value
C)   Concept that a dollar received today is worth more than a dollar received in the future
D)   Concept that a dollar received today is worth less than a dollar received in the future

Question 6

Compound interest method refers to:

Accepted Answer

A)   Interest is calculated only on the original principle
B)   Interest is calculated on a dollar received today
C)   Interest is calculated on both the original principle and on all interest accumulated since the beginning of interest period.
D)   All of the Above

Question 7

Future value implies using the compound interest method.

Accepted Answer

A) True 
 B)False

Question 8

Opportunity cost are revenues gained by forgoing other opportunities.

Accepted Answer

A) True 
 B)False

Question 9

In a simple interest method the principle is the amount invested.

Accepted Answer

A) True 
 B)False

Question 10

Amount of Perpetuity = Initial Investment x Interest Rate.

Accepted Answer

A) True 
 B)False

Question 11

Annuity due refers to:

Accepted Answer

A)   A series of equal annuity payments made or received at the beginning of each period
B)   A series of equal payments in the future is worth today
C)   Factors that show the value today of equal flows at the end of each future period
D)   An equal series of payments worth at some future date

Question 12

Interest determines how much an amount of money invested today will be worth in the future.

Accepted Answer

A) True 
 B)False

Question 13

An effective interest rate is the stated annual interest rate of a loan.

Accepted Answer

A) True 
 B)False

Question 14

Future value is determined using:

Accepted Answer

A)   Worth of a dollar today
B)   Calculations only on the original principle
C)   A compound interest method
D)   Using a simple interest method

Question 15

Tables and spreadsheets are used to calculate future value.

Accepted Answer

A) True 
 B)False

Question 16

Discounting is:

Accepted Answer

A)   Converting present value into its future value
B)   Value today of a payment to be received
C)   Calculating the future value using a formula
D)   Converting future cash flows in the their present value

Question 17

An effective interest rate is:

Accepted Answer

A)   The stated annual interest rate of a loan which does not account for compounding
B)   The actual interest rate earned or charged which is affected by the number of compounding periods.
C)   The frequency of compounding for any given interest level and time period
D)   None of the above

Question 18

Perpetual annuities refers to an organization making an investment to generate an annuity for an infinite period.

Accepted Answer

A) True 
 B)False

Question 19

Present value of an annuity refers to:

Accepted Answer

A)   What series of equal payment in the future is worth today taking into account time value of money
B)   A factor that when multiplied by a stream of equal payments equals present value
C)   What an equal series of payments will be worth at some future date using compound interest
D)   None of the Above

Exam 6: The Time Value of Money

Compound growth rate is calculated:

Future Value Table is used :

Present value (PV) refers to:

To find future value discount.....

The time value of money refers to:

Compound interest method refers to:

Future value implies using the compound interest method.

Opportunity cost are revenues gained by forgoing other opportunities.

In a simple interest method the principle is the amount invested.

Amount of Perpetuity = Initial Investment x Interest Rate.

Annuity due refers to:

Interest determines how much an amount of money invested today will be worth in the future.

An effective interest rate is the stated annual interest rate of a loan.

Future value is determined using:

Tables and spreadsheets are used to calculate future value.

Discounting is:

An effective interest rate is:

Perpetual annuities refers to an organization making an investment to generate an annuity for an infinite period.

Present value of an annuity refers to: