The Time Value Of Money

This question bank verified by Studydeets

All Questions

Question 1

Free

True/False

Compound interest pays interest for each time period on the original investment plus the accumulated interest.

Choose correct answer/s

True

False

Check answer

Question 2

Free

True/False

When money is invested at compound interest,the growth rate is the interest rate.

Choose correct answer/s

True

False

Check answer

Question 3

Free

True/False

For a given amount,the lower the discount rate,the less the present value.

Choose correct answer/s

True

False

Check answer

Question 4

Free

True/False

Present values decline as the time to the cash flows increases.

Choose correct answer/s

True

False

Check answer

Question 5

Free

True/False

The present value of an annuity due equals the present value of an ordinary annuity times the discount rate.

Choose correct answer/s

True

False

Check answer

Question 6

True/False

A perpetuity is a special form of an annuity.

Choose correct answer/s

True

False

To unlock the question

Question 7

True/False

An annuity factor represents the future value of $1 that is deposited today.

Choose correct answer/s

True

False

To unlock the question

Question 8

True/False

With a fixed-rate mortgage,the proportion of each payment used to pay interest on the loan declines over time.

Choose correct answer/s

True

False

To unlock the question

Question 9

True/False

Converting an annuity to an annuity due decreases the present value.

Choose correct answer/s

True

False

To unlock the question

Question 10

True/False

It is important to discount both real and nominal cash flows at the real interest rate.

Choose correct answer/s

True

False

To unlock the question

Question 11

True/False

The term "constant dollars" refers to equal payments for amortizing a loan.

Choose correct answer/s

True

False

To unlock the question

Question 12

True/False

Nominal dollars refer to their purchasing power.

Choose correct answer/s

True

False

To unlock the question

Question 13

True/False

When inflation is positive,the nominal interest rate is larger than the real rate.

Choose correct answer/s

True

False

To unlock the question

Question 14

True/False

The effective annual interest rate cannot be less than the annual percentage rate.

Choose correct answer/s

True

False

To unlock the question

Question 15

True/False

The more frequent the compounding,the higher the future value,other things equal.

Choose correct answer/s

True

False

To unlock the question

Question 16

True/False

An annual percentage rate (APR)is determined by annualizing the rate using compound interest.

Choose correct answer/s

True

False

To unlock the question

Question 17

True/False

A dollar tomorrow is worth more than a dollar today.

Choose correct answer/s

True

False

To unlock the question

Question 18

True/False

To calculate present value,we discount the future value by some interest rate r,the discount rate.

Choose correct answer/s

True

False

To unlock the question

Question 19

True/False

The discount factor is used to calculate the present value of $1 received in year t.

Choose correct answer/s

True

False

To unlock the question

Question 20

True/False

You should never compare cash flows occurring at different times without first discounting them to a common date.

Choose correct answer/s

True

False

To unlock the question