Quiz 1 - Mat 540

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* Question 1
2 out of 2 points
| |
| Which of the following statements is CORRECT?Answer | | | | | Selected Answer:|    If CF0
is positive and all the other CFs are negative, then you can still solve for I.| Correct Answer:|    If CF0
is positive and all the other CFs are negative, then you can still solve for I.|
| | | |
* Question 2
2 out of 2 points
| |
|  You plan to analyze the value of a potential investment by calculating the sum of the present values of its expected cash flows.  Which of the following would lower the calculated value of the investment?Answer | | | | | Selected Answer:|    The discount rate increases.|

Correct Answer:|    The discount rate increases.|
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* Question 3
2 out of 2 points
| |
| Which of the following statements is CORRECT?Answer | | | | | Selected Answer:|    Time lines can be constructed to deal with situations where some of the cash flows occur annually but others occur quarterly.| Correct Answer:|    Time lines can be constructed to deal with situations where some of the cash flows occur annually but others occur quarterly.|

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* Question 4
2 out of 2 points
| |
| Which of the following investments would have the highest future value at the end of 10 years?  Assume that the effective annual rate for all investments is the same and is greater than zero.Answer | | | | | Selected Answer:|    Investment A pays $250 at the beginning of every year for the next 10 years (a total of 10 payments).| Correct Answer:|    Investment A pays $250 at the beginning of every year for the next 10 years (a total of 10 payments).|

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* Question 5
2 out of 2 points
| |
| Which of the following statements is CORRECT?Answer | | | | | Selected Answer:|    The cash flows for an annuity due must all occur at the beginning of the periods.| Correct Answer:|    The cash flows for an annuity due must all occur at the beginning of the periods.|

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* Question 6
2 out of 2 points
| |
| Which of the following statements regarding a 15-year (180-month) $125,000, fixed-rate mortgage is CORRECT?  (Ignore taxes and transactions costs.)Answer | | | | | Selected Answer:|    The outstanding balance declines at a faster rate in the later years of the loan’s life.| Correct Answer:|    The outstanding balance declines at a faster rate in the later years of the loan’s life.|

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* Question 7
2 out of 2 points
| |
| Your bank account pays a 6% nominal rate of interest.  The interest is compounded quarterly.  Which of the following statements is CORRECT?Answer | | | | | Selected Answer:|    The periodic rate of interest is 1.5% and the effective rate of interest is greater than 6%.| Correct Answer:|    The periodic rate of interest is 1.5% and the effective rate of interest is greater than 6%.|

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* Question 8
2 out of 2 points
| |
| Which of the following statements is CORRECT?Answer | | | | | Selected Answer:|    The cash flows for an annuity must all be equal, and they must occur at regular intervals, such as once a year or once a month.| Correct Answer:|    The cash flows for an annuity must all be equal, and they must occur at regular intervals, such as once a year or once a month.|

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* Question 9
2 out of 2 points
| |
| Which of the following statements is CORRECT?Answer | | | | | Selected Answer:|    Time lines can be constructed where some of the payments constitute an annuity but others are unequal and thus are not part of the annuity.| Correct Answer:|    Time lines can be constructed where some of the payments constitute an annuity but others are unequal and thus are not part of the annuity.|

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* Question 10
2 out of 2 points
| |
| Which of the following investments would have the lowest present value? ...
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