# Fin221 Preflight

Pages: 46 (9377 words) Published: April 28, 2013
Chapter 5
Which of the following is the actual rate of interest paid or earned over a year's time? Wrong Answer: the periodic rate

Which of the following has the highest time value of money at the same time interest rate for the same number of payments Correct Answer: the future value or an annuity-due

Which of the following would increase the present value of a single cash flow? Wrong Answer: a decrease in the cash flow

You invest \$1000 at 6% compounded annually and want to know how much money you will have in 5 years. What does the \$1000 represent? Correct Answer: the present value

What is the appropriate interest rate and number of time periods to use to find the monthly payment for a 30-year mortgage at 6% compounded monthly? Correct Answer: 0.5% and 360

Which of the following would increase the present value of a single cash flow? a. an increase in the time period
b. a decrease in the cash flow
c. an increase in the interest rate
d. none of the above
Answer: D

At what point in time is the future value of an annuity-due found?

a. at the time of the last annuity payment
b. at the time of the first annuity payment
c. a period after the last annuity payment
d. a period before the first annuity payment
Answer: A IS WRONG, B IS WRONG

Which of the following has the lowest time value of money at the same interest rate for the same number of payments?

a. The present value of an ordinary annuity
b. The present value of an annuity-due
c. The future value of an ordinary annuity
d. The future value or an annuity-due
Answer: A

Which of the following is the actual rate of interest paid or earned over a year's time?

a. the periodic rate
b. the effective annual rate
c. the nominal annual rate
d. the annual percentage rate
Answer: B

Which of the following would increase the future value of a single cash flow?

a. a decrease in the interest rate
b. a decrease in the cash flow
c. an increase in the interest rate
d. a decrease in the time period
Answer: C
Which of the following would decrease the present value of a single cash flow?

a. a decrease in the interest rate
b. an increase in the cash flow
c. an increase in the interest rate
d. a decrease in the time period
Answer: C

At what point in time is the present value of an ordinary annuity found?

a. at the time of the last annuity payment
b. at the time of the first annuity payment
c. a period after the last annuity payment
d. a period before the first annuity payment
Answer: D

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Which of the following would increase the future value of a single cash flow?

a. a decrease in the interest rate
b. a decrease in the cash flow
c. an increase in the interest rate
d. a decrease in the time period
Answer: C

Which of the following would increase the present value of a single cash flow?

a. an increase in the time period
b. a decrease in the cash flow
c. an increase in the interest rate
d. none of the above
Answer: D

A series of or equal periodic cash flows is known as a(n) _______________.

a. annuity
b. future value
c. present value
d. none of the above
Answer: A

a. The present value of an ordinary annuity
b. The present value of an annuity-due
c. The future value of an ordinary annuity
d. The future value or an annuity-due
Answer: D

Which of the following is the actual rate of interest paid or earned over a year's time?

a. the periodic rate
b. the effective annual rate
c. the nominal annual rate
d. the annual percentage rate
Answer: B

What is the appropriate interest rate and number of time periods to use to find the monthly payment for a 30-year mortgage at 6% compounded monthly?

a. 6% and 30
b. 6% and 360
c. 0.5% and 30
d. 0.5% and 360
Answer: D

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Which of the following would increase the future value of a single cash flow?

a. a decrease in...

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