Multiple Choice: Present Values Select the correct answer for each of the following:

1. The time value of money concept refers to the notion that:

a. When cash is received is not important, so long as it is collected.

b. Cash received later is better than sooner.

c. Cash paid out later is better than sooner.

d. Cash paid out sooner is better than later.

2. Compound interest refers to:

a. Interest earned during the first year the money is invested.

b. A higher than normal rate of interest.

c. Interest on two or more investments being received at the same time.

d. Computing interest on principal plus previously earned interest.

3. Which of the following rates considers the compounding of interest?

a. Effective interest rate.

b. Stated interest rate.

c. Nominal interest rate.

d. All of the above.

4. The present value of a future cash payment:

a. Is always greater than the actual amount of the payment.

b. Is always smaller than the actual amount of the payment.

c. Decreases if the time of payment is changed to be several years sooner.

d. Increases if the time of payment is delayed several years.