1. In computing the present and future value of multiple cash flows: A) each cash flow is discounted or compounded at the same rate. B) each cash flow is discounted or compounded at a different rate. C) earlier cash flows are discounted at a higher rate. D) later cash flows are discounted at a higher rate. 2. The future value of multiple cash flows is: A) greater than the sum of the cash flows. B) equal to the sum of all the cash flows. C) less than the sum of the cash flows. D) higher or lower than the cash flows depending on the interest rate. 3. If your investment pays the same amount at the end of each year for a period of six years, the cash flow stream is called: A) a perpetuity. B) an ordinary annuity. C) an annuity due. D) a growing perpetuity. 4. If your investment pays the same amount at the beginning of each year for a period of 10 years, the cash flow stream is called: A) a perpetuity. B) an ordinary annuity. C) an annuity due. D) a growing perpetuity. 5. A preferred stock would be an ideal example of: A) a perpetuity. B) an ordinary annuity. C) an annuity due. D) a growing annuity. 6. Which of the following statements is true of amortization? A) With an amortized loan, a periodical payment of principal portion gradually decreases over a period. B) Amortization schedule represents only the interest portion of the loan. C) With an amortized loan, a bigger proportion of each month's payment goes toward interest in the early periods. D) The computation of loan amortization is wholly based on the computation of simple interest. 7. A firm receives a cash flow from an investment that will increase by 10 percent annually for an infinite number of years. This cash flow stream is called: A) an annuity due. B) a growing perpetuity. C) an ordinary annuity. D) a growing annuity. 8. Your investment in a small business venture will produce cash flows that increase by 15 percent every year for the next 25 years. This cash flow stream is called: A) an annuity due. B) a growing perpetuity. C) an ordinary annuity. D) a growing annuity. 9. Which of the following statements is true about the effective annual rate (EAR)? A) The effective annual interest rate (EAR) is defined as the annual growth rates that do not take compounding into account. B) The EAR is the annualized interest rate using simple interest. It ignores the interest earned on interest associated with compounding periods of less than one year. C) The EAR is the simple interest charged per period multiplied by the number of periods per year. D) The EAR is the interest rate actually paid (or earned) after accounting for compounding. 10. The true cost of lending is the: A) annual percentage rate. B) effective annual rate. C) quoted interest rate. D) interest rate per period. 11. Which of the following statements is true of annual percentage rate (APR)? A) The APR is similar to quoted interest rate which is a simple annual rate. B) The APR calculation adjusts for the effects of compounding and, hence, the time value of money. C) The APR is the true cost of borrowing and lending. D) The APR takes compounding into account. 12. Phosfranc Inc., is expecting the following cash flows starting at the end of each year over the next four years$133,245, $152,709, $161,554, and $200,760. If their opportunity cost is 9.4 percent, find the future value of these cash flows at the end of four years. (Round to the nearest dollar.) A) $734,731 B) $756,525 C) $734,231 D) $776,252 13. Helen Ashley is expecting cash flows of $50,000, $75,000, $125,000, and $250,000 from an inheritance over the next four years. If she can earn 11 percent on any investment that she makes, what is the present value of her inheritance? (Round to the nearest dollar.) A) $361,998 B) $414,454 C) $412,372 D) $434,599