1) Present Value of a Perpetuity implies that

A) the payments will last until the life expectancy of the recipient

B) you have to determine the present value of the payments that will last indefinitely

C) we are dealing exclusively with a preferred stock which makes dividend payments indefinitely

D) we are indulging in a fantasy because no one makes payments forever

E) one can obtain the correct answer by using the following simple formula: PV=PMT (1+r)

2) Which formula(s) listed below represent(s) a time value of money equation?

A.FV=PV(1+rⁿ)

B.FV=PV(1+r)ⁿ

C.PV=FV/(1+r)

D.PV=FV/(1+r)ⁿ

E.Both B and D

3) Of all the steps in the financial planning process,which 2are the most important?

A.Establish relationship and implementing the plan

B.Implementing the plan and monitoring the plan

C.Gathering data and developing the plan

D.Establish relationship and developing the plan

4) Of all the guiding principles of finance, where does time value of money fall?

1.first

2.second

3.third

4.fourth

5.fifth

5) Evelyn and Michael both age 30 with two children and reasonable incomes. They have engaged an attorney,Ms.Sue Yoo, to review their financial plan. The attorney finds that no insurance was included or recommendedfor the plan. What could have went wrong in the planning process?

A.The planner recommended insurance but did not state the fact in the recommendations.

B.Only 24 of the 25items for analysis were collected

C.The planner gave the plan to the family without going over it

D.The planner did not take Finance 447