1. The real rate of interest reflects compensation for?
Time value of money
Future value
Present value
None of the options are correct

2. An annuity may be defined as a series of unlimited payments of equal amounts.
a series of equal payments for a specified period of time.
a payment at a fixed interest rate.
a series of payments of unequal amount.

3. Starting to invest late for retirement increases the benefits for the investor
True
False

4. An investment will cost $1000 today and will pay at the end of each year $550 for the next 2 years, $100 at the end of Year 3, and $300 at the end of Year 4. If other investments of equal risk earn 8% annually, what is its present value?
*Ans. 2280.69*

5. To increase a given future value, the discount rate should be adjusted __________.

None of the above answers are correct
downward
upward
first upward and then downward

6. In determining the future value of a single amount, one measures
the future value of an amount allowed to grow at a given interest rate.
the present value of an amount discounted at a given interest rate.
the present value of periodic payments at a given interest rate.
the future value of periodic payments at a given interest rate.

7. In 3 years you are to receive $8,000. If the interest rate were to suddenly increase, the present value of that future amount to you would remain unchanged
The correct answer cannot be determined without more information
rise
fall

8. Your brother is planning to invest Rs.500,000 in an online account that has an annual interest rate of 6.5%. At the start of every year (beginning of each year) he will also deposit Rs. 20,000. His goal is to accumulate his investment balance to Rs. 2,000,000. How long it will take him to reach his goal?
Ans. 16.42

9. The value which converts series of equal payments in to one value received at the beginning of investment plan is classified as timing
present value of annuity
future value of annuity
decreased value of annuity
increased value of annuity

10. From the following, choose the correct statement:
If a series of unequal cash flows occurs at regular intervals, such as once a year, then the series is by definition an annuity.
*If a series of equal cash flows occurs at regular intervals, such as at the beginning and once a year, then the series is by definition an annuity due.*
The cash flows for an annuity due must all occur at the end of the periods.
The cash flows for an ordinary annuity all occur at the beginning of the periods.

11. Which of the following statements is CORRECT?

Time line is only meaningful for annual cash flows
Time lines help in understanding problems as they are used for visualizing complex problems before doing actual calculations.
Time lines cannot be constructed in situation where cash flows occur quarterly.
Time lines cannot be constructed for annuities where the payments occur at the beginning of the periods.
Some of the cash flows shown on a time line can be in the form of annuity payments, but none can be uneven amounts.

12. A decrease in the supply for loanable funds, holding demand constant, will cause interest rates to?
Decrease
Not enough information to tell
Stay the same
Increase

13. Money has time value because?
(a) Individuals prefer future consumption to present consumption
(b) Money today is worth more than money tomorrow in terms of purchasing power
(c) There is a possibility of earning risk free return on money invested today
(d) B and C above
(e) A and B above

14. $1000 to be received in the future is _______in value of the same amount of money in hand today?
High
Lower
None of the options are correct
same

MCQ questions