1)

Which of the following statements about the time value of money concept is true?

A) It assumes that inflation rate remains constant for the foreseeable future.

B) It refers to the fact that higher cash flows in earlier years are less desirable.

C) It assumes that people prefer to consume things at some time in the future rather than today.

D) It means a dollar received today is worth more than a dollar received tomorrow.

2) Which of the following is true of the future value of an investment?

A) The lower the present value of an investment, the higher the future value of an investment.

B) The lower the interest rate, the higher the future value of an investment.

C) The lower the number of compounding periods, the higher the future value of an investment.

D) The higher the interest rate, the higher the future value of an investment.

3)Which of the following statements is correct, assuming positive interest rates and holding other things constant?

A) Banks A and B offer the same nominal annual rate of interest, but A pays interest daily and B pays semiannually. A deposit in Bank B will have a higher value in five years.

B) Banks A and B offer the same nominal annual rate of interest, but A pays interest quarterly and B pays monthly. A deposit in Bank B will have a higher value in five years.

C) Banks A and B offer the same annual rate of interest, but A pays interest quarterly and B pays semiannually. A deposit in Bank A will have a higher value in five years.

D) Banks A and B offer the same nominal annual rate of interest, but A pays interest weekly and B pays quarterly. A deposit in Bank B will have a higher value in five years.