11.You buy a 2-year, 8 percent savings certificate for $1,000. If interest is compounded annually, what will be its value at maturity? a. $1,067.43 b. $1,166.40 c. $1,201.03 d. $1,396.57 e. $1,466.33

12.You buy a 2-year, 8 percent savings certificate for $1,000. If interest is compounded semi- annually, what will be its value at maturity? a. $1,067.43 b. $1,146.40 c. $1,169.86 d. $1,201.03 e. $1,396.57

13.Which of the following statements concerning time value of money is false? a.Moving to the right along a time line is called compounding. b.Moving to the left along a time line is called discounting. c.The appropriate discount rate to apply to investment cash flows is the opportunity cost rate. d.When dealing with lump sums, it is easy to solve for future value (FV) and present value (PV), but it is quite difficult to solve for number of periods (N) and interest rate (I), even when using a financial calculator or a spreadsheet. e.In an ordinary (regular) annuity, payments occur at the end of each year.

14.The effective annual rate (EAR) is used to compare investments that have different lifetimes; for example, 5-year and 10-year bank certificates of deposit. a.True b.False

15.Which of the following statements concerning financial risk is false? a.Generically, financial risk is related to the probability of a return less than expected. b.If an investment is held in isolation (stand-alone), the appropriate measure of risk is the beta coefficient. c.In theory, you can create a riskless portfolio by combining a large number of investments whose returns are uncorrelated (independent of one another). d.In the real world, it is not possible to create a riskless portfolio because all investment returns, to a greater or lesser extent, move with the overall economy. e.Assume you know for certain that an investment will return negative 10 percent. (In other words, the probability of a -10% return is 100 percent.) Although the expected return is negative, the investment is riskless.