5. TRUE or FALSE: A dollar today is worth more than a dollar tomorrow if the interest rate is positive. a. True b. False

6. TRUE or FALSE: One can find the future value at the end of year 10 of an amount deposited today by multiplying the amount deposited today by an appropriate discount factor (i.e., by (1 + n) r ). a. True b. False

7. TRUE or FALSE: The rate of return on any perpetuity is equal to its annual cash flow divided by its present value. a. True b. False

8. TRUE or FALSE: In the amortization of a mortgage loan with equal payments, the fraction of each payment devoted to interest steadily decreases over time and the fraction devoted to reducing the loan balance increases with additional each payment made. a. True b. False

9. For an annuity due of $325 per year for 10 years, which of the following interest rates will result in the largest present value?

a. 10%, compounded annually.

b. 10%, compounded semiannually

c. 10%, compounded monthly.

d. 10%, compounded daily.

e. Because this is an annuity due, all of these interest rates will produce the same present value.

10. A perpetuity is:

a. a stream of equal payments at unequal time intervals.

b. a stream of equal payments at equal time intervals.

c. a stream of equal payments that continue forever.

d. all of the above.

e. none of the above.