Answer these questions:

1. If you are loaning money, which of the following would you prefer?

a. Interest compounded quarterly.

b. Interest compounded semiannually.

c. Simple interest.

d. Interest compounded monthly

2. The present value of $1 and the future value of $1 are reciprocals of one anolher.

• True
• False

3. If the frequency of compounding increases:

a. The future value decreases and the present value increases.

b. The future value decreases and the present value decreases.

c. The future value increases and the present value decreases.

d. The future value increases and the present value increases.

4. In contrast to the RATE function, Excel's IRR function only works with a series of equal interim cash flows.

True

False

5. Which of the following Excel functions will allow vou to compute the present value of a

series of unequal cash flows with one formula, as opposed to calculating individual present values and summing them?

a. IRR.

b. FV.

c.NPER.

d.NPV.