In future value or present value problems, unless otherwise stated, cash flows are assumed to be at the end of the time period (6) at the beginning of the time period in the middle of the time period (d) spread out evenly over the time period. If the interest rate is zero, the future value interest factor equals (a) -1.0 (b) 0.0 (c) 1.0 (a) (d) 2.0 As the interest rate increases for any given period, the future value interest factor will decrease (b) increase remain unchanged (d) move toward 1 TIf the present value interest factor for i percent and n periods is 0.270, the future value interest factor for the same i and n is (a) 0.730 (b) 3.797. 3.704 cannot be determined (d) The rate of interest actually paid or earned, also called the annual percentage rate (APR), is the interest rate. (a) effective (b) nominal (c) discounted continuous The rate of interest agreed upon contractually charged by a lender or promised by a borrower is the _interest rate. (a) effective (b) nominal (c) discounted (d) continuous the interest rate is positive, a six-year ordinary annuity of $500 per year must have a present lue over $3,000. (a) True (b) False ou just invested $50,000 into an account that earns 7 percent compounded annually. At the end of each year you can withdraw $4,971. How many years can you continue to make the withdrawals (a) 12 years (b) 13.5 years (c) 18 years (d) 10 years When repaying an amortized loan, the interest payments increase over time due to the compounding process. (a) True (6) False You can buy a $50 savings bond today for $25 and redeem the bond in 10 years for its full face value of $50. You could also put your money in a money market account that pays 7% interest per year. Which option is better, assuming they are of equal risk? (a) The money market account is better because it pays more interest. (b) The money market account is better because it requires a smaller investment. (c) The savings bond is better because it earns a higher interest rate. (d) The money market and savings bond both earn 7% interest, so they are equal in value The present value of $100 to be received 10 years from today, assuming an opportunity cost of 9 percent, (a) $236 (6) $699 (c) $42 (d) $75 Calculate the future value of $4600 received today if in is deposited at 9 percent for three years. Colin has inherited $6000 from the death of his grandmother. He would like to use the money to buy his mother a new Harley scooter costing $7000 two years from now. Will Colin have enough money to buy the scooter if he deposits his money in an account paying 8% compounded semi-annually