1. Lucas expects to receive a sales bonus of $7,500 one year from now. The process of determining how much that bonus is worth today is called:
   1. aggregating.
   2. discounting.
   3. simplifying.
   4. compounding.
   5. extrapolating.
2. Richards Inc. feels strongly about supporting the education of aspiring accountants. They recently created a trust fund that will provide annual scholarships for students getting their Master Of Accounting. The fund allows for a $20,000 scholarship each year indefinitely. These annual scholarships are:
   1. an ordinary annuity.
   2. an annuity due.
   3. amortized payments.
   4. a perpetuity.
   5. a perpetuity due.
3. A well diversified investor is not concerned with:
   1. Asset-specific risk.
   2. Unsystematic risk.
   3. Diversifiable risk.
   4. Systematic risk.
4. Which one of the following features distinguishes an ordinary annuity from an annuity due?
   1. Number of equal payments
   2. Amount of each payment
   3. Frequency of the payments
   4. Annuity interest rate
   5. Timing of the annuity payments
5. Which one of the following has the highest effective annual rate?
   1. 6 percent compounded annually
   2. 6 percent compounded semiannually
   3. 6 percent compounded quarterly
   4. 6 percent compounded daily
   5. 6 percent compounded every 2 years