Question 2

One way to visualize cash flows, interest rates, and time that is very helpful is to put this information on a:

		timeline.
		space ship.
		discount double check.
		longitudinal study.

5 points

Question 3

The type of interest that does NOT take into account compounding is called:

		compound interest.
		simple interest.
		usury interest.
		riba.

5 points

Question 4

Future value measures:

		what one or more cash flows are worth at the end of a specified period.
		what one or more cash flows that is to be received in the future will be worth today.
		the value of an investment after subtracting interest earned on it for one or more periods.
		the value of an investments worth today.

5 points

Question 5

The process of converting an amount given at the present time into a future value is called:

		annualizing.
		discounting.
		compounding.
		capital budgeting.

5 points

Question 6

Which of the following investments will have the highest future value?

		$1,000 invested at an annual interest rate of 5% for 5 years
		$1,000 invested at an annual interest rate of 5% for 10 years
		$1,000 invested at an annual interest rate of 10% for 5 years
		$1,000 invested at an annual interest rate of 10% for 10 years

5 points

Question 7

Which of the following investments will result in the highest future value?

		$1,000 invested at 10% compounded annually for 5 years.
		$1,000 invested at 10% compounded quarterly for 5 years.
		$1,000 invested at 10% compounded monthly for 5 years.
		$1,000 invested at 10% compounded continuously for 5 years.

5 points

Question 8

The process of converting an amount in the future to the present time is called:

		annualizing.
		discounting.
		compounding.
		capital budgeting.

5 points

Question 9

All else equal, when the discount rate:

		decreases, the present value of the future cash flow does not change.
		decreases, the present value of any future cash flow increases.
		increases, the present value of any future cash flow increases.
		increases, the present value of any future cash flow does not change.

5 points

Question 10

Who is the mathematician credited with discovering the number e = 2.71828?

		James Edgeworth
		Eve
		Emilio Estevez
		Leonhard Euler

5 points

Question 11

Kate Eden received a graduation present of $2,000 that she is planning on investing in a mutual fund that earns 8.5 percent each year. How much money can she collect in 3 years?

5 points

Question 12

Your bank pays 5 percent interest semiannually on your savings account. The current balance in the account is $3,000. How much money will you have at the end of four years?

5 points

Question 13

Santiago Hernandez is planning to invest $25,000 in a money market account for two years. The account pays interest of 6.0 percent compounded on a monthly basis. How much money will Santiago Hernandez have at the end of two years?

5 points

Question 14

You invest $1,500 in a mutual fund today that pays 9 percent interest every year. How long will it take to double your money in years?

5 points

Question 15

What is the future value of $10,000 invested at 10% for 10 years with continuous compounding?

5 points

Question 16

You bought a corporate bond for $863.75 today. In five years the bond will mature and you will receive $1,000. What is the rate of return on this bond?

5 points

Question 17

What is the present value of a $10,000 investment received in five years at 10 percent compounded semiannually?

5 points

Question 18

What is the present value of $10,000 received in five years at 10 percent compounded monthly?

Question 19

What is the present value of $10,000 received in five years at 10 percent compounded continuously?

5 points

Question 20

Sam Braxton, the number one draft pick of the Phoenix Cardinals (NFL), and his agent are evaluating the following contract option. The contract provides for a series of annual payments over the next three years. What is the present value of these payments if Sam's required rate of return is 10 percent? (Hint: discount each cash flow to the present and then sum.)

Year 1: $1,000,000

Year 2: $1,250,000

Year 3: $1,500,000