Question
Which of the following is not one of the intuitive reasons that a cash flow in the future is worth less than a similar cash
Which of the following is not one of the intuitive reasons that a cash flow in the future is worth less than a similar cash flow today?
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| a. | When there is money inflation, the value of currency decreases over time. |
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| b. | A promised cash flow in the future may not be received (there is risk). |
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| c. | People prefer current consumption to future consumption. |
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| d. | Future income may not be the same as income today. |
Which of the following is true about the present value of a regular annuity when compared to the present value of an annuity due with the same payments and interest rate?
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| a. | The present value of the annuity due will always be less than the present value of the regular annuity because the regular annuity has one less period of discounting. |
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| b. | The present value of the annuity due will always be greater than the present value of the regular annuity because the regular annuity has one less period of discounting. |
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| c. | The present value of the annuity due will always be greater than the present value of a regular annuity because the annuity due has one less period of discounting. |
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| d. | The present value of the annuity due will always be less than the present value of a regular annuity because the annuity due has one less period of discounting. |
As the frequency of discounting increases...
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| a. | the present value of an annuity gets larger. |
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| b. | the present value of a single sum in the future gets smaller. |
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| c. | the present value of a single sum in the future get larger. |
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| d. | the future value of a single sum today gets smaller. |
When calculating a present value using a higher interest rate in the equation will cause the present value to...
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| a. | increase. |
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| b. | possibly increase or decrease. |
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| c. | decrease. |
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| d. | not change |
What is the PV of $10,000 expected to be received 5 years from now assuming an 8% annual interest rate?
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| a. | $6,867.49 |
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| b. | $6,768.39 |
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| c. | $6,805.83 |
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| d. | $5,402.69 |
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The Little Book Of Market Myths: How To Profit By Avoiding The Investing Mistakes Everyone Else Makes
Authors: Kenneth L. Fisher
1st Edition
1118445015, 978-1118445013
