FIN 370T Wk 2 – Practice: Ch. 4 and 5 Knowledge Check

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FIN 370T Wk 2 – Practice: Ch. 4 and 5 Knowledge Check

Time value of money concepts can be used by

Multiple Choice

individuals doing personal financial planning.

CFOs and CEOs to make business decisions.

investors calculating a return on an investment.

All of these choices are correct.

With regard to money deposited in a bank, future values are

Multiple Choice

smaller than present values.

larger than present values.

equal to present values.

are completely independent of present values.

What is the future value of $1,000 deposited for one year earning 5 percent interest rate annually?

Multiple Choice

$1,000

$1,005

$1,050

$2,050

Approximately what interest rate is needed to double an investment over eight years?

Multiple Choice

8 percent

9 percent

12 percent

100 percent

A dollar paid (or received) in the future is

Multiple Choice

worth more than a dollar paid (or received) today.

worth as much as a dollar paid (or received) today.

not worth as much as a dollar paid (or received) today.

not comparable to a dollar paid (or received) today.

Approximately how many years does it take to double a $500 investment when interest rates are 4 percent per year?

Multiple Choice

6 years

18 years

When computing the rate of return from selling an investment, the number of years between the present and future cash flows is an important factor in determining

Multiple Choice

the annual rate earned.

the annual payments required.

whether the present value or the future value is a cash inflow.

whether the present value or the future value is a cash outflow.

Determine the interest rate earned on a $200 deposit when $208 is paid back in one year.

Multiple Choice

104 percent

8 percent

4 percent

2 percent