# 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

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smaller than present values.

•

larger than present values.

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equal to present values.

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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

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\$1,005

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\$1,050

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\$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

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

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

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

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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

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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

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the annual rate earned.

•

the annual payments required.

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

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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

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