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Format: True/False Learning Objective: LO 1 Level of Difficulty: Easy 1. Time value of money is based on the belief that people have a positive time preference for consumption. A) True B) False Ans: A Format: True/False Learning Objective: LO 1 Level of Difficulty: Easy 2. Individuals prefer to consume goods in the future rather than right away. A) True B) False Ans: B Format: True/False Learning Objective: LO 1 Level of Difficulty: Easy 3. The value of a dollar invested at positive interest rate grows over time. A) True B) False Ans: A Format: True/False Learning Objective: LO 1 Level of Difficulty: Medium 4. The value of a dollar invested at positive interest rate grows over time but at an increasingly slower rate further into the future. A) True B) False Ans: B Format: True/False Learning Objective: LO 1 Level of Difficulty: Easy 5. The further in the future you receive a dollar, the more it is worth today. A) True B) False Ans: B Format: True/False Learning Objective: LO 2 Level of Difficulty: Medium 6. The higher the rate of interest, the more likely you will elect to invest your funds and forego current consumption. A) True B) False Ans: A Format: True/False Learning Objective: LO 3 Level of Difficulty: Medium 7. Future value focuses on the valuation of cash flows received over time, while present value focuses on the valuation of cash flows received at a point in time. A) True B) False Ans: B Format: True/False Learning Objective: LO 3 Level of Difficulty: Easy 8. The present value technique uses discounting to find the present value of each cash flow at the beginning of the project. A) True B) False Ans: A Test Bank, Fundamentals of Corporate Finance, 2e Format: True/False Learning Objective: LO 3 Level of Difficulty: Easy 9. The present value technique uses compounding to find the present value of each cash flow at the beginning of the project. A) True B) False Ans: B Format: True/False Learning Objective: LO 2 Level of Difficulty: Easy 10. The future value technique uses discounting to find the future value of each cash flow at the end of the project's life. A) True B) False Ans: B Format: True/False Learning Objective: LO 2 Level of Difficulty: Easy 11. The future value technique uses compounding to find the future value of each cash flow at the end of the project's life. A) True B) False Ans: A Format: True/False Learning Objective: LO 2 Level of Difficulty: Easy 12. Compounding is the process by which interest earned on an investment is reinvested so that in future periods, interest is earned on the interest as well as the principal. A) True B) False Ans: A 5-3 Format: True/False Learning Objective: LO 2 Level of Difficulty: Easy 13. Compound interest consists of both simple interest and interest-on-interest.... View Full Document

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