Quiz2Sol

Quiz2Sol - VERSION 1 FAMILY NAME / INITIAL STUDENT ID #...

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VERSION 1 1 FAMILY NAME / INITIAL STUDENT ID # SOLUTI ONS MIME 310 ENGINEERING ECONOMY – QUIZ #2 May 19, 2009 – 8:30 to 9:15 Formula sheets 1 and 2 attached at back. This quiz paper must be returned. Multiple-choice Statements and Short Problems – Circle the correct answer on this paper and record it on the computer answer sheet. Questions 1 to 4 are worth ½ point each and questions 5 to 12, 1 point each, for a total of 10 points. There are no penal- ties for incorrect answers. 1. Which one of the following statements is true? A) At a given positive interest rate, the present value of an ordinary annuity is always greater than the present value of an equivalent annuity due. B) At a given positive interest rate, the future value of an annuity due is always greater than the future value of an equivalent ordinary annuity. C) Both A and B are true. D) Both A and B are false. E) A is true and B is false. 2. Which one of the following statements is true? A) The process of discounting is the inverse of the process of compounding. B) At positive interest rates, the ending balance using simple interest is always greater than the ending balance using compound interest. C) The present value of an ordinary annuity can be obtained by multiplying the present value of an equivalent annuity due by (1 + i). D) The effective annual interest rate is always less than the nominal annual rate except when compounding occurs once per year.

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Quiz2Sol - VERSION 1 FAMILY NAME / INITIAL STUDENT ID #...

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