CHAP004students

# CHAP004students - Multiple Choice Questions 2 The future...

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Multiple Choice Questions 2. The future value of \$100 at a 5% per year interest rate at the end of one year is: A) \$95.00 B) \$105.00 C) \$97.50 D) None of the above. Answer: B LOD: 3 Page: 63 A-Head: Valuing Monetary Payments Now and in the Future. 4. Which of the following expresses 5.65%? A) 0.565 B) 0.00565 C) 5.65 D) 0.0565 Answer: D LOD: 1 Page: 63 A-Head: Valuing Monetary Payments Now and in the Future.

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8.If a saver is willing to wait a year to receive a \$100 payment rather than accept a lesser amount today: A) The \$100 is less than the present value. B) The present value must not be calculable. C) The present value must be less than \$100. D) The saver must not know the present value. Answer: C LOD: 2 Page: 63 A-Head: Valuing Monetary Payments Now and in the Future.
9. Which of the following best expresses the proceeds a lender receives from a simple loan? A) PV + i B) FV/i C) PV(1 + i) D) PV/i Answer: C LOD: 2 Page: 63 A-Head: Valuing Monetary Payments Now and in the Future. 11. Suppose Tom receives a one year simple loan from ABC Bank for \$5000.00. At the end of the year, Tom repays \$5400.00 to ABC Bank. The interest rate on Tom's loan was: A) \$400 B) 8.00% C) 7.41% D) None of the above Answer: B LOD: 3 Page: 63 A-Head: Valuing Monetary Payments Now and in the Future.

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13. Compound interest is the idea: A) That says you get an interest deduction for paying your loan off early. B) That says you get interest on interest. C) That says you get an interest deduction if you take out a loan for longer than one year. D) That says interest rates will rise on larger loans. Answer: B LOD: 1 Page: 64 A-Head: Valuing Monetary Payments Now and in the Future. 15. Which of the following best expresses the payment a lender receives for lending their money for three years? A) 3PV B) PV(1+i) 3 C) PV/(1 + i) 3 D) None of the above. Answer: B LOD: 2 Page: 65 A-Head: Valuing Monetary Payments Now and in the Future. 16. Suppose Paul borrows \$4000 for one year from his grandfather who charges Paul 7% interest. At the end of the year Paul will have to repay his grandfather: A) \$4,280 B) \$4,290 C) \$4,350 D) None of the above Answer: A LOD: 3 Page: 65 A-Head: Valuing Monetary Payments Now and in the Future.
17. A lender is promised a \$100 payment (including interest) one year from today. If the lender has a 6% opportunity cost of money, she should be willing to accept what amount today? A) \$100.00 B) \$106.20 C) \$96.40 D) \$94.34 Answer: D LOD: 3 Page: 67 A-Head: Valuing Monetary Payments Now and in the Future. 18. A saver knows that she will receive \$100 from the bank one year from now, this includes the interest she will earn. What is the interest rate she is earning if she put \$95 in the bank today? A) 5.10%

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## This note was uploaded on 02/23/2010 for the course FINANCE 4035 taught by Professor Q during the Spring '10 term at Edison College.

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CHAP004students - Multiple Choice Questions 2 The future...

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