Chapter 4--Time Value of Mo - Copy

Chapter 4--Time Value of Mo - Copy - Chapter 4-Time Value...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 4--Time Value of Money Chapter 4--Time Value of Money Student: ___________________________________________________________________________ 1. Cash flow time lines are used primarily for decisions involving paying off debt or investing in financial securities. They cannot be used when making decisions about investments in physical assets. True False 2. One of the potential benefits of investing early for retirement is that an investor can receive greater benefits from the compounding of interest. True False 3. Of all the techniques used in finance, the least important is the concept of the time value of money. True False 4. Compounding is the process of converting today's values, which are termed present value, to future value. True False 5. The coupon rate is the rate of return you could earn on alternative investments of similar risk. True False 6. A perpetuity is an annuity with perpetual payments. True False 7. An amortized loan is a loan that requires equal payments over its life; its payments include both interest and repayment of the debt. True False
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
invested initially, and the greater the present value of a given lump sum to be received at maturity. True False 9. Suppose an investor can earn a steady 5% annually with investment A, while investment B will yield a constant 12% annually. Within 11 years time, the compounded value of investment B will be more than twice the compounded value of investment A (ignore risk). True False 10. Solving for the interest rate associated with a stream of uneven cash flows, without the use of a calculator, usually involves a trial and error process. True False 11. When a loan is amortized, the largest portion of the periodic payment goes to reduce principal in the early years of the loan such that the accumulated interest can be spread out over the life of the loan. True False 12. The effective annual rate is always greater than the simple rate as a result of compounding effects. True False 13. Because we usually assume positive interest rates in time value analyses, the present value of a three-year annuity will always be less than the future value of a single lump sum, if the annuity payment equals the original lump sum investment. True False 14. All else equal, a dollar received sooner is worth more than a dollar received at some later date, because the sooner the dollar is received the more quickly it can be invested to earn a positive return. True False 15. An annuity is a series of equal payments made at fixed equal-length intervals for a specified number of periods. True False
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 01/18/2011 for the course FIN 3604 taught by Professor Patterson during the Spring '10 term at University of South Florida.

Page1 / 52

Chapter 4--Time Value of Mo - Copy - Chapter 4-Time Value...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online