Chapter 6-Time Value of Money MULTIPLE CHOICE 1. Which of the following statemen

Question

Chapter 6-Time Value of Money MULTIPLE CHOICE 1. Which of the following statements about time lines is false? a. A time line is a graphic portayal of a time vas s false? b. Time zero is the present point in time. portrayal of a time value problem. c. Future time periods are to the right of zero 2. Which of the following is not a time value key? b. VY c. LN d. PMT e. FV 3 The higher the rate of interest a. b. c. d. the larger the present value of a future sum of money the smaller the future value of an amount invested today the smaller the present value of a future sum of money all of the above 4. The principle behind time value of money is based on the fact that a a sum of money in hand today is worth more than the same sum in the future b. a sum of money in hand today is worth less than the same sum in the future c. a sum of money in the future is worth less than the same sum in hand today d. a and ce 5. Effective annual rates decrease asdecrease: a. annual percentage rates b. number of compounding periods c. quoted rates d. All of the above 6. Holding all other variables constant, an increase in the interest rate will cause a. Future values b. Present values c. Annuity payments d. Growth rates to decrease.

Explanation / Answer

1.(a) Time is portrayed along a verticle line.

2 (a) a

3.(c) The smaller the present value of a future sum of money

4 (d) a and c

5 (d) All of the above.

6( b) Present values.

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