Multiple Choice Questions
1. All of the following mean the same as rate of return except:
(a) Internal rate of return
(b) Time for return of capital
(c) Interest rate
(d) Return on investment
2. The numerical value of i in a rate of return equation can range from:
(a) 0% to 100%
(b) 0 to ∞
(c) –100% to +100%
(d) –100% to ∞
3. The internal rate of return on an investment refers to the interest rate earned on the:
(a) Initial investment
(b) Unrecovered balance of the investment
(c) Money recovered from an investment
(d) Income from an investment
4. A conventional (or simple) cash flow series is one wherein:
(a) The algebraic signs on the net cash flows change only once.
(b) The interest rate you get is a simple interest rate.
(c) The total of the net cash flows is equal to 0.
(d) The total of the cumulative cash flows is equal to 0.
5. According to Descartes’ rule of signs, for a net cash flow sequence of – – + + – +, the number of possible i values is:
(a) 2
(b) 3
(c) 4
(d) 5
6. According to Norstrom’s criterion, the one statement below that is correct is:
(a) The cumulative cash flow must start out positively.
(b) The cumulative cash flow must start out negatively.
(c) The cumulative cash flow must equal 0.
(d) The net cash flow must start out positively.