15. If a bank uses quarterly compounding for saving account, the nominal rate will be greater than the effective annual rate (EAR)

a. True b) False

16. If money has time value (that is, i>0), the future value of some amount of money will always be more than the amount invested. The present value of some amount to be received in the future is always less than the amount to be reviewed.

a) True b) False

17. You have determined the profitability of a planned project by finding the present value of all the cash flows from that project. Which of the following would cause the project to look less appealing, that is, have a lower present value?

1. The discount rate decreases.
2. The cash flows are extended over a longer period of time
3. The discount rate increases
4. Statement b and c are both correct
5. Statement a and b are both correct

18. As the discount rate increases without limit, the present value of a future cash inflow

a. Gets larger without limit

b. Stays unchanged

c. Approaches zero

d. Gets smaller without limit; that is, approaches minus infinity

e. Goes to e^in