1.If an 8% interest rate is compounded twice a year for 10 years, then the future value would be calculated using an interest rate of:

4%, compounded over 20 interest periods

None of the above

16%, compounded over 20 interest periods.

4%, compounded over 10 interest periods

8%, compounded over 10 interest periods.

4.A series of identical cash flows (inflow or outflow) is referred to as a(n)

single sum

identical series

sum series

annuity

None of the other alternatives are correct

6.You have a choice of putting your $1,000 life savings into investment Uno (which bears 5 % per annum compound interest compounded annually) or putting your $1,000 into investment Duos (which bears interest at only 4% per annum, but is compounded semi-annually). Which investment is better for you if you invest for a year?

Duos

Uno is better in even numbered years and Duos is better in odd numbered years

Uno

They provide identical returns

There is not enough information provided to make an assessment

7.If $1,628,900 is the FV (future value) of an investment and $1,000,000 is the PV (present value) of that same investment then how many periods would the investment have to run to accumulate to that future value given that money is worth 10% per annum and compounding occurs semi-annually? Round your answer to the nearest whole number and remember that .5 and up rounds up while less than .5 rounds down.

Some other number of periods

12 periods

13 periods

10 periods

11 periods

8.A bank investment of $100 is made by Alpha which provides an annual return of 8% (simple interest) and principle plus interest is left in the bank for 5 years to accumulate. Beta also invests $100 at this bank for a term of 5 years and earns compound interest compounded annually. At the end of 5 years when the investments are cashed in:

There is not enough information provided to solve this problem.

Alpha receives $164

Beta receives more

They receive identical amounts

Alpha receives more

9.Which of the following statements is true?

When time periods are short (less than one year) the time value of money is essential to consider

Money grows linearly with compound interest

When time periods are short (less than one year) the time value of money is usually ignored

None of the other alternatives are correct

As time passes, the amount in the Discount account, which is the result of the present value being less than the amount which will ultimately be paid in the future, increases

10.If 8% is compounded quarterly for 2 years then the number of periods used in a time-value money calculation would be

8 periods

None of the other alternatives are correct

12 periods

4 periods

3 periods