Disregarding risk, if money has time value, the future value of some amount of money always will be more than the amount originally invested, and the present value of some amount to be received in the future is always less than that future amount to be received.

Question 5 options:

True

False

One of the potential benefits of investing early for retirement is that an investor can receive greater benefits from the compounding of interest.

Question 7 options:

True

False

Assume that you wish to purchase a 20-year bond that has a maturity value of $1,000 and makes semiannual interest payments of $40. If you require a 10 percent simple yield to maturity on this investment, what is the maximum price you should be willing to pay for the bond?

Question 8 options:

a)

$619

b)

$674

c)

$761

d)

$828

e)

$902

The process of discounting or finding the present value of a cash flow to be received in the future is really the reverse of compounding.

Question 9 options:

True

False

Other things held constant, (1) if the expected inflation rate decreases, and (2) investors become more risk averse, the Security Market Line would shift

Question 10 options:

a)

Down and have steeper slope.

b)

Up and have less steep slope.

c)

Up and keep same slope.

d)

Down and keep same slope.

e)

Down and have less steep slope.