True-False Question

1. Lump sums are multiple cash flows.

2. PVs are later values and FVs are earlier values.

3. PVs are rightward on a time line and FVs are leftward on the time line.

4. PVs represent the amount that an earlier amount will grow into.

5. FVs represent what you need to invest earlier to have it grow into a specified later amount.

6. Discounting is the process used to find a FV.

7. What is discounted from the PV is the interest part to arrive at the FV.

8. With compound interest, interest is earned every period only on the original starting amount.

9. Ceteris paribus, as a depositor and for the same annual interest rate, you would prefer simple interest to compound interest.

10. There are a total of 3 variables in the basic TVM formulas.

11. The right-hand side variables in the FV formula represent the 3 key factors determining stock prices.

12. The FV and the discount rate are inversely related.

13. The number of years it would take an investment to double is approximately equal to the annual interest rate times 72.