IET 334 Final Review || with Complete Solutions.
Norstrom's Criterion correct answers If the cumulative NCF starts with a negative value and has
only one sign change, then there is exactly one positive solution to the ROR equation.
Descartes' Rule correct answers The total number of solutions is always less than or equal to the
number of sign changes in the NCF series
Non-Conventional Cash Flows correct answers A NCF series with more than one sign change
Conventional Cash Flows correct answers A series of net cash flows (NCF) with only one sign
change
When evaluating independent choose best option correct answers False
When making AW comparisons, calculations are based on at least two life cycles correct
answers False
AW comparisons assume that the alternatives will be needed for the LCM period correct answers
True
If annual worth (AW) assumptions are met, comparisons require that AW is calculated over the
LCM period. correct answers False
Rate of Return correct answers The interest rate paid on the unrecovered balance of borrowed
money so that the final payment brings the balance to zero with interest considered.
Rate of return is basically determining what interest rate balances all expenses with all correct
answers True
Capital Recovery (CR) correct answers The equivalent A that must be earned to recover the
initial investment plus a stated rate of return (MARR) over the expected life.
Clicker: Annual worth (AW) analysis and present worth (PW) analysis yield the same decision,
but from a different perspective. correct answers True
Annual Worth Main Advantage correct answers Only need to calculate AW over one life cycle
for each alternative.
Clicker: Independent alternatives are exempt from the equal service requirement. correct answers
True
Bonds: What are they? correct answers o A debt financing tool to raise capital
o "IOU"
Bond Types correct answers Treasury Security
, Municipal bond
Mortgage bond
Debenture bond
Capitalized cost is nothing more than the present worth of an indefinite cash flow correct
answers True
Capitalized Cost correct answers - Present worth of a cash flow that is expected to last
indefinitely (perpetuity)
Ar = Pi
If alternatives are independent, then PW analysis determines the single best alternative to select
correct answers False
Given an interest rate of 16% per year, compounded monthly, what is the effective quarterly
rate? correct answers 16%/4 = 4% per qtr CP mo
Iqtr = (1+ .04/3)3 - 1 = 4.05%
If interest is 6% per semiannual period, compounded monthly, what is the effective annual rate?
correct answers Ryr = 6% x 2 = 12% per yr CP mo
Iyr = (1+.12/12)12 - 1 = 12.68%
Which of the following best describes an interest rate of 2% per month? correct answers 24% per
year, compounding monthly
An interest rate of 1% per month is a/an correct answers (effective rate with a known
compounding period)
APR - effective interest rate correct answers False
With one exception, multiplying or dividing a given interest rate to change the interest period,
creates a nominal rate correct answers True
It's okay to use nominal rates in compounded interest formulas or standard factors correct
answers False
Given an effective continuous rate of 11.628% per year, determine the nominal rate. correct
answers r = ln(1+i) = ln(1.11628) = 11.00%
Given an interest rate of 17% per year compounded continuously, determine the effective annual
rate correct answers iyr = e.17 -1 = 18.53%
Given an interest rate of 15% per year, determine the effective continuous rate. correct answers
iyr = er - 1 = e.15 - 1 = 16.18%
Norstrom's Criterion correct answers If the cumulative NCF starts with a negative value and has
only one sign change, then there is exactly one positive solution to the ROR equation.
Descartes' Rule correct answers The total number of solutions is always less than or equal to the
number of sign changes in the NCF series
Non-Conventional Cash Flows correct answers A NCF series with more than one sign change
Conventional Cash Flows correct answers A series of net cash flows (NCF) with only one sign
change
When evaluating independent choose best option correct answers False
When making AW comparisons, calculations are based on at least two life cycles correct
answers False
AW comparisons assume that the alternatives will be needed for the LCM period correct answers
True
If annual worth (AW) assumptions are met, comparisons require that AW is calculated over the
LCM period. correct answers False
Rate of Return correct answers The interest rate paid on the unrecovered balance of borrowed
money so that the final payment brings the balance to zero with interest considered.
Rate of return is basically determining what interest rate balances all expenses with all correct
answers True
Capital Recovery (CR) correct answers The equivalent A that must be earned to recover the
initial investment plus a stated rate of return (MARR) over the expected life.
Clicker: Annual worth (AW) analysis and present worth (PW) analysis yield the same decision,
but from a different perspective. correct answers True
Annual Worth Main Advantage correct answers Only need to calculate AW over one life cycle
for each alternative.
Clicker: Independent alternatives are exempt from the equal service requirement. correct answers
True
Bonds: What are they? correct answers o A debt financing tool to raise capital
o "IOU"
Bond Types correct answers Treasury Security
, Municipal bond
Mortgage bond
Debenture bond
Capitalized cost is nothing more than the present worth of an indefinite cash flow correct
answers True
Capitalized Cost correct answers - Present worth of a cash flow that is expected to last
indefinitely (perpetuity)
Ar = Pi
If alternatives are independent, then PW analysis determines the single best alternative to select
correct answers False
Given an interest rate of 16% per year, compounded monthly, what is the effective quarterly
rate? correct answers 16%/4 = 4% per qtr CP mo
Iqtr = (1+ .04/3)3 - 1 = 4.05%
If interest is 6% per semiannual period, compounded monthly, what is the effective annual rate?
correct answers Ryr = 6% x 2 = 12% per yr CP mo
Iyr = (1+.12/12)12 - 1 = 12.68%
Which of the following best describes an interest rate of 2% per month? correct answers 24% per
year, compounding monthly
An interest rate of 1% per month is a/an correct answers (effective rate with a known
compounding period)
APR - effective interest rate correct answers False
With one exception, multiplying or dividing a given interest rate to change the interest period,
creates a nominal rate correct answers True
It's okay to use nominal rates in compounded interest formulas or standard factors correct
answers False
Given an effective continuous rate of 11.628% per year, determine the nominal rate. correct
answers r = ln(1+i) = ln(1.11628) = 11.00%
Given an interest rate of 17% per year compounded continuously, determine the effective annual
rate correct answers iyr = e.17 -1 = 18.53%
Given an interest rate of 15% per year, determine the effective continuous rate. correct answers
iyr = er - 1 = e.15 - 1 = 16.18%
