FIN 202 COMPREHENSIVE QUESTIONS AND
ANSWERS SURE A+
✔✔QN=100 (20345) Which one of the following statements is NOT true?
a. The time value money refers to what the value of the stream of future cash flows
today is.
b. A dollar received today is worth more than a dollar received tomorrow.
c. A dollar received tomorrow is worth less than a dollar received today.
d. A dollar received today is worth less than a dollar received tomorrow. - ✔✔D
✔✔QN=101 (20359) Which of the following statements is true?
a. The longer the time period that funds are invested, the greater the future value,
regardless of investment rate.
b. The lower the discount rate that funds are invested at, the greater the future value.
c. The shorter the time period that funds are invested, the greater the future value,
regardless of investment rate.
d. The higher the interest rate, the slower the value of an investment will grow. - ✔✔A
✔✔QN=102 (20357) Using lower interest rates will
a. decrease the future value of any investment.
b. increase the future value of any investment.
c. not affect the future value of the investment.
d. None of these. - ✔✔A
✔✔QN=103 (20351) Which one of the following statements is NOT true?
a. Present value calculations involve bringing a future amount back to the present.
b. The present value (PV) is often called the discounted value of future cash payments.
c. The present value factor is more commonly called the discount factor.
d. All of these are true statements. - ✔✔D
✔✔QN=104 (20358) Which of the following statements is true?
,a. A dollar received today is worth more than a dollar to be received in the future
because future dollars are not affected by inflation.
b. A dollar to be received in the future is worth more than a dollar received today
because of the positive impact of rates of return.
c. A dollar received today is worth more than a dollar to be received in the future
because funds received today can be invested to earn a return.
d. A dollar to be received in the future is worth more than a dollar received today
because it would have less risk associated with it. - ✔✔C
✔✔QN=105 (20356) Using lower discount rates will
a. not affect the present value of the future cash flow.
b. increase the present value of any future cash flow.
c. decrease the present value of any future cash flow.
d. None of these. - ✔✔B
✔✔QN=106 (20355) Using higher interest rates will
a. not affect the future value of the investment.
b. increase the future value of any investment.
c. decrease the future value of any investment.
d. None of these. - ✔✔B
✔✔QN=107 (20350) The process of converting future cash flows to what its present
value is
a. time value of money.
b. discounting.
c. compounding.
d. none of these. - ✔✔B
✔✔QN=108 (20347) Future value measures
a. (i) what one or more cash flows are worth at the end of a specified period.
b. (ii) what one or more cash flows that is to be received in the future will be worth
today.
c. both (i) and (ii)
d. None of these - ✔✔A
✔✔QN=109 (20348) Which one of the following statements is true?
a. Individuals prefer to consume goods right away rather than in the future.
b. Individuals prefer to consume goods in the future rather than right away.
c. The time of consumption is irrelevant to individuals.
d. None of these. - ✔✔A
✔✔QN=110 (20344) The time value of money refers to the issue of
a. what the value of the stream of future cash flows is today.
b. why a dollar received tomorrow is worth more than a dollar received today.
c. why a dollar received tomorrow is worth the same as a dollar received today.
,d. None of these. - ✔✔A
✔✔QN=111 (20352) Which one of the following statements is NOT true?
a. Present value calculations involve bringing a future amount back to the present.
b. The future value is often called the discounted value of future cash payments.
c. The present value factor is more commonly called the discount factor.
d. The higher the discount rate, the lower the present value of a dollar. - ✔✔B
✔✔QN=112 (20369) If your investment pays the same amount at the end of each year
for a period of six years, the cash flow stream is called
a. a perpetuity.
b. an ordinary annuity.
c. an annuity due.
d. none of these. - ✔✔B
✔✔QN=113 (20365) In computing the present and future value of multiple cash flows,
a. each cash flow is discounted or compounded at the same rate.
b. each cash flow is discounted or compounded at a different rate.
c. earlier cash flows are discounted at a higher rate.
d. later cash flows are discounted at a higher rate. - ✔✔A
✔✔QN=114 (20372) Cash flows associated with annuities are considered to be
a. an uneven cash flow stream.
b. a cash flow stream of the same amount (a constant cash flow stream).
c. a mix of constant and uneven cash flow streams.
d. none of these. - ✔✔B
✔✔QN=115 (20383) Which one of the following statements is NOT true?
a. The correct way to annualize an interest rate is to compute the effective annual
interest rate (EAR).
b. The APR is the annualized interest rate using simple interest.
c. The correct way to annualize an interest rate is to compute the annual percentage
rate (APR).
d. You can find the interest rate per period by dividing the quoted annual rate by the
number of compounding periods. - ✔✔C
✔✔QN=116 (20375) Which one of the following statements is true about amortization?
a. With an amortized loan, a bigger proportion of each month's payment goes toward
interest in the early periods.
b. With an amortized loan, a bigger proportion of each month's payment goes toward
interest in the later periods.
c. With an amortized loan, a smaller proportion of each month's payment goes toward
interest in the early periods.
d. None of these. - ✔✔A
, ✔✔QN=117 (20362) Which one of the following steps is NOT involved in solving future
value problems?
a. First, draw a time line to make sure that each cash flow is placed in the correct time
period.
b. Second, discount each cash flow for its time period.
c. Third, add up the values.
d. All of these are necessary steps. - ✔✔B
✔✔QN=118 (20380) The true cost of borrowing is the
a. annual percentage rate.
b. effective annual rate.
c. quoted interest rate.
d. periodic rate. - ✔✔B
✔✔QN=119 (20364) Which one of the following steps is NOT involved in solving
present value problems?
a. First, draw a time line to make sure that each cash flow is placed in the correct time
period.
b. Second, compound each cash flow for its time period.
c. Third, add up the values.
d. All of these are necessary steps. - ✔✔B
✔✔QN=120 (20382) Which one of the following statements is NOT true?
a. The APR is the appropriate rate to do present and future value calculations.
b. The EAR is the appropriate rate to do present and future value calculations.
c. The EAR is the true cost of borrowing and lending.
d. The EAR takes compounding into account. - ✔✔A
✔✔QN=121 (20374) Which one of the following statements is NOT true about
amortization?
a. Amortization refers to the way the borrowed amount (principal) is paid down over the
life of the loan.
b. With an amortized loan, each loan payment contains some payment of principal and
an interest payment.
c. With an amortized loan, a smaller proportion of each month's payment goes toward
interest in the early periods.
d. A loan amortization schedule is just a table that shows the loan balance at the
beginning and end of each period, the payment made during that period, and how much
of that payment represents interest and how much represents repayment of principal. -
✔✔C
✔✔QN=122 (20378) Your investment in a small business venture will produce cash
flows that increase by 15 percent every year for the next 25 years. This cash flow
stream is called
ANSWERS SURE A+
✔✔QN=100 (20345) Which one of the following statements is NOT true?
a. The time value money refers to what the value of the stream of future cash flows
today is.
b. A dollar received today is worth more than a dollar received tomorrow.
c. A dollar received tomorrow is worth less than a dollar received today.
d. A dollar received today is worth less than a dollar received tomorrow. - ✔✔D
✔✔QN=101 (20359) Which of the following statements is true?
a. The longer the time period that funds are invested, the greater the future value,
regardless of investment rate.
b. The lower the discount rate that funds are invested at, the greater the future value.
c. The shorter the time period that funds are invested, the greater the future value,
regardless of investment rate.
d. The higher the interest rate, the slower the value of an investment will grow. - ✔✔A
✔✔QN=102 (20357) Using lower interest rates will
a. decrease the future value of any investment.
b. increase the future value of any investment.
c. not affect the future value of the investment.
d. None of these. - ✔✔A
✔✔QN=103 (20351) Which one of the following statements is NOT true?
a. Present value calculations involve bringing a future amount back to the present.
b. The present value (PV) is often called the discounted value of future cash payments.
c. The present value factor is more commonly called the discount factor.
d. All of these are true statements. - ✔✔D
✔✔QN=104 (20358) Which of the following statements is true?
,a. A dollar received today is worth more than a dollar to be received in the future
because future dollars are not affected by inflation.
b. A dollar to be received in the future is worth more than a dollar received today
because of the positive impact of rates of return.
c. A dollar received today is worth more than a dollar to be received in the future
because funds received today can be invested to earn a return.
d. A dollar to be received in the future is worth more than a dollar received today
because it would have less risk associated with it. - ✔✔C
✔✔QN=105 (20356) Using lower discount rates will
a. not affect the present value of the future cash flow.
b. increase the present value of any future cash flow.
c. decrease the present value of any future cash flow.
d. None of these. - ✔✔B
✔✔QN=106 (20355) Using higher interest rates will
a. not affect the future value of the investment.
b. increase the future value of any investment.
c. decrease the future value of any investment.
d. None of these. - ✔✔B
✔✔QN=107 (20350) The process of converting future cash flows to what its present
value is
a. time value of money.
b. discounting.
c. compounding.
d. none of these. - ✔✔B
✔✔QN=108 (20347) Future value measures
a. (i) what one or more cash flows are worth at the end of a specified period.
b. (ii) what one or more cash flows that is to be received in the future will be worth
today.
c. both (i) and (ii)
d. None of these - ✔✔A
✔✔QN=109 (20348) Which one of the following statements is true?
a. Individuals prefer to consume goods right away rather than in the future.
b. Individuals prefer to consume goods in the future rather than right away.
c. The time of consumption is irrelevant to individuals.
d. None of these. - ✔✔A
✔✔QN=110 (20344) The time value of money refers to the issue of
a. what the value of the stream of future cash flows is today.
b. why a dollar received tomorrow is worth more than a dollar received today.
c. why a dollar received tomorrow is worth the same as a dollar received today.
,d. None of these. - ✔✔A
✔✔QN=111 (20352) Which one of the following statements is NOT true?
a. Present value calculations involve bringing a future amount back to the present.
b. The future value is often called the discounted value of future cash payments.
c. The present value factor is more commonly called the discount factor.
d. The higher the discount rate, the lower the present value of a dollar. - ✔✔B
✔✔QN=112 (20369) If your investment pays the same amount at the end of each year
for a period of six years, the cash flow stream is called
a. a perpetuity.
b. an ordinary annuity.
c. an annuity due.
d. none of these. - ✔✔B
✔✔QN=113 (20365) In computing the present and future value of multiple cash flows,
a. each cash flow is discounted or compounded at the same rate.
b. each cash flow is discounted or compounded at a different rate.
c. earlier cash flows are discounted at a higher rate.
d. later cash flows are discounted at a higher rate. - ✔✔A
✔✔QN=114 (20372) Cash flows associated with annuities are considered to be
a. an uneven cash flow stream.
b. a cash flow stream of the same amount (a constant cash flow stream).
c. a mix of constant and uneven cash flow streams.
d. none of these. - ✔✔B
✔✔QN=115 (20383) Which one of the following statements is NOT true?
a. The correct way to annualize an interest rate is to compute the effective annual
interest rate (EAR).
b. The APR is the annualized interest rate using simple interest.
c. The correct way to annualize an interest rate is to compute the annual percentage
rate (APR).
d. You can find the interest rate per period by dividing the quoted annual rate by the
number of compounding periods. - ✔✔C
✔✔QN=116 (20375) Which one of the following statements is true about amortization?
a. With an amortized loan, a bigger proportion of each month's payment goes toward
interest in the early periods.
b. With an amortized loan, a bigger proportion of each month's payment goes toward
interest in the later periods.
c. With an amortized loan, a smaller proportion of each month's payment goes toward
interest in the early periods.
d. None of these. - ✔✔A
, ✔✔QN=117 (20362) Which one of the following steps is NOT involved in solving future
value problems?
a. First, draw a time line to make sure that each cash flow is placed in the correct time
period.
b. Second, discount each cash flow for its time period.
c. Third, add up the values.
d. All of these are necessary steps. - ✔✔B
✔✔QN=118 (20380) The true cost of borrowing is the
a. annual percentage rate.
b. effective annual rate.
c. quoted interest rate.
d. periodic rate. - ✔✔B
✔✔QN=119 (20364) Which one of the following steps is NOT involved in solving
present value problems?
a. First, draw a time line to make sure that each cash flow is placed in the correct time
period.
b. Second, compound each cash flow for its time period.
c. Third, add up the values.
d. All of these are necessary steps. - ✔✔B
✔✔QN=120 (20382) Which one of the following statements is NOT true?
a. The APR is the appropriate rate to do present and future value calculations.
b. The EAR is the appropriate rate to do present and future value calculations.
c. The EAR is the true cost of borrowing and lending.
d. The EAR takes compounding into account. - ✔✔A
✔✔QN=121 (20374) Which one of the following statements is NOT true about
amortization?
a. Amortization refers to the way the borrowed amount (principal) is paid down over the
life of the loan.
b. With an amortized loan, each loan payment contains some payment of principal and
an interest payment.
c. With an amortized loan, a smaller proportion of each month's payment goes toward
interest in the early periods.
d. A loan amortization schedule is just a table that shows the loan balance at the
beginning and end of each period, the payment made during that period, and how much
of that payment represents interest and how much represents repayment of principal. -
✔✔C
✔✔QN=122 (20378) Your investment in a small business venture will produce cash
flows that increase by 15 percent every year for the next 25 years. This cash flow
stream is called
