Question

1 As the interest rate increases, the present value of an annuity decreases. Group of answer choices False True

**2 As the number of periods N increases, the future value
of a savings account increases.**

Group of answer choices

True

False

3

**Forty years ago, Jordan purchased an investment for
$10,000. The investment earned 5 percent rate of return each year.
What is the worth of the investment today?**

Group of answer choices

73,584.17

70,399.89

400,000.00

151,090.21

Answer #1

Answer to Question 1:

**True**

Interest rate and present value of an annuity are inversely proportionate to each other. If interest rate increases, then the present value of an annuity decreases. If interest rate decreases, then the present value of an annuity increases.

Answer to Question 2:

**True**

If number of periods increase, then number of times interest earned on the investment will also increase which leads to increase in the future value.

Answer to Question 3:

Amount Invested = $10,000

Time Period = 40 years

Interest Rate = 5%

Future Value = Amount Invested * (1 + Interest Rate)^Time
Period

Future Value = $10,000 * 1.05^40

Future Value = $10,000 * 7.039989

**Future Value = $70,399.89**

The present value of a single sum:
Group of answer choices
increases as the discount rate decreases
increases as the discount rate increases
increases as the number of discount periods increases
increases as the number of discount periods increases and as the
discount rate decreases

1. The future value of a present sum increases as either the
discount rate or the number of periods per year increases, other
things held constant.
True or False
2.It is always desirable to have a higher compounding frequency,
regardless of the initial investment or the time horizon.
True or False
3.A perpetuity is a level stream of evenly spaced cash flows
that never ends.
True or False

Which one of the following statements is correct?
a. The future value of an annuity increases when the interest rate
decreases.
b. The present value of an annuity increases when the interest rate
increases.
c. The present value of an annuity is unaffected by the number of
the annuity payments.
d. The future value of an annuity is unaffected by the amount of
each annuity payment.
e, The present value of an annuity increases when the interest rate
decreases.

When calculating the present value of an annuity, we assume
that
a) the number of compundings depends on the annual interest
rate
b. the number of compoundings per year is equal to the number of
payments per year
c. the number of compoundings each year is independent of the
payments per year
d. the number of compundings depends on the size of the
payment.
the difference between the present value and future value of an
amount is:
a. an annuity...

An ordinary annuity has a present value of $1,000,000. The
annuity has monthly payments.
The interest rate on the annuity is 10% APR. Which of the
following represents the present value
if this were an annuity due?
a. $1,000,000 x 1.01
b. $1,000,000 / 1.10
c. $1,000,000 / 1.008333333
d. $1,000,000 x 1.008333333
e. $1,000,000 x 1.10
If you double the initial investment, then the future value will
be more than doubled for a multi-period investment, everything else
equat (Hint:...

A.Calculate the present value of an annuity of $5,000 received
annually that begins today and continues for 10 years, assuming a
discount rate of 9%.
B. Joan invested $5,000 in an interest-bearing account earning
an 8% annual rate of interest compounded monthly. How much will the
account be worth at the end of 5 years, assuming all interest is
reinvested at the 8% rate?
C. Calculate the present value of an ordinary annuity of $5,000
received annually for 10 years,...

All else constant, the net present value of a typical investment
project increases when:
Group of answer choices
The cost of capital increases.
Each cash inflow is delayed by one year.
The initial investment of a project increases.
The cost of capital decreases.
All cash inflows occur during the last year of a project’s life
instead of periodically throughout the life of the project.

1. (TRUE or FALSE?) The lower the interest rate, the faster the
investment will grow.
2. (TRUE or FALSE?) The higher the interest rate, the lower the
future value of an investment.
3. (TRUE or FALSE?) Compound growth occurs when the initial
value of a number increases or decreases each period by the factor
1/(1 + growth rate).

Answer the following questions: What happens to the future value
of some fixed dollar amount invested today as the interest rate
decreases? Why? What happens to the present value of some fixed
dollar amount to be received in the future as the interest rate
increases? Why? What happens to the present value of some fixed
dollar amount to be received in the future as the time to receive
the money decreases? Why? Which will have a higher present value,
assuming...

1. Which of the following statements is incorrect?
a. The time value of money implies that a dollar received today
is worth more than a dollar received tomorrow.
b. The time value of money implies that the further in the
future you receive a dollar, the more it is worth today.
c. All the answers are correct except one.
d. A dollar today is worth more than a dollar received in the
future.
e. The earnings from compounding drive much...

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