Reference no: EM132189786

Answer the following Question :

1. The present value of multiple cash flows is greater than the sum of those cash flows.
A) True
B) False

2. When you pay the same amount every month on your car loan for a period of three years, the stream of cash flows is called an annuity.
A) True
B) False

3. The present value of a perpetuity is the promised constant cash payment divided by the interest rate (i).
A) True
B) False

4. The Truth-in-Lending Act and the Truth-in-Savings Actrequire by law that the APR be disclosed on all consumer loans and savings plans and that it is to be prominently displayed on advertising and contractual documents.
A) True
B) False

5. Which one of the following steps is NOT involved in solving future value problems for multiple cash flows?
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 the above are necessary steps.

6. Which one of the following steps is NOT involved in solving present value problems for multiple cash flows?
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 the above are necessary steps.

7. The future value of multiple cash flows is:
A) Greater than the sum of the cash flows.
B) Equal to the sum of all the cash flows.
C) Less than the sum of the cash flows
D) None of the above.

8. Which ONE of the following statements is 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) 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.
D) All of the above are true.

9. 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 the above.

10. The management of Stymied, Inc. is expecting the following end-of-year annual cash flows from a three-year project it is contemplating:$113,000, $132,000, $141,000. If their opportunity cost is 11.5 percent, calculate how much the company should spend today on this opportunity. (Round to the nearest dollar.)

11. Your Company is about to make an investment in another company that will guarantee it a cash flow of $40,000 each year for the next ten years. If the company uses a discount rate of 15 percent on its investments, what is the present value of this investment? (Round to the nearest dollar.)

12.  You plan to save $1,250 at the end of each of the next three years to pay for a vacation. If you can invest it at 7 percent, how much will you have at the end of three years? (Round to the nearest dollar.)