Mid term - Introduction to Finance

Simple interest is computed on principal and on any interest earned that has not been withdrawn.

• True

• False

Interest is the excess cash received or repaid over and above the amount lent or borrowed.

• True

• False

If two annuities have the same number of rents with the same dollar amount, but one is an annuity due and one is an ordinary annuity, the future value of the annuity due will be greater than the future value of the ordinary annuity.

• True

• False

What is interest?

• a. Payment for the use of money.

• b. An equity investment.

• c. Return on capital.

• d. Loan.

Compound interest, rather than simple interest, must be used to properly evaluate long- term investment proposals.

• True

• False

Compound interest uses the accumulated balance at each year end to compute interest in the succeeding year.

• True

• False

The future value of an ordinary annuity table is used when payments are invested at the beginning of each period.

• True

• False

The present value of an annuity due table is used when payments are made at the end of each period

• True

• False

Present value is the value now of a future sum or sums discounted assuming compound interest.

• True

• False

The future value of a single sum is determined by multiplying the future value factor by its present value

• True

• False