TIME VALUE OF MONEY

What is the time value of money?

• The idea
• The concept
• The theory
• The fact

What is the future value of a present amount of money?

• The past
• The present
• The future
• The random

Which formula is used to calculate future value?

• PV
• PMT
• FV
• NPV

How does compounding affect the future value of money?

• Decreases
• Increases
• Has no effect
• Fluctuates

What is the difference between simple and compound interest?

• Simple interest is charged only on the principal amount while compound interest is charged on both the principal and interest.
• Simple interest is charged on both the principal and interest while compound interest is charged only on the principal amount.
• Simple interest is charged only on the principal amount while compound interest is charged on both the principal and interest.
• Simple interest and compound interest are the same.

Which is a better investment option - 5% simple interest or 4% compounded annually?

• 5% simple interest
• 4% compounded annually
• Both are the same
• Cannot be determined

If you deposit $500 in a bank account that pays 7% interest annually, how much money will you have in the account after 5 years?

• 714.5
• 714.05
• 714
• 714.75

What is the present value of $1,000 received 5 years from now if the discount rate is 6%?

• 747.26
• 747.52
• 747.84
• 748.12

What is the difference between annuity and perpetuity?

• An annuity is a series of fixed payments for a fixed period, while a perpetuity is a series of fixed payments for an infinite period.
• An annuity is a series of fixed payments for an infinite period, while a perpetuity is a series of fixed payments for a fixed period.
• An annuity and perpetuity are the same.
• Cannot be determined