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Principles of Finance

Multiple Choice

Principles of FinanceMultiple Choice
1 .
The most basic type of financial transaction involves _______________.
  1. an amount of money that is not invested
  2. a series of equal installment amounts paid or received over a period of time
  3. a simple, one-time amount of cash that can be either a receipt or a payment
  4. None of the above
2 .
If a discount (or interest) rate has a positive value, then the future value of any amount deposited in an interest-bearing account will _______________.
  1. be less than the present value
  2. be equal to the present value
  3. be greater than the present value
  4. decline over time
3 .
If the discount (or interest) rate used to calculate the present value of a future payment increases, the calculated present value will do which of the following?
  1. Increase
  2. Decrease
  3. Remain the same
  4. Increase as the period of time shortens
4 .
The discount rate that is required to equate a future payment of $500 in three years to a present value of $400 is _______________.
  1. 4.7%
  2. 6.5%
  3. 7.7%
  4. 8.8%
5 .
If compounding periods increase in frequency and all else remains the same, the dollar values of any resulting future value calculations will _______________.
  1. increase
  2. remain the same
  3. decrease
  4. None of the above
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