1.
Interest is the difference between the amount borrowed and the amount repaid.
A. True
B. False


2.
Simple interest is the return on the principal for two or more periods.
A. True
B. False


3.
Compound interest is computed on principal and on any interest that has not been paid or withdrawn.
A. True
B. False


4.
The process of determining the present value is referred to as discounting the present amount.
A. True
B. False


5.
The present value of 1 factors increase as the interest rate increases.
A. True
B. False


6.
The further removed from the present the future value is, the smaller its present value.
A. True
B. False


7.
The present value of an annuity is the value now of a series of future receipts or payments, discounted assuming simple interest.
A. True
B. False


8.
Discounting may be done on an annual basis or over shorter periods of time such as monthly or semiannually.
A. True
B. False


9.
The present value of cash flows is often used in making a capital investment decision.
A. True
B. False


10.
Computing the present value of salvage value in a capital budgeting decision is discounting an annuity.
A. True
B. False


11.
The amount of interest involved in any financing transaction is based on each of the following except the:
A.
interest rate.
B.
present value of 1 factors.
C.
principal.
D.
time.


12.
When the computation of interest includes both principal and any interest earned that has not been paid or withdrawn, the calculation involves:
A.
simple interest.
B.
discounting.
C.
compound interest.
D.
either simple or compound interest.


13.
The present value of a given amount is based on each of the following except the:
A.
dollar amount to be received.
B.
length of time until the amount is received.
C.
interest rate.
D.
date of the original transaction.


14.
The present value of 1 factors decrease as the:
A.
discount rate decreases.
B.
discount rate increases.
C.
number of periods increase.
D.
both b and c.


15.
In computing the present value of an annuity, each of the following is needed except the:
A.
amount of the periodic receipts or payments.
B.
discount rate.
C.
number of discount periods.
D.
present value of 1 factors.


16.
A decision to make a long term investment will take into account the present value of all of the following except:
A.
present value of operating cash inflows.
B.
present value of operating cash outflows.
C.
present value of salvage value.
D.
present value of depreciation expense.


17.
Discounting the future amount is usually done over each of the following periods except:
A.
daily
B.
monthly
C.
quarterly.
D.
semiannually.



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