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8414 Unit 4 Part 1

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6 views3 pages

8414 Unit 4 Part 1

Uploaded by

ishaansar25
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Multiple-Choice Questions

1. What does the term "future value" refer to in financial terms?

A) The amount of money invested initially


B) The value of money at the present time
C) The future value of one rupee invested at a given rate for a given number of periods
D) The value of money in the past

Answer: C) The future value of one rupee invested at a given rate for a given number of periods

2. How is the present value defined in financial contexts?

A) The value of money in the future


B) The amount of money invested initially
C) The present value of one rupee to be received after a given number of periods at a given interest rate
D) The value of money at the present time

Answer: C) The present value of one rupee to be received after a given number of periods at a given interest
rate

3. What does the term "net present value" represent in financial analysis?

A) The total value of all future cash flows


B) The difference between the future value and the present value
C) The initial investment amount
D) The value of money at the present time

Answer: B) The difference between the future value and the present value

4. What does the term "time value of money" refer to in financial terms?

A) The present value of one rupee to be received after a given number of periods at a given interest rate.
B) The difference between the future value and the present value
C) The value of money that changes over time due to inflation
D) The value of money that remains constant over time

Answer: A) The present value of one rupee to be received after a given number of periods at a given interest
rate.

5. How is the time value of money affected by changes in interest rates?

A) Increases with higher interest rates


B) Decreases with higher interest rates
C) Remains constant regardless of interest rates
D) Is not influenced by interest rates

Answer: A) Increases with higher interest rates

6. What is the future value of money?

A) The value of an amount of money at a future date


B) The value of money at the present time
C) The value of money that changes over time
D) The value of money that remains constant

Answer: A) The value of an amount of money at a future date

7. How does compounding affect the future value of money?


A) Increases the future value
B) Decreases the future value
C) Has no impact on the future value
D) Makes the future value unpredictable

Answer: A) Increases the future value

8. What is the present value of money?

A) The current value of an amount of money to be received in the future


B) The value of money at a future date
C) The value of money that changes over time
D) The value of money that remains constant

Answer: A) The current value of an amount of money to be received in the future

9. How does discounting impact the present value of money?

A) Decreases the present value


B) Increases the present value
C) Has no effect on the present value
D) Makes the present value unpredictable

Answer: A) Decreases the present value

10. In financial terms, what does the term "discount rate" refer to?

A) The interest rate used to calculate the present value of future cash flows
B) The interest rate used to calculate the future value of money
C) The rate at which money depreciates over time
D) The rate at which money appreciates over time

Answer: A) The interest rate used to calculate the present value of future cash flows

11. How does the time value of money concept impact investment decisions?

A) Encourages investing for the long term


B) Discourages investing due to uncertainty
C) Has no influence on investment decisions
D) Promotes short-term investments

Answer: A) Encourages investing for the long term

12. What role does inflation play in the time value of money?

A) Inflation decreases the purchasing power of money over time


B) Inflation increases the purchasing power of money over time
C) Inflation has no impact on the time value of money
D) Inflation stabilizes the value of money

Answer: A) Inflation decreases the purchasing power of money over time

13. How does the time value of money concept apply to loans and mortgages?

A) It determines the total amount to be repaid over time


B) It has no relevance to loan or mortgage calculations
C) It impacts the interest rates charged on loans
D) It affects the credit score of the borrower
Answer: A) It determines the total amount to be repaid over time

14. What is the primary reason for considering the time value of money in financial decision-making?

A) To account for the opportunity cost of money over time


B) To predict future economic trends accurately
C) To eliminate the impact of interest rates on investments
D) To ensure immediate returns on investments

Answer: A) To account for the opportunity cost of money over time

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