Time Value of Money

1. What is the present value (PV) of a future sum of money?

The value of money today The value of money in the future The total interest earned over time The principal amount invested

2. Which formula calculates the future value (FV) of a single sum with simple interest?

FV = PV * (1 + r * t) FV = PV * (1 + r)^t FV = PMT * [(1 + r)^n - 1]/r FV = PV / (1 + r)^t

3. In time value of money formulas, what does 'r' typically represent?

Number of compounding periods Future value Discount rate or interest rate Present value

4. Which of the following are recognized types of annuities?

Ordinary annuity Annuity due Perpetuity Variable annuity

5. Which factors influence the time value of money?

Interest rate Time period Principal amount Inflation rate

6. Compound interest earns interest only on the original principal amount.

True False

7. An annuity due is characterized by payments made at the end of each period.

True False

8. What term describes a series of equal payments made at regular intervals?

9. In the future value formula FV = PV*(1 + r)^n, what does the variable 'n' represent?

10. Calculate the present value of $1,000 to be received in 5 years with an annual discount rate of 5%. (Round to the nearest dollar)

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