Test Bank For Personal Finance 6th Edition Madura

Test Bank For Personal Finance 6th Edition Madura

Personal Finance, 6e (Madura) 

Chapter 3   Applying Time Value Concepts

3.1   The Importance of the Time Value of Money

1) The time period over which you save money has very little impact on its growth.

Answer:  FALSE

Diff: 1

Question Status:  Previous edition

2) The time value of money concept can help you determine how much money you need to save over a period of time to achieve a specific savings goal.

Answer:  TRUE

Diff: 1

Question Status:  Previous edition

3) Time value of money calculations, such as present and future value amounts, can be applied to many day-to-day decisions.

Answer:  TRUE

Diff: 1

Question Status:  Revised

4) Time value of money is only applied to single dollar amounts.

Answer:  FALSE

Diff: 1

Question Status:  Previous edition

5) Your utility bill, which varies each month, is an example of an annuity.

Answer:  FALSE

Diff: 1

Question Status:  Previous edition

6) In general, a dollar can typically buy more today than it can in one year.

Answer:  TRUE

Diff: 1

Question Status:  Revised

7) An annuity is a stream of equal payments that are received or paid at equal intervals in time.

Answer:  TRUE

Diff: 1

Question Status:  Previous edition

8) An annuity is a stream of equal payments that are received or paid at random periods of time.

Answer:  FALSE

Diff: 2

Question Status:  Previous edition

9) Time value of money computations relate to the future value of lump-sum cash flows only.

Answer:  FALSE

Diff: 2

Question Status:  Revised

10) There are two sets of present and future value tables: one set for lump sums and one set for annuities.

Answer:  TRUE

Diff: 1

Question Status:  Previous edition

11) Money received today is worth more than the same amount of money received in the future. This is true because

A) money received today can grow at a compounded rate.

B) future inflation will devalue your current investments.

C) all goods and services will cost more in the future.

D) unique investment opportunities exist today, which may not be available in the future.

Answer:  A

Diff: 2

Question Status:  Revised

12) The time value of money refers to

A) personal opportunity costs such as time lost on an activity.

B) financial decisions that require borrowing funds from a bank.

C) changes in interest rates due to changes in the supply and demand for money in the national economy.

D) the difference in the value of money depending on when it is received.

Answer:  D

Diff: 2

Question Status:  Revised

13) The time value of money implies that a dollar received today is worth ________ a dollar received tomorrow.

A) more than

B) less than

C) the same as

D) Insufficient data to determine the answer.

Answer:  A

Diff: 1

Question Status:  Revised

14) The concept of the time value of money is based on

A) the level of unemployment.

B) taxes.

C) interest earned over time

D) the Dow Jones Industrial Average.

Answer:  C

Diff: 1

Question Status:  Revised

15) An ordinary annuity can be defined as

A) a series of unequal payments received or paid at equal intervals at the beginning of each period.

B) a series of equal payments received or paid at equal intervals of time at the end of each period.

C) a lump sum.

D) intermittent payments for ordinary expenses.

Answer:  B

Diff: 2

Question Status:  Revised

16) Which of the following it not an annuity?

A) Equal monthly payments to your investment account

B) Lottery winnings of $100 per month for life

C) Mortgage payments for a fixed-rate loan

D) Monthly utility bills

Answer:  D

Diff: 2

Question Status:  Revised