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Question 1 of 10
1. Question
As the number of discount periods, n, becomes larger, what happens to the discount factor and the present value?
I. The discount factor becomes smaller
II. The discount factor becomes larger
III. The present value becomes less
IV. The present value becomes moreCorrect
As the number of discount periods, n, becomes larger, the discount factor becomes smaller and the present value becomes less.
Incorrect
As the number of discount periods, n, becomes larger, the discount factor becomes smaller and the present value becomes less.

Question 2 of 10
2. Question
As the interest rate per period, i, becomes larger, what happens to the discount factor the present value?
I. the discount factor becomes smaller
II. the discount factor becomes larger
III. the present value becomes less
IV. the present value becomes moreCorrect
As the interest rate per period, i, becomes larger, the discount factor becomes smaller and the present value becomes less.
Incorrect
As the interest rate per period, i, becomes larger, the discount factor becomes smaller and the present value becomes less.

Question 3 of 10
3. Question
Suppose that you wish to have $20,000 saved by the end of six years. And suppose you deposit funds today in an account that pays 3 percent interest, compounded annually. How much must you deposit today to meet your goal?
I. $16,749.69
II. $16,747.69
III. $16,748.69
IV. $16,750.69Correct
PV = $20,000 ÷ (1 + 0.03)6 = $20,000 ÷ 1.1941 = $16,749.69
Incorrect
PV = $20,000 ÷ (1 + 0.03)6 = $20,000 ÷ 1.1941 = $16,749.69

Question 4 of 10
4. Question
What is the value today of $500,000 to be received in 10 years, with an interest rate of 7 percent?
I. $254,172.65
II. $254,174.65
III. $254,175.65
IV. $254,173.65Correct
Inputs: i = 7%, n = 10; FV = 500,000. Solve for the present value:
PV = $254,174.65Incorrect
Inputs: i = 7%, n = 10; FV = 500,000. Solve for the present value:
PV = $254,174.65 
Question 5 of 10
5. Question
The process of valuation involves estimating future cash inflows and outflows, and discounting these future cash flows to?
I. The future at a compound rate
II. The future at a discount rate
III. The present at a compound rate
IV. The present at a discount rateCorrect
The process of valuation involves estimating future cash inflows and outflows, and discounting these future cash flows to the present at a discount rate that reflects the uncertainty of these cash flows.
Incorrect
The process of valuation involves estimating future cash inflows and outflows, and discounting these future cash flows to the present at a discount rate that reflects the uncertainty of these cash flows.

Question 6 of 10
6. Question
Suppose you deposit $100 today, $200 one year from today, and $300 two years from today, in an account that pays 10 percent interest, compounded annually. What is the balance in the account at the end of two years?
I. $641
II. $639
III. $642
IV. $640Correct
FV = [$100 × (1.10)2] + [$200 × 1.10] + $300 = $641
Incorrect
FV = [$100 × (1.10)2] + [$200 × 1.10] + $300 = $641

Question 7 of 10
7. Question
Suppose you deposit $100 today, $200 one year from today, and $300 two years from today, in an account that pays 10 percent interest, compounded annually. What is the balance in the account at the end of three years?
I. $706.10
II. $703.10
III. $704.10
IV. $705.10Correct
FV = [$100 × (1.10)3] + [$200 × (1.10)2] + [$300 × 1.10]
= $133.1 + 242 + 330 = $641 × 1.10 = $705.10Incorrect
FV = [$100 × (1.10)3] + [$200 × (1.10)2] + [$300 × 1.10]
= $133.1 + 242 + 330 = $641 × 1.10 = $705.10 
Question 8 of 10
8. Question
Suppose you deposit $100 today, $200 one year from today, and $300 two years from today, in an account that pays 10 percent interest, compounded annually. What is the present value of these deposits?
I. $570.68
II. $569.68
III. $568.68
IV. $567.68Correct
PV = $100 + [$200 ÷ 1.10] + [$300 ÷ (1.10)2]
= $100 + 192.31 + 277.37 = $569.68Incorrect
PV = $100 + [$200 ÷ 1.10] + [$300 ÷ (1.10)2]
= $100 + 192.31 + 277.37 = $569.68 
Question 9 of 10
9. Question
Which of the following is the rate of return the investor requires on an investment, given the price he or she is willing to pay for its expected future cash flow?
I. The interest rate
II. The compound interest
III. The discount rate
IV. The cash flow indexCorrect
the discount rate is the rate of return the investor requires on an investment, given the price he or she is willing to pay for its expected future cash flow.
Incorrect
the discount rate is the rate of return the investor requires on an investment, given the price he or she is willing to pay for its expected future cash flow.

Question 10 of 10
10. Question
Suppose a bank offers you lending rates at 6 percent APR, with interest compounded monthly. What is the compounding period?
I. Yearly
II. Monthly
III. Quarterly
IV. SemiannuallyCorrect
A month
Incorrect
A month