longer the period of time, the greater the future value. True or False?

11. Everything else being equal, the lower the discount rate, the higher the present value.

True or False?

12. Everything else being equal, the longer the period of time, the lower the present value. True or False?

13. John just inherited $100,000 from his Aunt Emma. He wants to retire in 25 years. John has decided to put the entire amount in a savings account paying 6% interest. This is an example of:

a. present value of a lump sum                               b. present value of an annuity

c. future value of a lump sum                                  d. future value of an annuity

14. A term associated with future value is “compounding”; a term associated with present value is “discounting”.

a. True                                        b. False

c. OK, if you can’t make up your mind: none of the above

d. There is no “d” but this stupid program won’t let me have only three answers. A note to students: this is NOT the correct answer – don’t even try it! J

15. As the interest rate increases for any given period, the future value interest factor will

a. decrease                                                                 b. increase

c. remain unchanged                                                 d. approach 1.0

16. For a given interest rate, as the length of time until receipt of funds increases, the present value interest factor

a. changes proportionally                                            b. increases

c. decreases                                                                d. remains unchanged.