HI5002 QUIZ

Lecture 3: Time value of money

1. The process of accumulating interest on an investment over multiple time periods is called
_______________________
2. Suppose that you put $100 in a savings account earning 6% simple interest annually. How much
will your savings grow after 2 year?
3. When quoting interest rates, banks will generally use what is known as the
__________________________
4. To make interest rates comparable, we calculate the ___________________________________
5. _________________________ refers to finite series of equal payments that are made at the end
of equidistant points in time, such as monthly, quarterly, or annually
6. A timeline identifies the timing and amount of a stream of payments—both cash received and
cash spent—along with the interest rate earned. True / False
7. If we assume an investment will earn interest only on the original principal, we call this compound
interest True / False
8. The present value or FV of money, tells us, “What a current specific amount of money will be
worth in the future?”
9. A perpetuity is an annuity that continues forever or has no maturity. True / False
10. The CFs may have a mixed pattern of cash inflows and outflows, single and annuity CFs.
True / False