FIN 301 Test 2 Module 5 Exam Questions with Complete Solutions
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Course
FIN 301
Institution
FIN 301
The process of finding the future value of dollar is called discounting. - Answer-False
1. The process of finding the future value of a dollar is called compounding.
True False - Answer-True
1. For a series of equal flows over equal periods of time, those flows are called annuities.
Tru...
FIN 301 Test 2 Module 5 Exam Questions
with Complete Solutions
The process of finding the future value of dollar is called discounting. - Answer-False
1. The process of finding the future value of a dollar is called compounding.
True False - Answer-True
1. For a series of equal flows over equal periods of time, those flows are called
annuities.
True False - Answer-True
1. When a series of equal flows over equal periods of time occur at the end of each of
the periods, the annuity is called an ordinary annuity.
True False - Answer-True
1. When a series of equal flows over equal periods of time occur at the end of each of
the periods, the annuity is called an annuity due.
True False - Answer-False
1. When compounding takes place more than once per year, the effective rate of
interest is less than the stated or nominal rate of interest
True False - Answer-False
1. When compounding takes place more than once per year, the effective rate of
interest is greater than the stated or nominal rate of interest
True False - Answer-True
1. A common term used to describe finding the present value of future flows is
a. Compounding
b. Capitalizing
c. Reduction
d. Discounting
e. None of the answers provided is correct. - Answer-D
1. It is possible to convert the present value of an ordinary annuity table factor to a
present value of an annuity due table factor by
, a. Multiplying the ordinary annuity table factor by (1+ r)n
b. Multiplying the ordinary annuity table factor by (1- r)n
c. Dividing the ordinary annuity table factor by (1+ r)n
d. Dividing the ordinary annuity table factor by (1- r)n
e. None of the answers provided is correct - Answer-E
1. Increasing the required rate of return in a time value problem will
a. Increase the present value of the cash flows
b. Decrease the future value of the cash flows
c. Decrease the present value of the cash flows
d. Increase the time required to reach a future value
e. None of the answers provided is correct - Answer-c
1. In a time value problem, the periodic rate of interest is
a. the stated rate of interest
b. the nominal rate of interest
c. The effective rate of interest
d. The actual interest rate earned when compounding is more than once per year
e. None of the answers provided is correct - Answer-e
1. Dominic's Dominoes, Inc. has seen its earnings decline over the past three years
from $500,000 to $465,000. At what compound rate did the firm's earnings change over
that time frame?
a. (2.39)%
b. 2.39%
c. 2.45%
d. (2.45%)
e. None of the answers provided is correct - Answer-a
1. Jennifer's Jellies, Inc. recently purchased a building for $800,000. To finance the
building, the firm obtained a mortgage in the full amount of $800,000. If the mortgage is
to be paid off in 25 years and has a stated interest rate of 12%, how much are the firm's
monthly payments?
a. $102,000.00
b. $8,425.80
c. $6,000.00
d. Cannot be determined from the information provided
e. None of the answers provided is correct. - Answer-b
1. Jeff and Teara Washington have just financed a home and make annual payments of
$19,515.43. If the mortgage has a stated interest rate of 5%, and will be paid off in 30
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