Money Banking and Financial Markets Stephen Cecchetti 5th edition – Test bank

Money Banking and Financial Markets Stephen Cecchetti 5th edition – Test bank

Chapter 04

Future Value, Present Value and Interest Rates

Multiple-Choice Questions

1.  A promise of a $100 payment to be received one year from today is:

a. more valuable than receiving the payment today.

b. less valuable than receiving the payment two years from now.

c. equally valuable as a payment received today if the interest rate is zero.

d. not enough information is provided to answer the question.

Ans: C

Difficulty: 02 Medium

Learning Objective: 04-01

AACSB: Reflective Thinking

Blooms: Understand

Topic: Valuing Monetary Payments Now and in the Future

2.  The future value of $100 at a 5% per year interest rate at the end of one year is:

a. $95.00

b. $105.00

c. $97.50

d. 107.50

Ans: B

Difficulty: 03 Hard

Learning Objective: 04-01

AACSB:  Knowledge Application

Blooms: Apply

Topic: Valuing Monetary Payments Now and in the Future

3. Credit:

a. probably came into being at the same time as coinage.

b. predates coinage by 2,000 years.

c. did not exist until the middle ages.

d. first became popular due to the writings of Aristotle.

Ans: B

Difficulty: 01 Easy

Learning Objective: 04-01

AACSB: Reflective Thinking

Blooms: Remember

Topic: Valuing Monetary Payments Now and in the Future

4.  Which of the following expresses 5.65%?

a. 0.565

b. 0.00565

c. 5.65

d. 0.0565

Ans: D

Difficulty: 01 Easy

Learning Objective: 04-01

AACSB: Reflective Thinking

Blooms: Remember

Topic: Valuing Monetary Payments Now and in the Future

5.  Which of the following expresses 4.85%?

a. 0.0485

b. 4.850

c. 0.00485

d. 0.485

Ans: A

Difficulty: 01 Easy

Learning Objective: 04-01

AACSB: Reflective Thinking

Blooms: Remember

Topic: Valuing Monetary Payments Now and in the Future