Quiz Ch 05 – T/F Annual Cash Flows and Time Line Relevance
Fundamentals of Financial Management, Concise
Brigham and Houston
09th Edition
True or false: A time line retains its significance even when not all cash flows take place annually.
True or false: A time line retains its significance even when not all cash flows take place annually.
True or false: When presented with a periodic interest rate, such as monthly, the nominal annual rate can be computed by multiplying the periodic rate by the number of periods per year.
True or false: With a given periodic interest rate, such as monthly, the nominal annual rate is obtained by dividing the periodic rate by the number of periods per year.
True or false: If Randy Jones invests $1,000, Security B’s compounded value should be slightly less than twice the compounded value of Security A after 11 years, given effective annual rates of 5% and 12%, respectively assuming annual compounding and disregarding risk.
True or false: If Sally Smith invests $1,000, Security B’s compounded value should exceed twice that of Security A after 11 years, given effective annual rates of 5% and 12%, respectively assuming annual compounding and disregarding risk.
True or false: Compounding ensures the effective annual rate on a bank deposit (or loan) is never greater than the nominal rate on the deposit (or loan).
True or false: Compounding ensures that the effective annual rate on a bank deposit (or loan) is either equal to or greater than the nominal rate on the deposit (or loan).
True or false: When the number of compounding periods in a year increases, the future value of an initial investment at Time 0 becomes greater, and the present value of a specified lump sum to be received in the future also becomes greater.
True or false: When the number of compounding periods in a year increases, the future value of an initial investment at Time 0 becomes greater, and the present value of a specified lump sum to be received in the future also becomes greater.
True or false: Time lines can be formulated when cash flows transpire annually as well as quarterly.