#1
What does the concept of time value of money suggest?
Money loses value over time
Money grows over time
Money has the same value regardless of time
Money is influenced by inflation only
#2
Which of the following formulas represents the future value of an investment?
FV = PV / (1 + r)
FV = PV * (1 + r)
FV = PV * r
FV = PV + r
#3
What does the term 'opportunity cost' refer to in investment analysis?
The cost of the next best alternative that is foregone
The cost of capital
The cost of inflation
The cost of borrowing
#4
What is the primary objective of investment analysis?
To maximize risk
To minimize returns
To maximize returns while minimizing risk
To maximize returns regardless of risk
#5
Which of the following is a characteristic of a bond?
Ownership stake in a company
Fixed interest payments
Unlimited maturity
Variable interest rates
#6
What does the term 'discount rate' refer to in the context of investment analysis?
The rate at which future cash flows are discounted
The rate at which investments are sold at a discount
The rate of inflation
The rate of return on a risk-free investment
#7
Which of the following is a characteristic of a mutual fund?
Investments in individual stocks only
Low risk
Profits based on fixed interest rates
Pooled funds invested in various securities
#8
What is the formula for calculating the present value of a single future sum?
PV = FV / (1 + r)
PV = FV * (1 + r)
PV = FV * r
PV = FV - r
#9
Which of the following is NOT a component of the time value of money?
Interest Rate
Future Value
Inflation Rate
Risk-Free Rate
#10
What is the internal rate of return (IRR) of an investment?
The interest rate at which the present value of cash inflows equals the initial investment
The interest rate at which the future value of cash inflows equals the initial investment
The interest rate at which the future value of cash inflows exceeds the initial investment
The interest rate at which the present value of cash inflows exceeds the initial investment
#11
Which of the following is a disadvantage of using the payback period as an investment evaluation method?
It considers the time value of money
It is easy to understand and calculate
It ignores cash flows beyond the payback period
It considers the profitability of investments
#12
What does the term 'compounding' refer to in the context of time value of money?
The process of converting future values into present values
The process of calculating the future value of an investment
The process of reinvesting earnings to generate additional earnings
The process of adjusting for inflation
#13
Which of the following factors affects the present value of an investment?
Inflation rate
Risk-free rate
Time horizon
All of the above
#14
What is the formula for calculating the future value of an annuity?
FV = PMT * (1 + r)
FV = PMT / r
FV = PMT * ((1 + r)^n - 1) / r
FV = PMT * ((1 + r)^n - 1)
#15
What does the term 'discounting' refer to in the context of time value of money?
The process of reducing future cash flows to their present value
The process of increasing future cash flows to their future value
The process of comparing different investment options
The process of adjusting for inflation
#16
Which of the following is a characteristic of a perpetuity?
It has a finite life
It has a fixed maturity date
It pays an equal amount at regular intervals indefinitely
It has variable cash flows
#17
What is the formula for calculating the net present value (NPV) of an investment?
NPV = PV / (1 + r)
NPV = PV - Initial Investment
NPV = Sum of PV of cash flows - Initial Investment
NPV = PV * (1 + r)
#18
In the context of investment analysis, what does the term 'sensitivity analysis' refer to?
A method to determine the optimal investment option
An analysis of the impact of changes in key variables on project outcomes
An analysis of historical investment data
A method to evaluate the profitability of investments
#19
Which of the following is a characteristic of an annuity due?
Payments occur at the beginning of each period
Payments occur at the end of each period
Payments vary over time
There are no fixed payments
#20
What does the term 'risk premium' represent in investment analysis?
The additional return expected for taking on additional risk
The minimum acceptable rate of return
The inflation-adjusted return
The return without considering risk
#21
In investment analysis, what does the term 'capital budgeting' refer to?
The process of estimating project costs
The process of evaluating and selecting long-term investments
The process of managing short-term investments
The process of calculating the internal rate of return