#1
5. In the context of Time Value of Money, what does the term 'annuity' refer to?
A series of equal periodic cash flows
ExplanationRegular cash flow series
#2
10. In the context of Time Value of Money, what is the opportunity cost?
The value of the best alternative forgone in making a decision
ExplanationCost of missed opportunities
#3
15. What does the term 'compounding' mean in the context of Time Value of Money?
Adding interest to the principal amount
ExplanationInterest accumulation
#4
1. What does the term 'Time Value of Money' (TVM) refer to?
The idea that money available today is worth more than the same amount in the future
ExplanationValue of money today vs. future
#5
2. Which of the following formulas is used to calculate the future value of a single sum investment?
FV = PV * (1 + r)^t
ExplanationCalculating future worth
#6
6. What does the present value represent in Time Value of Money calculations?
The value of money today equivalent to a future sum
ExplanationCurrent worth of future sum
#7
9. What is the time horizon in Time Value of Money calculations?
The duration over which cash flows occur
ExplanationTime span for cash flow
#8
13. Which factor is considered in the calculation of the present value of an annuity?
Discount rate
ExplanationDiscounting regular payments
#9
14. How does a longer time horizon impact the future value of an investment?
Increases future value
ExplanationTime's effect on worth
#10
3. What is the discount rate in the context of Time Value of Money?
The interest rate used to calculate present value
ExplanationDetermines present value
#11
4. How does compounding frequency affect the future value of an investment?
Higher compounding frequency increases the future value
ExplanationMore frequent growth
#12
7. Which formula is used to calculate the present value of a single sum investment?
PV = FV / (1 + r)^t
ExplanationDetermining current worth
#13
8. How does an increase in the interest rate affect the present value of a future sum?
Higher interest rate decreases present value
ExplanationImpact of interest rate change
#14
11. What is the formula for calculating the number of periods (t) in the future value of a single sum?
t = log(FV / PV) / log(1 + r)
ExplanationFuture period calculation
#15
12. In Time Value of Money, what does the term 'real interest rate' refer to?
The interest rate adjusted for inflation
ExplanationAdjusted for inflation