Fundamentals of Financial Management, Third Edition

OBJECTIVE-TYPE QUESTIONS

1. Mark true or false.
   1. Present value is multiplied by the compound factor to find the future value.
   2. In case of regular annuity, cash flow occurs at the beginning of each time period.
   3. In case of annuity due, cash flow occurs at the beginning of each time period.
   4. Actual percentage rate and annual percentage yield are synonymous.
   5. In case of deferred annuity, the present value of cash flow during the deferral period is subtracted from that for the entire period.
2. Choose the most suitable answer.
   1. Computing future value involves:
      1. simple interest rate formula
      2. compound interest rate formula
      3. the average of both the above
   2. An annuity involves:
      1. uniform cash flow during different periods
      2. different size of cash flows during different ...