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Interest Rate Quiz

As the interest rate rises, the present value of a future lump sum:

One of the key concepts of the time value of money is that:

Which term represents the process where interest is paid on an investment and then added to the principal during the next period, and then interest is earned on the new sum?

Suppose you borrow $12 and promise to pay it back over 12 months in monthly installments. If the interest rate were positive, your payment would be:

A decrease in the interest rate will ________ the present value of an annuity.

John wants to know how much money he will have in 4 years if he puts $1,000 into an investment opportunity that pays 7% interest annually. What is John looking for?

To value a set of uneven cash flows, be begin by averaging the cash flows and then treat that average as an annuity.

In order for a series of cash flows to be called an ordinary annuity, equal dollar payments must be made:

To calculate the present value of a lump sum with nonannual compounding periods, the annual interest rate is divided by the number of compounding periods per year, and:

The present value of a perpetuity:

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