Chapter05-IntroductiontoValuation:TheTimeValueofMoney5-Chapter05IntroductiontoValuation:TheTimeValueofMoneyMultipleChoiceQuestions1.Youareinvesting$100todayinasavingsaccountatyourlocalbank.Whichoneofthefollowingtermsreferstothevalueofthisinvestmentoneyearfromnow?A.futurevalueB.presentvalueC.principalamountsD.discountedvalueE.investedprincipal2.Tracyinvested$1,000fiveyearsagoandearns4percentinterestonherinvestment.Byleavingherinterestearningsinheraccount,sheincreasestheamountofinterestsheearnseachyear.Thewaysheishandlingherinterestincomeisreferredtoaswhichoneofthefollowing?A.simplifyingB.compoundingC.aggregationD.accumulationE.discounting3.Steveinvested$100twoyearsagoat10percentinterest.Thefirstyear,heearned$10interestonhis$100investment.Hereinvestedthe$10.Thesecondyear,heearned$11interestonhis$110investment.Theextra$1heearnedininterestthesecondyearisreferredtoas:A.freeinterest.B.bonusincome.C.simpleinterest.D.interestoninterest.E.presentvalueinterest.4.Interestearnedonboththeinitialprincipalandtheinterestreinvestedfrompriorperiodsiscalled:A.freeinterest.B.dualinterest.C.simpleinterest.D.interestoninterest.E.compoundinterest.5.Sarainvested$500sixyearsagoat5percentinterest.Shespendsherearningsassoonassheearnsanyinterestsosheonlyreceivesinterestonherinitial$500investment.WhichtypeofinterestisSaraearning?A.freeinterestB.complexinterestC.simpleinterestD.interestoninterestE.compoundinterest6.Shelleywonalotteryandwillreceive$1,000ayearforthenexttenyears.Thevalueofherwinningstodaydiscountedatherdiscountrateiscalledwhichoneofthefollowing?A.singleamountB.futurevalueC.presentvalueD.simpleamountE.compoundedvalue7.Terryiscalculatingthepresentvalueofabonushewillreceivenextyear.Theprocessheisusingiscalled:A.growthanalysis.B.discounting.C.accumulating.D.compounding.E.reducing.8.Stevejustcomputedthepresentvalueofa$10,000bonushewillreceiveinthefuture.Theinterestrateheusedinthisprocessisreferredtoaswhichoneofthefollowing?A.currentyieldB.effectiverateC.compoundrateD