BUF Quiz 4

What is the formula for calculating the future value of a single cash flow?

• FV = C0 × (1 + r)T

• FV = C0 / (1 + r)T

• FV = C0 + r × T

• FV = C0 - (1 + r)T

If the interest rate is 10%, what is the present value of $1 paid to you one year from now?

• $1.00

• $0.95

• $0.81

• $0.91

What is the Effective Annual Rate (EAR) of an 18% APR loan compounded monthly?

• 17.50%

• 20.00%

• 18.00%

• 19.56%

What does a positive Net Present Value (NPV) indicate?

• The investment is expected to be profitable.

• The investment will result in a loss.

• The investment is not worth considering.

• The investment has no effect on cash flows.

Which of the following is NOT a method of investment appraisal?

• Net Income

• Net Present Value

• Internal Rate of Return

• Payback Period

What is the formula for calculating the present value of a future payment?

• PV = FV + (1 + i)n

• PV = FV - (1 + i)n

• PV = FV × (1 + i)n

• PV = FV / (1 + i)n

If you invest $5,000 today at an interest rate of 10%, how long will it take to grow to $10,000?

• 7.27 years

• 5 years

• 10 years

• 8 years

What is the payback period technique used for?

• To determine how long it takes for an investment to pay for itself.

• To calculate the total profit from an investment.

• To evaluate the market value of an investment.

• To assess the risk of an investment.

What is the formula for calculating the present value of a perpetuity?

• PV = C / r

• PV = C × r

• PV = C + r

• PV = C - r

Which of the following describes an annuity?

• A one-time cash flow.

• A stream of cash flows that grows indefinitely.

• A cash flow that varies each period.

• A stream of constant cash flows that lasts for a fixed number of periods.