Present Value of a Single Amount MCQs (1-10)

1. Assume that the interest rate is greater than zero. Which of the following cash-inflow streams totaling $1, 500 would you prefer? The cash flows are listed in order for Year 1, Year 2, and Year 3 respectively?

(a) $700; $500 and $300

(b) $300; $500 and $700

(c) $500; $500 and $500

(d) Any of the above, since they each sum to $1,500

Correct! Wrong!

2. The higher the Future Value (FV) of the payment, the higher will be the?

(a) Discount rate

(b) Liquidity

(c) Present value

(d) Cost of borrowing

Correct! Wrong!

3. Present value of a single amount is simply termed as current value of?

(a) Present payment

(b) Future payment

(c) Annuity payment

(d) Discount payment

Correct! Wrong!

4. ________ means current value of a future amount of money evaluated at a given interest rate?

(a) Compounding

(b) Discounting

(c) Nominal rate

(d) Continuous rate

Correct! Wrong!

5. What does net present value give?

(a) Future values of present cash flows

(b) Present value of present cash flow

(c) Present value of future cash flows

(d) Future values of future cash flows

Correct! Wrong!

6. What is the present value of $8, 000 to be paid at the end of three years if interest rate is 11%?

(a) $6,015

(b) $4, 872

(c) $6, 725

(d) $1, 842

Correct! Wrong!

7. What is the present value of a stream of $2,500 semiannual payments received at the end of each period for the next 10 years? The APR is 6%?

(a) $35,810

(b) $38,310

(c) $37,194

(d) $36,885

Correct! Wrong!

8. What is the present value of $1,000 to be paid at the end of 5 years if the correct risk adjusted interest rate is 8%?

(a) $714

(b) $1,462

(c) $322.69

(d) $401.98

Correct! Wrong!

9. To increase a given future value, the discount rate should be adjusted ________?

(a) Downward

(b) Upward

(c) First upward and then downward

(d) None

Correct! Wrong!

10. You are to receive cash flows of $10,000,000 in 4 years’ time and $11,000,000 in 8 years’ time. Your discount rate is 9% per year. What is the present value of the cash flows?

(a) $9,531,412

(b) $9,784,598

(c) $10,453,025

(d) $12,604,781

Correct! Wrong!

Present Value of a Single Amount MCQs (1-10)

1. Assume that the interest rate is greater than zero. Which of the following cash-inflow streams totaling $1, 500 would you prefer? The cash flows are listed in order for Year 1, Year 2, and Year 3 respectively?

2. The higher the Future Value (FV) of the payment, the higher will be the?

3. Present value of a single amount is simply termed as current value of?

4. ________ means current value of a future amount of money evaluated at a given interest rate?

5. What does net present value give?

6. What is the present value of $8, 000 to be paid at the end of three years if interest rate is 11%?

7. What is the present value of a stream of $2,500 semiannual payments received at the end of each period for the next 10 years? The APR is 6%?

8. What is the present value of $1,000 to be paid at the end of 5 years if the correct risk adjusted interest rate is 8%?

9. To increase a given future value, the discount rate should be adjusted ________?

10. You are to receive cash flows of $10,000,000 in 4 years’ time and $11,000,000 in 8 years’ time. Your discount rate is 9% per year. What is the present value of the cash flows?

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