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1. Which of the following statement is correct?

a. All the answers are incorrect.

b. A dollar in hand today is worth less than a dollar to be received in the future.

c. The intrinsic value of a business or any asset, including stocks and bonds is the present value of its expected future cash flows.

d. The cash flows for an annuity due must all occur at the end of the periods.

e. The future value (FV) is also the beginning amount that will grow to some future value.

2. Doggie company has the following production budget for one of the products for the first quarter of 2016:

Month production

January 18300

February 15500

March 12000

Each units required 2 pounds material K9 which cost $5 per pound. Doggie has 1000 pounds of K9 on hand on December 31, 2015, and wants an inventory of K9 equal to 10% percent of the need months production requirements. What is the cost of K9 purchased in February?

a. 176400

b. 188600

c. 152400

d. 193600

3. The production budget is required to prepare all of the following budgets except :

A.the overhead budget.

B.the selling and administrative budget.

C.the labor budget

D.the materials purchase budget.

4. Which of the following statement is correct?

a. All the answers are incorrect.

b. A cash flow can be an inflow (a deposit, a cost, or an amount paid to others) or an outflow (a receipt from others).

c. A regular amortizing loan calculates a monthly interest charge by multiplying the beginning loan balance by the effective rate.

d. Annual compounding means that interest is paid twice a year.

e. Annuities must have constant payments for a fixed number of periods and if these conditions do not hold, then the series is not an annuity.

5. Which of the following statement is incorrect?

a. Discounting is the process of finding the present value (PV) of a future cash flow or a series of cash flows.

b. Most of the answers are correct.

c. The nominal annual interest rate or just the nominal rate is the rate quoted by banks, brokers, and other financial institutions.

d. As a result of compounding, the effective annual rate on a bank deposit or a loan is always equal to or greater than the nominal rate on the deposit or loan.

e. Discounting is the same as compounding.

6. Which of the following statement is incorrect?

a. Before 1968, lenders were not required to tell borrowers the APR but this changed when the Congress passed the Consumer Credit Protection Act in 1968.

b. The cash flows for an annuity due must all occur at the beginning of the periods.

c. An amortized loan is paid off with uneven payments over infinitely many periods.

d. A bank loan's nominal interest rate will always be equal to or less than its effective annual rate, assuming positive interest rates and holding other things constant.

e. Most of the answers are correct.

7. Which of the following statement is correct?

a. When compounding occurs more frequently than once a year, the nominal rate must be converted to a periodic rate, and the number of years must be converted to periods.

b. If the annuity payments occur at the end of each period, then we call it an annuity due.

c. All the answers are incorrect.

d. An ordinary annuity is a series of cash flows in which the amount varies from one period to the next.

e. An ordinary annuity has payments occurring at the beginning of each period.

8. Which of the following statement is correct?

a. The process of going forward, from present values (PVs) to future values (FVs), is called discounting.

b. Discounting is the process of determining the future value (FV) of a cash flow or a series of cash flows.

c. If you know the cash flows and the PV of a cash flow stream, you can determine its interest rate.

d. All the answers are incorrect.

e. Compounding is the process of finding the present value of a single payment or series of payments.

9. Which of the following statement is incorrect?

a. An inflow is a deposit, a cost, or an amount paid to others, while an outflow is a receipt collected from others.

b. Regarding a 20-year monthly payment amortized mortgage with a nominal interest rate of 10%, a smaller proportion will be principal, than for the last monthly payment.

c. Most of the answers are correct.

d. To find the PV of an uneven series, find the PV of each individual cash flow and then sum them.

e. The greater the number of compounding periods within a year, then the smaller the present value of a given lump sum to be received at some future date.

10. Which of the following statement is incorrect?

a. An ordinary annuity has payments occurring at the end of each period.

b. A cash flow can be an inflow (a receipt from others) or an outflow (a deposit, a cost, or an amount paid to others).

c. If interest is earned only on the principal, we call it compound interest.

d. Most of the answers are correct.

e. An amortized loan is paid off with equal payments over a specified period.

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