IFM11 TB Ch28

(Difficulty Levels: Easy, Easy/Medium, Medium, Medium/Hard, and Hard)

Please see the preface for information on the AACSB letter indicators (F, M, etc.) on the subject lines.

Multiple Choice: True/False

(28.2) Compounding F J Answer: a EASY
1. Starting to invest early for retirement increases the benefits of compound interest.

a. True
b. False

(28.2) Compounding F J Answer: b EASY
2. Starting to invest early for retirement reduces the benefits of compound interest.

a. True
b. False

(28.2) Compounding F J Answer: a EASY
3. A time line is meaningful even if all cash flows do not occur annually.

a. True
b. False

(28.2) Compounding F J Answer: b EASY
4. A time line is not meaningful unless all cash flows occur annually.

a. True
b. False

(28.2) Compounding F J Answer: a EASY
5. Time lines can be constructed in situations where some of the cash flows occur annually but others occur quarterly.

a. True
b. False

(28.2) Compounding F J Answer: b EASY
6. Time lines cannot be constructed in situations where some of the cash flows occur annually but others occur quarterly.

a. True
b. False

(28.2) Compounding F J Answer: a EASY
7. Time lines can be constructed for annuities where the payments occur at either the beginning or the end of the periods.

a. True
b. False

(28.2) Compounding F J Answer: b EASY
8. Time lines cannot be constructed for annuities unless all the payments occur at the end of the periods.

a. True
b. False

(28.2) Compounding F J Answer: a EASY
9. Some of the cash flows shown on a time line can be in the form of annuity payments while others can be uneven amounts.

a. True
b. False

(28.2) Compounding F J Answer: b EASY
10. Some of the cash flows shown on a time line can be in the form of annuity payments but none can be uneven amounts.

a. True
b. False

(28.3) PV versus FV C J Answer: b EASY
11. If the discount (or interest) rate is positive, the present value of an expected series of payments will always exceed the future