SECTION A – MULTIPLE CHOICE QUESTIONS
- What do we mean when we say that money has “time value”?
(a) A dollar tomorrow is worth more than a dollar today.
(b) Money is more valuable if you receive it at the time you need to spend it.
(c) Both (a) and (b)
(d) None of the above - If interest compounds more than once a year, which of the following will be greater?
(a) The APR
(b) The EAR
(c) The interest rate per compounding period
(d) Impossible to say without more information
La Trobe University 4
SECTION D – CALCULATION QUESTIONS - What is the future value of $100 invested for 5 years at an interest rate of 7%? *
- You win a $3000 lottery prize, and decide to put it away for your retirement. You invest it in a term deposit
paying 7% p.a., compounded semi‐annually? How much will be in the account after 40 years? * - What is the pres
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