[QUESTION]
2. The time value of money is a concept, which means that the value of $1 increases over time.
Answer: False
Difficulty: 1 Easy
Learning Objective: C-01 Contrast simple and compound interest.
Topic: Simple Versus Compound Interest
Blooms: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
Feedback: Time value of money means that interest causes the value of money received today to
be greater than the value of that same amount of money received in the future.
[QUESTION]
3. Simple interest is interest earned on the initial investment only.
[QUESTION]
4. If you put $500 into a savings account that pays simple interest of 8% per year and then
withdraw the money two years later, you will earn interest of $80.
[QUESTION]
5. If you put $600 into a savings account that pays simple interest of 10% per year and then
withdraw the money two years later, you will earn interest of $126.
[QUESTION]
7. If you put $200 into a savings account that pays annual compound interest of 8% per year and
then withdraw the money two years later, you will earn interest of $32.
[QUESTION]
9. Future value is how much an amount today will grow to be in the future.
Answer: True
Difficulty: 1 Easy
Learning Objective: C-02 Calculate the future value and present value of a single amount.
Topic: Time Value of a Single Amount
Blooms: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
[QUESTION]
10. The more frequent the rate of compounding, the more interest that is earned on previous
interest, resulting in a higher future value.
Answer: True
Difficulty: 2 Medium
Learning Objective: C-02 Calculate the future value and present value of a single amount.
Topic: Time Value of a Single Amount
Blooms: Understand
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
[QUESTION]
11. Present value indicates how much a present amount of money will grow to in the future.
Answer: False
Difficulty: 1 Easy
Learning Objective: C-02 Calculate the future value and present value of a single amount.
Topic: Time Value of a Single Amount
Blooms: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
Feedback: Present value indicates the value today of receiving some larger amount in the future.
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