Which of the following is false? A. The greater the interest rate, the greater the present...

Which of the following is false?

A. The greater the interest rate, the greater the present value, given a $100 future value and holding the time period constant.

B. The discount factor is the reciprocal of the compound factor.

C. The longer the time period, the smaller the present value, given a $100 future value and holding the interest rate constant.

D. A future dollar is always less valuable than a dollar today if interest rates are positive.

Solutions

Expert Solution

Present value = Future value/(1+i)^n

i = interest rate per period

n= number of periods

choose A)

A) False, since present value and interest rate are inversely proportional

B) True, as per the formula

C) True, since present value and time period are inversely poportional

D) True, Time value of money decreases with time

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

2. As long as the interest rate is greater than zero, the present value of a...

2. As long as the interest rate is greater than zero, the present value of a single sum will always: Select one: a. Equal the future value if the time period is one year. b. Increase as the interest rate increases. c. Be more than the future value. d. Increase as the number of periods decreases. e. Decrease as the number of periods increases. 3. A project costs $525 and has cash flows of $100 for the first three years...

Which of the following sentences is FALSE? Select one: a. Interest rate risk is the risk...

Which of the following sentences is FALSE? Select one: a. Interest rate risk is the risk that results from the changes in interest rates and thereby impact the bond value. b. As a bond approaches maturity, the price of the bond will approach its par value until, the bond is worth its face value at maturity. c. The value of a bond that pays semiannual interest is greater than that of an otherwise equivalent annual coupon interest paying bond. d....

Which of the following statements is FALSE? Select one: A. In a standard interest rate swap,...

Which of the following statements is FALSE? Select one: A. In a standard interest rate swap, one party agrees to pay coupons based on a fixed interest rate in exchange for receiving coupons based on the prevailing market interest rate during each coupon period. B. An interest rate swap is a contract entered into with a bank, much like a forward contract, in which the firm and the bank agree to exchange the coupons from two different types of loans....

(1) If the interest rate in Japan is greater than the interest rate in the United...

(1) If the interest rate in Japan is greater than the interest rate in the United States, other things held constant, according to interest rate parity, will the Japanese Yen appreciate or depreciate against US dollar? (2) If Mexico experiences a hyperinflation (very high inflation) relative to the US, other things held constant, according to the parity condition, will the Mexican Peso appreciate or depreciate against US dollar?

Solve for the unknown interest rate in each of the following Present Value Years Interest Rate...

Solve for the unknown interest rate in each of the following Present Value Years Interest Rate Future Value $ 220 4 % $ 270 340 18 986 37,000 19 169,819 36,261 25 481,638

Solve for the unknown interest rate in each of the following: Present Value Years Interest Rate...

Solve for the unknown interest rate in each of the following: Present Value Years Interest Rate Future Value $ 805 4 % $ 1,561 995 5 1,898 24,000 16 150,832 79,300 19 330,815 --------------------------------------------------------------------- For each of the following, compute the future value: (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Present Value Years Interest Rate Future Value $ 2,650 6 20 % $ 9,453 19 8 99,305 13 13 237,382 29...

Which of the following statements is false with respect to the present value of a future...

Which of the following statements is false with respect to the present value of a future amount? Select one: a. The higher the discount rate, the lower the present value of a single sum for a given time period. b. The lower the discount rate, the lower the present value of a single sum for a given time period. c. none of the answers is correct. d. The relation between present value and time is exponential. e. The greater the...

Which of following statement/s is/are false regarding convexity: Select one: a. The greater the convexity of...

Which of following statement/s is/are false regarding convexity: Select one: a. The greater the convexity of a security or portfolio of securities, the more insurance or interest rate protection against rate increases b. High convexity results in less potential gains after interest rate falls c. Convexity diminishes the error in duration as an investment criterion d. Convexity is a feature of all fixed-income securities e. None of the Above

Calculating Interest Rates. Solve for the unknown interest rate in each of the following. PRESENT VALUE...

Calculating Interest Rates. Solve for the unknown interest rate in each of the following. PRESENT VALUE YEARS INTEREST RATE FUTURE VALUE $ 812 9 $ 2 491 1 120 6 2 829 19 500 21 252 942 66 500 18 423 925

Calculating Interest Rates Solve for the unknown interest rate in each of the following: Present Value...

Calculating Interest Rates Solve for the unknown interest rate in each of the following: Present Value Years Future Value 189 4 287 410 8 887 51,700 14 152,184 21,400 27 538,600

Subjects