Question

1.

When comparing the future value of two investments: one that earns 6% p.a. simple interest and the other that earns 6% p.a interest compounding annually, the difference can best be described as:

Select one:

A. the time value of money

B. a pricing convention in money markets

C. compound interest

D. interest on interest

2.The concept that a unit of currency today is not worth the same as a unit of currency in another time period is best described as the:

Select one:

A. rate of money.

B. capital use rate.

C. time value of money.

D. economic measure of money.

3.

Investment banks perform an important role in:

Select one:

A. Providing commercial loans to business

B. Providing a range of products including options, futures and general insurance to the general public

C. Originating, underwriting and distributing new securities for issuer companies

D. Networking clients to over-the-counter markets.

4.

A monetary strategy which involves negative interest rates, is likely to:

Select one:

A. Increase the funds that households save/lend

B. Increase the demand for funds by borrowers/spenders

C. Increase the rate of inflation

D. All of the above

5.

Which of the following option(s) represent the correct formula to multiply two values located in cells B1 and B2, by each other?

Select one:

a. Entering the formula: =B1*B2

b. Entering the formula: =MULTIPLY(B1:B2)

c. Entering the formula: =SUM(B1:B2)

d. Entering the formula: =B1xB2

Answer 1

1. The accurate option is D :- interest on interest

Interest means the cost of borrowing funds. It is an extra consideration above the principle paid to lender for using lenders money.

Simple interest is interest calculated on the principal amount of a loan or advances, while compound interest is calculated on both principal and the interest amount accumulated over time.

2. The accurate option is C: time value of money.

The very basic idea of time value of money is that the value of money available today is not equal to the same amount of money in future.

3. The accurate option is C: Originating, underwriting and distributing new securities for issuer companies

The investment banks performs all of the functions as mentioned in option C while other options are inaccurate.

4. The accurate option is B: Increase the demand for funds by borrowers/spenders

Strategy of negative interest rates is used to encourage businesses and individuals to invest, lend and spend more rather than increasing savings by paying a fee.

5. The accurate option is A: Entering the formula: =B1*B2

The correct formula is =B1*B2 to achieve the multiplication objective and all other options are inaccurate.