Deck 4: Time Value of Money

Question 1

Which of the following refers to the purchasing power of a dollar?

A) Nominal value
B) Real value
C) Future value
D) Present value
E) None of the above

Answer 1

B

Question 2

In its policies regarding deferred salaries, which of the following leagues has stated that deferred payments must be placed by the team in a league fund for administration and future disbursement?

A) National Basketball Association
B) Major League Soccer
C) National Hockey League
D) National Football League
E) Major League Baseball

Answer 2

D

Question 3

The owners of which franchise agreed to a perpetuity when they negotiated to fold their team after the ABA and NBA merger.

A) New York Nets
B) Denver Nuggets
C) San Antonio Spurs
D) Indiana Pacers
E) St. Louis Spirits

Answer 3

E

Question 4

Which of the following is today's value of a future cash flow?

A) Nominal value
B) Real value
C) Future value
D) Present value
E) None of the above

Question 5

What is a measure of risk or uncertainty of time?

A) Inflation rate
B) Interest rate
C) Business activity rate
D) Development rate
E) Discount rate

Question 6

Which of the following is calculated by investigating changes in the Consumer Price Index (CPI)?

A) Inflation rate
B) Interest rate
C) Business activity rate
D) Development rate
E) Discount rate

Question 7

A series of equal payments or receipts made at any interval of time is referred to as which of the following?

A) Cash inflow
B) Cash outflow
C) Annuity
D) Lump sum
E) None of the above

Question 8

Which of the following is a single cash flow per year forever into the future?

A) Annuity
B) Infinite annuity
C) Perpetuity
D) Inflation rate
E) Infinite cash flow

Question 9

A dollar could purchase more goods or services in the 1960s than in the 2020s.

Question 10

Risk often leads to financial losses.

Question 11

Until recently, the NFL, NBA, and NHL had few contracts with deferred compensation.

Question 12

Players who sign long-term guaranteed contracts and then become injured or perform poorly often have their contracts rescinded.

Question 13

Annuity payments may only occur annually.

Question 14

To calculate the future value of an annuity, a financial manager needs to know the payment, rate of interest per period, and the present value of the principal.

Question 15

To determine the real change in value compare the future value of a single payment with the expected rate of inflation.

Question 16

In many financial arrangements, interest is compounded each quarter, month, week, or, in some cases, day.

Question 17

To calculate the present value of an annuity, a financial manager needs to know the payment per period, discount rate, and the number of periods.