Question 1

The present value of a future payment is _______ its future dollar amount.

Accepted Answer

The present value of a future payment is less than its future dollar amount because of the time value of money. Money today is worth more than the same amount of money in the future due to inflation and the potential to earn interest or investment returns.

Question 2

All other things unchanged, people who choose to have a certain amount of money now instead of at a future date:

Accepted Answer

People who choose to have a certain amount of money now instead of at a future date will benefit because they can use the money during the intervening time period. Additionally, they would benefit if prices go up unexpectedly during the time period, as they would have locked in the value of the money at the present time. Therefore, both option B and C are true, making option D the best choice. Choosing to have money now instead of at a future date may not necessarily be a mistake, as the individual may have a present need for the money or may have other factors to consider.

Question 3

An obligation to make future payments is:

Accepted Answer

An obligation to make future payments is a liability, as it represents a debt or obligation that the entity owes to another party. It is not an asset, as it does not represent something of value that the entity owns, and it is not wealth, as it represents an obligation rather than a resource. Interest, while related to future payments, is not the same thing as the obligation itself.

Question 4

Someone who has to make a choice involving whether to receive a certain amount of money now or in the future, will probably choose _______ , since there is a(n)________ in waiting to use money.

Accepted Answer

The correct answer is B) now; opportunity cost because there is a cost associated with waiting to use money, known as the opportunity cost, which refers to the benefits or earnings one foregoes by not having access to the money immediately.

Question 5

The interest rate is:

Accepted Answer

The interest rate is defined as the payment made for postponing the use of wealth, expressed as a percentage of the amount of wealth whose use is postponed. Therefore, option B is the correct choice. Option A refers to the total payment made, whereas option C refers to the cost of borrowing rather than the interest rate itself.

Question 6

Using slightly different notation from that used in the text, the present value (PV)of a payment one year in the future (FV), given interest rate (r), is given by the equation:

Accepted Answer

The present value (PV) of a payment one year in the future (FV) is given by PV = FV / (1 + r), which is equivalent to PV = FV ˜ (1 + r). Therefore, the best choice is C.

Question 7

Liabilities are:

Accepted Answer

Liabilities are obligations that a person or entity owes to others, which includes future payments, debts, or obligations. It is not the sum of all your assets. "Anything of value" is a broad definition and doesn't specifically refer to liabilities. Lastly, the definition of liabilities does not involve making a payment to people who postpone the use of their wealth.

Question 8

The present value of a future payment increases if the:

Accepted Answer

The answer of The present value of a future payment...

Question 9

Using slightly different notation than in the text, we could say that the present value (PV)of a payment n years in the future (FV), given interest rate (r), is given by the equation:

Accepted Answer

Option D is the correct equation for calculating the present value (PV) of a payment n years in the future (FV) given interest rate (r). It uses the formula PV = FV / (1 + r)^n, which is also known as discounting the cash flow. Option A and B appear to use incorrect notation and Option C is missing the exponent n in the formula.

Question 10

Assets are:

Accepted Answer

Assets are anything of value that can be owned, including but not limited to cash, securities, real estate, and personal property. They are economic resources that can be used to generate income, create wealth, or provide utility to their owner.

Question 11

The dollar amount of a future payment is ________ its present value.

Accepted Answer

The dollar amount of a future payment is greater than its present value due to the time value of money, which suggests that a dollar today is worth more than a dollar in the future because of its potential earning capacity.

Question 12

An individual's wealth:

Accepted Answer

Wealth is not the same as income, which is the amount of money earned during a specific time period. Also, taxes are not necessarily factored in when determining an individual's wealth. Therefore, the best choice is C, which defines wealth as the sum of all assets minus liabilities.

Question 13

Anything that is of value is:

Accepted Answer

Anything that has value and can be used to generate future economic benefits is considered an asset. Examples of assets include cash, property, and investments. Liabilities, on the other hand, are debts or obligations that a company or individual owes to others. Wealth and interest are related concepts but do not necessarily imply value. Wealth refers to the total value of assets minus liabilities, while interest is a payment made in exchange for borrowed money or the use of an asset.

Question 14

The amount paid to postpone the use of wealth divided by the amount of wealth whose use is postponed is a(n):

Accepted Answer

The definition given in the question perfectly matches with the definition of interest rate. Therefore, choice A is the correct answer. Options B, C, and D are not related to the given definition.

Question 15

Payments that are distributed over time are linked to one another by:

Accepted Answer

Payments that are distributed over time are linked to one another by interest rates. Interest rates represent the cost of borrowing or the return on saving money over a period of time. As a result, the payments that are made over time will include interest charges, which will affect the overall cost or value of the payments.

Question 16

An amount that would equal a particular future value if deposited today at a specific interest rate is the:

Accepted Answer

The present value is the amount that would need to be deposited today to equal a specific future value given a certain interest rate.

Question 17

The total of assets less liabilities is:

Accepted Answer

The total of assets less liabilities is known as net worth or wealth. It represents the value of an individual's or company's assets after their liabilities have been paid off. It is not the same as profit, which is the difference between revenue and expenses over a certain period of time. Insurance and depreciation are unrelated to this concept.

Question 18

If you are paid $10,500 in one year on a $10,000 loan made today, then your interest rate is:

Accepted Answer

To find the interest rate, we need to use the formula:
Interest = Principal x Rate x Time
where Principal is the borrowed amount, Rate is the interest rate, and Time is the duration of the loan. We know the Principal is $10,000 and the Interest earned is $10,500. We need to find Rate. We don't know the duration of the loan, but we can assume it's one year since we were given an annual payment of $10,500. So we can rewrite the formula as:
$10,500 = $10,000 x Rate x 1
Simplifying this gives:
Rate = $10,500/$10,000
Rate = 1.05 or 105%
Converting this to a percentage, we get 5%. Therefore, the answer is B: 5%.

Question 19

The _______ the payment made for waiting, the _______ the interest rate.

Accepted Answer

The answer of The _______ the payment made for waiting,...

Question 20

A payment made to people who agree to postpone their use of wealth is:

Accepted Answer

Interest is a payment made to people who agree to postpone their use of wealth. This can come in the form of interest on a bank account, bond, or loan. Rent is a payment made for the use of property or possessions, profit is the amount earned from business activities, and a wage is a payment made for labor or services rendered.

Quiz 13: Interest Rates and the Markets for Capital and Natural Resources

The present value of a future payment is _______ its future dollar amount.

All other things unchanged, people who choose to have a certain amount of money now instead of at a future date:

An obligation to make future payments is:

Someone who has to make a choice involving whether to receive a certain amount of money now or in the future, will probably choose _ , since there is a(n) __ in waiting to use money.

The interest rate is:

Using slightly different notation from that used in the text, the present value (PV) of a payment one year in the future (FV) , given interest rate (r) , is given by the equation:

Liabilities are:

The present value of a future payment increases if the:

Using slightly different notation than in the text, we could say that the present value (PV) of a payment n years in the future (FV) , given interest rate (r) , is given by the equation:

Assets are:

The dollar amount of a future payment is ________ its present value.

An individual's wealth:

Anything that is of value is:

The amount paid to postpone the use of wealth divided by the amount of wealth whose use is postponed is a(n) :

Payments that are distributed over time are linked to one another by:

An amount that would equal a particular future value if deposited today at a specific interest rate is the:

The total of assets less liabilities is:

If you are paid $10,500 in one year on a $10,000 loan made today, then your interest rate is:

The _ the payment made for waiting, the _ the interest rate.

A payment made to people who agree to postpone their use of wealth is:

Quiz 13: Interest Rates and the Markets for Capital and Natural Resources

The present value of a future payment is _______ its future dollar amount.

All other things unchanged, people who choose to have a certain amount of money now instead of at a future date:

An obligation to make future payments is:

Someone who has to make a choice involving whether to receive a certain amount of money now or in the future, will probably choose _______ , since there is a(n) ________ in waiting to use money.

The interest rate is:

Using slightly different notation from that used in the text, the present value (PV) of a payment one year in the future (FV) , given interest rate (r) , is given by the equation:

Liabilities are:

The present value of a future payment increases if the:

Using slightly different notation than in the text, we could say that the present value (PV) of a payment n years in the future (FV) , given interest rate (r) , is given by the equation:

Assets are:

The dollar amount of a future payment is ________ its present value.

An individual's wealth:

Anything that is of value is:

The amount paid to postpone the use of wealth divided by the amount of wealth whose use is postponed is a(n) :

Payments that are distributed over time are linked to one another by:

An amount that would equal a particular future value if deposited today at a specific interest rate is the:

The total of assets less liabilities is:

If you are paid $10,500 in one year on a $10,000 loan made today, then your interest rate is:

The _______ the payment made for waiting, the _______ the interest rate.

A payment made to people who agree to postpone their use of wealth is:

Someone who has to make a choice involving whether to receive a certain amount of money now or in the future, will probably choose _ , since there is a(n) __ in waiting to use money.

The _ the payment made for waiting, the _ the interest rate.