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    This document contains 31 multiple choice questions related to time value of money concepts. The questions cover topics such as compound interest calculation, present and future value factors, annuities, perpetuities, and applications of time value of money principles in finance. The document is a practice test for understanding time value of money concepts through multiple choice questions.

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    This document contains 31 multiple choice questions related to time value of money concepts. The questions cover topics such as compound interest calculation, present and future value factors, annuities, perpetuities, and applications of time value of money principles in finance. The document is a practice test for understanding time value of money concepts through multiple choice questions.

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    © All Rights Reserved
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    2K views4 pages

    Time Value of Money MCQ

    Uploaded by

    Amrita kumari
    This document contains 31 multiple choice questions related to time value of money concepts. The questions cover topics such as compound interest calculation, present and future value factors, annuities, perpetuities, and applications of time value of money principles in finance. The document is a practice test for understanding time value of money concepts through multiple choice questions.

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    of 4

    Prof.

    Ashish Parikh’s
    UNIQUE ACADEMY

    TIME VALUE OF MONEY (MCQ’s)


    1. Time Value of Money is the reward of
    (a) Risk (b) Inflation
    (c) Risk Free Return (d) All of above

    2. ` 1000 invested today will become ` 1210 after 2 years @ 10% P.A.
    (a) Simple Interest (b) Compounded Annually
    (c) Compounded Monthly (d) Compounded quarterly

    3. ` 1000 invested today @10% for 3 years compounded annually will become
    (a) ` 1300 (b) ` 1331 (c) `1500 (d) None of above

    4. Interest on Interest can not be computed in following methods:


    (a) Compounded Annually (b) Compounded Monthly
    (c) Compounded Quarterly (d) Simple Interest

    5. Present Value Factor is used to find


    (a) Future Value (b) Present Annuity Value
    (c) Present Value at T0 (d) Future Annuity Value

    6. Future Value Factor is used to find


    (a) Future Value (b) Present Annuity Value
    (c) Present Value at T0 (d) Future Annuity Value

    7. 1 / 1  r  is the symbol for


    T

    (a) FVF (b) PVAF (c) PVF (d) FVAF

    8. 1  r  is the symbol for


    T

    (a) FVF (b) PVAF (c) PVF (d) FVAF

    9. Annuity Due starts from


    (a) End of the month (b) Mid of the month
    (c) Beginning of the month (d) Any time in the month

    Prof. Ashish Parikh 8007978700 1


    10.Ordinary Annuity starts from
    (a) End of the month (b) Mid of the month
    (c) Beginning of the month (d) Any time in the month

    11.Time Value of Money is an important concept in finance because it takes into account:
    (a) Risk (b) Time
    (c) Compound Interest (d) All of the above

    12.Discounting technique is used to find out:


    (a) Terminal Value (b) Compound Value
    (c) Present Value (d) Future Value

    13.Equal Annual Cash Flows occurring at the end of each year for certain period are
    known as:
    (a) Annuity (b) Perpetuity
    (c) Annuity Due (d) Deferred Payments

    14.Equal annual amounts occurring in the beginning of certain years are known as:
    (a) Annuity (b) Perpetuity
    (c) Annuity Due (d) Deferred Payments

    15.Present Value of a future cash flow would decrease if:


    (a) Discount Rate is reduced (b) Discount Rate is increased
    (c) Time Period is decreased (d) All of the above

    16.Which of the following is called an annuity:


    (a) Lump Sum after few years
    (b) A series of equal and regular amounts
    (c) A series of Unequal Amounts
    (d) A series of equal and Irregular amounts

    17.Future cash flows are converted to present values, so that these can be:
    (a) Aggregated (b) Compared
    (c) Used in Decision-making (d) All of the above

    18.A series of Constant Cash Flows occurring at regular intervals forever is known as:
    (a) Growing Annuity (b) Perpetuity
    (c) Growing Perpetuity (d) Annuity

    Prof. Ashish Parikh 8007978700 2


    19.Future Value and Present Value, both are based on:
    (a) Number of Time Periods (b) Interest Rate
    (b) Both (a) and (b) (d) None of the above

    20.If the Interest Rate is greater than zero, which of the following series you would prefer
    to receive.
    Year 1 Year 2 Year 3 Year 4
    (a) ` 500 ` 400 ` 300 ` 200
    (b) ` 200 ` 300 ` 400 ` 500
    (c) ` 350 ` 350 ` 350 ` 350
    (d) Any of the above as all are equal in total amount

    21.An investor wants to increase the Present Value. The rate of discount applied for
    should be:
    (a) Increased (b) Decreased
    (c) Any of (a) and (b) (d) None of the above

    22.If n  1 and Rate of interest > 0, which of the following interest factor is equal to one:
    (a) Present Value Factor (b) Compound Value Factor
    (c) Present Value Annuity Factor (d) None of the above

    23.If Time is ‘n’, Rate of Interest is ‘k’ then 1  k " may be called:
    (a) Present Value Factor (b) Compound Value Factor
    (c) Compound Value Annuity Factor (d) None of the above

    24.In a Loan Repayment Schedule, the interest amount paid each period:
    (a) Remained constant (b) Increases
    (c) Decreases (d) None of the above

    25.Future Value of an annuity is


    (a) Equal to Annuity Amount (b) Less than Annuity Amount
    (c) More than total of Annuity Amount (d) None of the above

    26.Concept of Future Value and Present Value are:


    (a) Proportionately related (b) Inversely related
    (c) Directly related (d) Not related

    Prof. Ashish Parikh 8007978700 3


    27.If a student is awarded scholarship receivable over next 12 months, what calculation he
    should use to find out the worth of scholarship today?
    (a) Present value of an amount (b) Future value of an amount
    (c) Present value of an annuity (d) Future value of an annuity

    28.A student deposits some amount daily to accumulate ` 5,000 to pay his tuition fees after
    one year. Which of the following compounding methods of interest should be opted by
    him:
    (a) Compounded Quarterly (b) Compounded Daily
    (c) Compounded Half-yearly (d) Compounded Annually

    29.Present Value can be calculated with the help of formula


    (a) 1  r  n (b) 1 / 1  r  n
    (c) 1  r  n / 1 (d) None of the above

    30.Present Value of a Rupee receivable after one year is


    (a) More than One Rupee (b) Equal to Present Value
    (c) Equal to One Rupee (d) Equal to Future Value

    31.Future Value of One Rupee invested today is


    (a) More than One Rupee (b) Equal to One Rupee
    (c) Equal to Present Value (d) Less than One Rupee

    Prof. Ashish Parikh 8007978700 4

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