Present Value of Annuity MCQs (1-10)

1. The interest rate used in the present value calculation is often referred to as?

(a) Discount rate

(b) Inflation rate

(c) Nominal rate

(d) None of the given option

Correct! Wrong!

2. In 2 years you are to receive $10,000. If the interest rate were to suddenly decrease, the present value of that future amount to you would?

(a) The correct answer cannot be determined without more information

(b) Rise

(c) Fall

(d) Remain unchanged

Correct! Wrong!

3. Which of the following is not true regarding an annuity due?

(a) It is a series of equal cash flows

(b) It is also known as deferred annuity

(c) Cash flows occur for a specific time period

(d) Payments are made at the start of each period

Correct! Wrong!

4. You are to receive $1,000 every month for 50 months. Your rate of discount is 0.6% per month. What is the present value to you of this cash flow?

(a) $41,588

(b) $42,221

(c) $43,086

(d) $48,352

Correct! Wrong!

5. Which one of the following is the procedure of finding out the Present Value (PV)?

(a) Discounting

(b) Compounding

(c) Time value of money

(d) All of above

Correct! Wrong!

6. An 8-year annuity due has a present value of $1,000. If the interest rate is 5 percent, the amount of each annuity payment is closest to which of the following?

(a) $104.72

(b) $147.36

(c) $109.39

(d) $154.73

Correct! Wrong!

7. What is the present value of a $1,000 ordinary annuity that earns 8% annually for an infinite number of periods?

(a) $12,500

(b) $80

(c) $800

(d) $1,000

Correct! Wrong!

8. The present value of an annuity of $5,000 to be received at the end of each of the next six months for 6 years at a 4% annual rate would be?

(a) $26,210

(b) $52,875

(c) $3,950

(d) None of the above

Correct! Wrong!

9. ____ is a series of payments or receipts occurring over a specific number of period, in_ payments or receipts occur at the end of each period. In_______ Payments or receipts occur at beginning of each period?

(a) Annuity, Ordinary annuity, Annuity due

(b) Annuity, Annuity due, Ordinary annuity

(c) Perpetuity, Ordinary annuity, Annuity due

(d) None

Correct! Wrong!

10. What is the present value of $2,500 semiannual payments received at the beginning of each period for the next 10 years? The APR is 6%?

(a) $38,309.50

(b) $37,194.70

(c) $35,809.50

(d) $36,884.80

Correct! Wrong!

Present Value of Annuity MCQs (1-10)

1. The interest rate used in the present value calculation is often referred to as?

2. In 2 years you are to receive $10,000. If the interest rate were to suddenly decrease, the present value of that future amount to you would?

3. Which of the following is not true regarding an annuity due?

4. You are to receive $1,000 every month for 50 months. Your rate of discount is 0.6% per month. What is the present value to you of this cash flow?

5. Which one of the following is the procedure of finding out the Present Value (PV)?

6. An 8-year annuity due has a present value of $1,000. If the interest rate is 5 percent, the amount of each annuity payment is closest to which of the following?

7. What is the present value of a $1,000 ordinary annuity that earns 8% annually for an infinite number of periods?

8. The present value of an annuity of $5,000 to be received at the end of each of the next six months for 6 years at a 4% annual rate would be?

9. ________ is a series of payments or receipts occurring over a specific number of period, in_________ payments or receipts occur at the end of each period. In___________ Payments or receipts occur at beginning of each period?

10. What is the present value of $2,500 semiannual payments received at the beginning of each period for the next 10 years? The APR is 6%?

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9. ____ is a series of payments or receipts occurring over a specific number of period, in_ payments or receipts occur at the end of each period. In_______ Payments or receipts occur at beginning of each period?