Time Value of Money MCQs (11-20)

11. The basic rule of the time value of money is?

(a) Investments will always be worth more tomorrow than they are today

(b) Its always wiser to save a dollar for tomorrow than to spend it today

(c) A dollar in hand today is worth more than a dollar promised at some time in the future

(d) All of the above express an aspect of the basic rule of time value of money

Correct! Wrong!

12. A decrease in the supply for loanable funds, holding demand constant, will cause interest rates to?

(a) Increase

(b) Decrease

(c) Stay the same

(d) Not enough information to tell

Correct! Wrong!

13. The value of money results from?

(a) Its backing

(b) Rates set by the State Bank

(c) Its purchasing power

(d) None of the above

Correct! Wrong!

14. The basic price that equates the demand for and supply of loanable funds in the financial markets is the _______?

(a) Interest rate

(b) yield curve

(c) Term structure

(d) Cash price

Correct! Wrong!

15. If the interest rate is greater than 0%, then a dollar today is worth?

(a) Less than a dollar tomorrow

(b) The same as a dollar tomorrow

(c) More than a dollar tomorrow

(d) There is not sufficient information to tell

Correct! Wrong!

16. In an inflationary period, interest rates have a tendency to?

(a) Fall

(b) Rise

(c) Stay the same

(d) Act erratically

Correct! Wrong!

17. Which of the following is not a determinant of market interest rates?

(a) The inflation premium

(b) The maturity risk premium

(c) The volatility risk premium

(d) The real rate of interest

Correct! Wrong!

18. An unexpected increase in inflation should?

(a) Increase the demand for loanable funds

(b) Decrease the interest rate on loans

(c) Increase the interest rate on loans

(d) None of the above

Correct! Wrong!

19. If the interest rate is less than 0%, then a dollar today is worth?

(a) More than a dollar tomorrow

(b) The same as a dollar tomorrow

(c) Less than a dollar tomorrow

(d) There is not sufficient information to tell

Correct! Wrong!

20. The risk-free interest rate is composed of?

(a) An inflation premium and a default risk premium

(b) A default risk premium and a maturity risk premium

(c) A real rate of interest and a liquidity premium

(d) A real rate of interest and an inflation premium

Correct! Wrong!

11. The basic rule of the time value of money is?

12. A decrease in the supply for loanable funds, holding demand constant, will cause interest rates to?

13. The value of money results from?

14. The basic price that equates the demand for and supply of loanable funds in the financial markets is the _______?

15. If the interest rate is greater than 0%, then a dollar today is worth?

16. In an inflationary period, interest rates have a tendency to?

17. Which of the following is not a determinant of market interest rates?

18. An unexpected increase in inflation should?

19. If the interest rate is less than 0%, then a dollar today is worth?

20. The risk-free interest rate is composed of?

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