Name:ndi Aet Instruction 1) Please, work independently (no cheating). 2) All ans

Question

Name:ndi Aet Instruction 1) Please, work independently (no cheating). 2) All answers should be in BLUE BOOK. 3) In PART II show all calculations (either by formula or by calculator functions) in order to receive points (16%) PARTIES TRUE OR FALSE QUESTIONS 1. FV represents what you need to invest earlier to have it grow into a specified later amount in the future. True or False? 2. What is "discounted" from the PV is the interest part to arrive at the FV. True or False? 3. Beta of a stock is a measure of its systematic risk not total risk. True or False? 4. Ceteris paribus, as a depositor and for the same annual interest rate, you would prefer simple interest to compound interest. True or False? s. Annuities are equal cash flows that go on forever. True or False? 6. On the time line for a retirement period, the FVA tells us the amount we should have accumulated by the time we retire. True or False? 7. The Fisher Effect illustrates the inverse relationship between inflation and nominal interest rates. True or False? 8. Ceteris paribus, as the frequency of compounding increases, the FV of annuity series True or False?

Explanation / Answer

1 False -PV is what you should have invested
2)False- PV is compounded to get FV
3)True
4)False- Would prefer compound because it has a higher effective rate
5)False- Perpetuities are those cash flows
6)True
7)False- It is a direct relationship
8)False- As compounding increases FV also increases

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