TRUE OR FALSE: Write TRUE if the statement is correct; incorrect, write FALSE. 1. Managers and investors can use the time value of money analysis to compare current cash flows against future cash flows. 2. Because an ordinary annuity is paid at the beginning of each period rather than at the end, the payment collects interest during the period for which it is made. 3. You borrow Php 12,000 from your aunt and promise to repay her at the rate of P1,000 each month for the next year. This is an example of an annuity payout.
TRUE OR FALSE: Write TRUE if the statement is correct; incorrect, write FALSE. 1. Managers and investors can use the time value of money analysis to compare current cash flows against future cash flows. 2. Because an ordinary annuity is paid at the beginning of each period rather than at the end, the payment collects interest during the period for which it is made. 3. You borrow Php 12,000 from your aunt and promise to repay her at the rate of P1,000 each month for the next year. This is an example of an annuity payout.
Chapter4: Time Value Of Money
Section: Chapter Questions
Problem 1cM
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Question
TRUE OR FALSE: Write TRUE if the statement is correct; incorrect, write FALSE.
1. Managers and investors can use the time value of money analysis to compare current cash flows against future cash flows.
2. Because an ordinary annuity is paid at the beginning of each period rather than at the end, the payment collects interest during the period for which it is made.
3. You borrow Php 12,000 from your aunt and promise to repay her at the rate of P1,000 each month for the next year. This is an example of an annuity payout.
4. Compounding procedures are used to determine the present value, whereas discounting approaches are used to determine the future value.
5. Debtors establish payment amounts and the allocation of each payment to interest and principal using a loan amortization plan.
6. A 6 percent interest rate for five years will produce a higher present value interest factor than a 5 percent interest rate for six years.
7. 11.4359 is the factor rate if an investor is computing the future value of an ordinary annuity of 8% for 10 years.
8. The Absorbent Diaper Company needs Php 2,000,000 in five years to buy a new diaper edging machine. The money is to be compounded for 5 years with a 5% interest rate that has a present value factor of 0.7835,
9. Refer to item #6, if the amount to be invested is Php 24,000 per year, the future value is Php 347,678.4
10. Refer to item #7, the present value is Php 1,567,000.
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