Exam 2 Multiple Choice Practice (Chpt 6)
1. Which of the following is true regarding an annuity.
a. Rents occur at the beginning of the period.
b. Rents occur at the end of the period.
c. An annuity due is the same as an ordinary annuity.
d. None of the above.
2. If you invest $100,000 to earn 12% interest, which of the following compounding approaches
would return the highest amount after one year?
a.Daily.
b.Monthly.
c.Quarterly.
d.Annually.
3. Which factor would be the lowest — the present value of $1 for 20 periods at 12% per period
or the future value of $1 for 20 periods at 12% per period?
a.The factors would be equal.
b. More information is required.
c. Present value of $1 for 20 periods at 12% per period.
d.Future value of $1 for 20 periods at 12% per period.
4.The figure .78353 is taken from the column marked 5% and the row marked five periods in a
certain interest table. From what interest table is this figure taken?
a.Present value of 1
b.Future value of annuity of 1
c. Future value of 1
d.Present value of annuity of 1
5. Payments are deposited for six years at 12%. For quarterly compounding, the interest factor in
the appropriate table would be found at
a. 12% for 6 periods.
b. 3% for 12 periods.
c. 3% for 24 periods.
d. 3% for 6 periods.