1. All else being equal, the present value of $X in T years at a discount rate of r is
a. higher if r is lower.
b. lower if $X is higher.
c. lower if T is smaller.
d. lower if r is lower.
e. higher if T is larger.
2. Which of the following is not a determinant of the future value of a cash flow?
a. interest rate
b. present value of the cash flow
c. whether interest is compound or simple
d. length of time for which interest is compounded
e. All of the above are determinants of future value of a cash flow.
3. You are in the process of budgeting for your university education. You estimate that you will need about $50,000 to go back to university after 3 years. You have already saved $35,000. You want to invest this money for the next 3 years, and then use the future proceeds to finance your university education. What is the minimum annual rate of return you must obtain on your investment to achieve your goal?
a. 23.33%
b. 16.72%
c. 12.62%
d. 11.89%
e. 10.00%