1. Which of the following statement is correct?
a. The smallest compounding period is used when we do continuous compounding.
b. Money expected or promised in the future is worth more than the same amount of money in hand today.
c. All the answers are incorrect.
d. Present value is positively related to interest rates and the number of periods.
e. Zero interest rate indicates that money has time value.
2. Which of the following statement is incorrect?
a. A given amount of money you must pay out today is a greater burden than the same amount paid in the future.
b. Most of the answers are correct.
c. With an amortized loan, the amount of interest increases each year, and the amount contributed to principal decreases each year.
d. With an amortized loan, the amount of interest decreases each year, and the amount contributed to principal increases each year.
e. Money grows over time when the interest rate is positive.