4-1
Chapter 04
Introduction to Valuation: The Time Value of Money
Multiple Choice Questions
1. Martha is investing $5 today at 6 percent interest so she can have $10 later. The $10 is
referred to as the:
A. true value.
B. future value.
C. present value.
D. discounted value.
E. complex value.
2. Tom earned $120 in interest on his savings account last year. Tom has decided to leave the
$120 in his account so that he can earn interest on the $120 this year. This process of earning
interest on prior interest earnings is called:
A. discounting.
B. compounding.
C. duplicating.
D. multiplying.
E. indexing.
3. Jamie earned $180 in interest on her savings account last year. She has decided to leave the
$180 in her account so that she can earn interest on the $180 this year. The interest Jamie earns
this year on this $180 is referred to as:
A. simple interest.
B. complex interest.
C. accrued interest.
D. interest on interest.
E. discounted interest.