Conceptual quiz time value of money part 2

Question 1

You have $1000 you want to save. If four different banks offer four different compounding methods for interest, which method should you choose to maximize your $1000?
compounded daily
compounded quarterly
compounded semi-annually
compounded annually

Answer 1

compounded daily

Question 2

The concepts of present value and future value are:
directly related to each other
not related to each other
proportionately related to each other
inversely related to each other

Answer 2

inversely related to each other

Question 3

If you win the lottery and you choose to have your proceeds distributed to you over a twenty-year time period, with the first payment coming to you one year from today, which calculation would you use to calculate the worth of those proceeds to you today?

future value of a lump sum
future value of an annuity
present value of a lump sum
present value of an annuity

Answer 3

present value of an annuity

Question 4

A growth rate implies going _______in time, a discount rate implies going _________ in
time.

Answer 4

forward; backward