Financial Management MCQ on Time Value of Money

Financial Management MCQ on Time Value of Money

1. The cash flows at different time periods should be made comparable to take sound

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Decisions by adjusting which of the following?

(a) Timing

(b) Timing & Risk

(c) Risk

(d) None of these

Ans-(b) Timing & Risk

2. The excess of the present value of benefits over the present value of costs of a course of

 Action is called as:

(a) Payoff

(b) Benefits

(c) Wealth

(d) All of these

Ans-(c) Wealth

3. The concept that value of a rupee to be received in future is less than the value of a rupee on hand today is known as:

(a) Recovery factor concept

(b) Time value of money

(c) Compounding factor concept

(d) None of these

Ans-(b) Time value of money

4. The process of calculating future value of cash flows is known as

(a) Discounting

(b) Compounding

(c) Both of these

(d) None of these

Ans-(b) Compounding

5. The method that converts the amount of present cash into an amount of cash of equivalent value in future is:

(a) Budgeting

(b) Discounting method

(c) Both

(d) Compounding method

Ans-(d) Compounding method

6. A fixed cash flow in each year for a specified number of years is called as…….

(a) Annuity

(b) Recovery factor

(c) Discounting

(d) Compounding

Ans-(a) Annuity

7. The method of converting the amount of future cash into an amount of cash and cash equivalents value in present is known as:

(a) Compounding

(b) Annuity

(c) Discounting

(d) None of these

Ans-(c) Discounting

8. The reciprocal of the present value of annuity is known as which of the following:

(a) Compounding factor

(b) Capital recovery factor

(c) Discounted factor

(d) None of these

Ans-(b) Capital recovery factor

9. The total of stream of discounted expected cash benefits from a course of action over period of time is called as:

(a) Capital

(b) Net Present Value

(c) Gross present value

(d) None of these

Ans-(c) Gross present value

10. The difference between present value of cash inflows and present value of cash outflows

is known as:

(a)Gross present value

(b)Capital

(c)Net present value

(d)None of these

Ans-(c)Net present value

11. Present value takes………..?

(a) Compounding rate

(b)  Deflation rate

(c) Inflation rate

(d) Discounting rate

Ans- (d) Discounting rate 

Also Read Financial Management MCQ

  1. Financial Management MCQ-Fundamentals
  2. FM MCQ on Time Value of Money
  3. Financial Management MCQ on Risk and Return
  4. Financial Management MCQ on Equity Valuation
  5. Financial Management MCQ on Valuation of Bonds
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