TRUE/FALSE. Write ‘T’ if the statement is true and ‘F’ if the statement is false. (Worth .25 points each or 2.5 points for this section) 1) For a given positive interest rate, the future value of $100 increases with the passage of time. Thus, the longer the period of time, the greater the future value. 2) Future value is the value of a future amount at the present time, found by applying compound interest over a specified period of time. 3) The aggressive financing strategy is a strategy by which the firm finances its current assets with short-term funds and its fixed assets with long-term funds. 4) Combining negatively correlated assets can reduce the overall variability of returns. 5) A portfolio that combines two assets having perfectly positively correlated returns cannot reduce the portfolio’s overall risk below the risk of the least risky asset. 6) In general, exchange rate risk is easier to protect against than political risk. 7) In selecting the best group of unequal-lived projects, if the projects are mutually exclusive, the length of the projects lives is not critical. 8) The EBIT-EPS analysis tends to concentrate on maximization of earnings rather than maximization of owners’ wealth. 9) The three basic types of risk associated with international cash flows are 1) business and financial risks, 2) inflation and foreign exchange risks, and 3) political risks. 10) Accounts payable result from transactions in which merchandise is purchased but no formal note is signed to show the purchaser’s liability to the seller. MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. (Worth .50 points each or 9.5 points for this section) 11) When the amount earned on a deposit has become part of the principal at the end of a specified time period the concept is called A) future value. B) discount interest. C) compound interest. D) primary interest. 12) The future value of $100 received today and…
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