Compound interest includes interest earned on interest.
A. 
T
B. 
F
2.
When interest is compounded, the stated rate of interest exceeds the effective rate of interest.
A. 
T
B. 
F
3.
The calculation of future value requires the removal of interest.
A. 
T
B. 
F
4.
The company's credit-adjusted risk-free rate of interest is used when computing present value applying the expected cash flow approach.
A. 
T
B. 
F
5.
The calculation of present value eliminates interest from future cash flows.
A. 
T
B. 
F
6.
With an ordinary annuity, a payment is made or received on the date the agreement begins.
A. 
T
B. 
F
7.
In the future value of an
ordinary annuity, the last cash payment will not earn any interest.
A. 
T
B. 
F
8.
An annuity consists of level
principal payments plus interest on the unpaid balance.
A. 
T
B. 
F
9.
With an annuity due, a payment
is made or received on the date the agreement begins.
A. 
T
B. 
F
10.
An annuity is a series of equal periodic payments.
A. 
T
B. 
F
11.
Given identical current
amounts owed and identical interest rates, annual payments of an ordinary
annuity will be greater than annual payments of an annuity due.
A. 
T
B. 
F
12.
Other things being equal,
the present value of an annuity due will be less than the present value
of an ordinary annuity.
A. 
T
B. 
F
13.
A deferred annuity is one
in which interest charges are deferred for a stated time period.
A. 
T
B. 
F
14.
Monetary assets include
only cash and cash equivalents.
A. 
T
B. 
F
15.
Most, but not all, liabilities
are monetary liabilities.
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Sample Question
Under the accrual method of accounting, expenses are recorded: