Quiz: Present Value and Risk-Free Investment Concepts

Test your understanding of present value calculations, discount rates, and risk-free investment scenarios as explained in this Khan Academy video

Business mixed 8 Questions Video Quiz

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Q1 Beginner 1 pts

According to the video, if you could invest $100 today at a 5% risk-free rate, how much would it be worth in one year? Video Reference:
"You could invest it at 5% risk-free. And then in a year from now, how much would that be worth, in a..."

$105 $110 $104.76 $100.50

Q2 Intermediate 2 pts

In the video's example, what is the present value of $110 to be received in one year, assuming a 5% discount rate? Video Reference:
"So the present value of $110 a year from now, if we assume that we could invest money risk-free at 5..."

$104.76 $105.00 $110.00 $100.00

Q3 Intermediate 2 pts

According to the video, which investment is considered 'risk-free' and why? Video Reference:
"Which are considered risk-free, because the U.S. government, the Treasury, can always indirectly pri..."

U.S. Treasury bonds, because the government can print money Bank deposits, because they're always safe Corporate bonds, because companies are reliable Stock market investments, because they always grow

Q4 Intermediate 2 pts

The video explains that to calculate present value, you divide the future amount by: Video Reference:
"To discount money in the future to the present, we divided by 1 plus the discount rate..."

1 plus the discount rate The discount rate alone 1 minus the discount rate The future value

Q5 Advanced 3 pts

According to the video, if given a choice between $110 in one year or $105 today with a 5% risk-free rate, which is the better choice? Video Reference:
"If I were to offer you $110 a year from now or $105 today. This, the $105 today, would be the better..."

$105 today $110 in one year They are equivalent It depends on market conditions

Q6 Beginner 1 pts

The video states that present value is: Video Reference:
"We'll now learn about what is arguably the most useful concept in finance, and that's called the pre..."

True

False

Q7 Beginner 1 pts

When calculating present value in the video's example, what specific discount rate is used? Video Reference:
"Assuming right now it's 2008, a year from now, is equal to $110 divided by 1.05..."

5% 10% 1.05% 0.5%

Q8 Advanced 3 pts

According to the video, what happens to the calculation process when risk is introduced? Video Reference:
"Once you introduce risk, then we have to start introducing different interest rates and probabilitie..."

Select all correct answers

Different interest rates must be used Probabilities must be considered The calculations become more complex The basic formula changes

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Quiz: Present Value and Risk-Free Investment Concepts

According to the video, if you could invest $100 today at a 5% risk-free rate, how much would it be worth in one year? Video Reference: "You could invest it at 5% risk-free. And then in a year from now, how much would that be worth, in a..."

In the video's example, what is the present value of $110 to be received in one year, assuming a 5% discount rate? Video Reference: "So the present value of $110 a year from now, if we assume that we could invest money risk-free at 5..."

According to the video, which investment is considered 'risk-free' and why? Video Reference: "Which are considered risk-free, because the U.S. government, the Treasury, can always indirectly pri..."

The video explains that to calculate present value, you divide the future amount by: Video Reference: "To discount money in the future to the present, we divided by 1 plus the discount rate..."

According to the video, if given a choice between $110 in one year or $105 today with a 5% risk-free rate, which is the better choice? Video Reference: "If I were to offer you $110 a year from now or $105 today. This, the $105 today, would be the better..."

The video states that present value is: Video Reference: "We'll now learn about what is arguably the most useful concept in finance, and that's called the pre..."

When calculating present value in the video's example, what specific discount rate is used? Video Reference: "Assuming right now it's 2008, a year from now, is equal to $110 divided by 1.05..."

According to the video, what happens to the calculation process when risk is introduced? Video Reference: "Once you introduce risk, then we have to start introducing different interest rates and probabilitie..."