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COB 300 Finance Exam 2 Question with correct Answer
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COB 300 Finance Exam 2 Question with correct Answer
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COB 300 Finance Exam 2 Question withcorrect Answer
Time Value of Money - Answers -money today is more valuable than same quantity of
money in the future
Reasons for Time Value of Money - Answers -- interest
- discount rate
- cost of
Interest - Answers -"exchange rate" between earlier money and later money
Simple Interest - Answers -interest paid or received only on the investment/principal; not
on interest
Compound interest ("Interest on Interest" - Answers -interest that is earned on principal
amount invested and on any accrued interest
Interest on Interest - Answers -difference between future value of compound interest
and future value of simple interest
- effect of ____ is small for a small number of periods but increases as the number of
periods increases
Rule of 72 - Answers -The number of years it takes for a certain amount to double in
value is equal to 72 divided by its annual rate of interest.
Continuously Compounded Interest - Answers -The interest is instantaneous, or
compounded an infinite number of times
- FV = PV(e)^(i * N)
Discounting - Answers -The process of finding the present value of a cash flow or a
series of cash flows; discounting is the reverse of compounding.
nPv( - Answers -used to find the PV of an uneven cash flow
Annuity - Answers -finite series of equal payments that occur at regular intervals
ordinary annuity - Answers -If the first payment occurs at the end of the period
annuity due - Answers -an annuity for which the cash flows occur at the beginning of the
period
perpetuity - Answers -a time period lasting through the ages; eternity
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