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COB 300 Finance Exam 2 Questions and Answers 100% Pass
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COB 300 Finance Exam 2 Questions and Answers 100% Pass Time Value of Money - money today is more valuable than same quantity of money in the future Reasons for Time Value of Money - - interest - discount rate - cost of Interest - "exchange rate" between earlier money and later money Simple I...

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  • January 8, 2025
  • 6
  • 2024/2025
  • Exam (elaborations)
  • Questions & answers

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  • cob 300 finance exam 2 questions and answers 100

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  • COB 300
  • COB 300

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COB 300 Finance Exam 2 Questions
and Answers 100% Pass

Time Value of Money - ✔✔money today is more valuable than same quantity of money in the future


Reasons for Time Value of Money - ✔✔- interest


- discount rate


- cost of


Interest - ✔✔"exchange rate" between earlier money and later money


Simple Interest - ✔✔interest paid or received only on the investment/principal; not on interest


Compound interest ("Interest on Interest" - ✔✔interest that is earned on principal amount invested and

on any accrued interest


Interest on Interest - ✔✔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 - ✔✔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.




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Continuously Compounded Interest - ✔✔The interest is instantaneous, or compounded an infinite

number of times


- FV = PV(e)^(i * N)


Discounting - ✔✔The process of finding the present value of a cash flow or a series of cash flows;

discounting is the reverse of compounding.


nPv( - ✔✔used to find the PV of an uneven cash flow


Annuity - ✔✔finite series of equal payments that occur at regular intervals


ordinary annuity - ✔✔If the first payment occurs at the end of the period


annuity due - ✔✔an annuity for which the cash flows occur at the beginning of the period


perpetuity - ✔✔a time period lasting through the ages; eternity


Growing Annuity - ✔✔a stream of cash flows, growing at a constant rate and paid at regular intervals,

that end after a specified number of periods


Annual Percentage Rate (APR) - ✔✔rate stated for an annual period, assuming no compounding of

interest within the year


- "nominal/stated rate"


- understates effective rates


Effective Annual Rate (EAR) - ✔✔rate at which a dollar invested grows over that period


For EAR and APR to be the same - ✔✔compound interest only occurs once a year


APR - ✔✔period rate * number of periods in a year




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Emily Charlene
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©All Rights Reserved, 2025

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