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BA 323 SDSU EXAM 2 | ALL QUESTIONS AND
CORRECT ANSWERS (DETAILED ANSWERS) | GRADED
A+ | NEWEST VERSION | VERIFIED ANSWERS
time value of money - ..(ANSWER)...Adjusting the value of cash flows based on
when the cash flows are received.
Future Value - ..(ANSWER)...the amount of money in the future that an amount of
money today will yield, given prevailing interest rates
Present Value - ..(ANSWER)...The value today of a future cash flow or series of
cash flows
Compounding - ..(ANSWER)...The arithmetic process of determining the final
value of a cash flow or series of cash flows when compound interest is applied
Know how to solve for the future value, present value, the interest rate, or time. -
..(ANSWER)...FVn = PV(1+ I)^n
N: Time / Number of years, I: Interest rate per year • Aside: use annual
compounding §PV, FV: • Amount of Money Starting With (PV) or Ending With (FV)
Value of an annuity - ..(ANSWER)...the sum of all deposits plus all interest paid.
KEY POINT: • To solve, we use PMT and set either Future value or present value to
zero
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Understand how different compounding periods impact cash flows (which
compounding period would you prefer?) - ..(ANSWER)...Daily! Interest on
interest!
bond - ..(ANSWER)...A long-term debt instrument in which a borrower agrees to
make payments of principal and interest, on specific dates, to the holders of the
bond.
What are the five key features of a bond? - ..(ANSWER)...Par value, coupon
interest rate, maturity date, issue date, and yield to maturity.
par value - ..(ANSWER)...the amount that an investor pays to purchase a bond and
that will be repaid to the investor at maturity.
Par value = Future value
coupon interest rate - ..(ANSWER)...the percentage of a bond's par value that will
be paid annually, typically in two equal semiannual payments, as interest.
(stated interest rate paid by the issuer. Multiply by par value to get dollar
payment of interest.)
Mature Date - ..(ANSWER)...years until the bond must be repaid.
BA 323 SDSU EXAM 2 | ALL QUESTIONS AND
CORRECT ANSWERS (DETAILED ANSWERS) | GRADED
A+ | NEWEST VERSION | VERIFIED ANSWERS
time value of money - ..(ANSWER)...Adjusting the value of cash flows based on
when the cash flows are received.
Future Value - ..(ANSWER)...the amount of money in the future that an amount of
money today will yield, given prevailing interest rates
Present Value - ..(ANSWER)...The value today of a future cash flow or series of
cash flows
Compounding - ..(ANSWER)...The arithmetic process of determining the final
value of a cash flow or series of cash flows when compound interest is applied
Know how to solve for the future value, present value, the interest rate, or time. -
..(ANSWER)...FVn = PV(1+ I)^n
N: Time / Number of years, I: Interest rate per year • Aside: use annual
compounding §PV, FV: • Amount of Money Starting With (PV) or Ending With (FV)
Value of an annuity - ..(ANSWER)...the sum of all deposits plus all interest paid.
KEY POINT: • To solve, we use PMT and set either Future value or present value to
zero
, 2
Understand how different compounding periods impact cash flows (which
compounding period would you prefer?) - ..(ANSWER)...Daily! Interest on
interest!
bond - ..(ANSWER)...A long-term debt instrument in which a borrower agrees to
make payments of principal and interest, on specific dates, to the holders of the
bond.
What are the five key features of a bond? - ..(ANSWER)...Par value, coupon
interest rate, maturity date, issue date, and yield to maturity.
par value - ..(ANSWER)...the amount that an investor pays to purchase a bond and
that will be repaid to the investor at maturity.
Par value = Future value
coupon interest rate - ..(ANSWER)...the percentage of a bond's par value that will
be paid annually, typically in two equal semiannual payments, as interest.
(stated interest rate paid by the issuer. Multiply by par value to get dollar
payment of interest.)
Mature Date - ..(ANSWER)...years until the bond must be repaid.
