BA 323 SDSU ACTUAL Exam 2 WITH QUESTIONS AND CORRECT VERIFIED ANSWERS
GRADED A+ GUARANTEED 100% PASS
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
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.
, BA 323 SDSU ACTUAL Exam 2 WITH QUESTIONS AND CORRECT VERIFIED ANSWERS
GRADED A+ GUARANTEED 100% PASS
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.
issue date - (answer)when the bond was issued
yield to maturity - (answer)the rate of return a bondholder will receive if the bond is held to maturity.
"promised yield".
call provision - (answer)a provision in a bond contract that gives the issuer the right to redeem the
bonds under specified terms prior to the normal maturity date.
*Companies like these incase interest rates go down! Investors don't!
call premium - (answer)Penalty paid by the corporation is a bond is called (amount in excess of par-
value).
Bond investors require higher yields
Typically requires 5 to 10 years to call
GRADED A+ GUARANTEED 100% PASS
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
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.
, BA 323 SDSU ACTUAL Exam 2 WITH QUESTIONS AND CORRECT VERIFIED ANSWERS
GRADED A+ GUARANTEED 100% PASS
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.
issue date - (answer)when the bond was issued
yield to maturity - (answer)the rate of return a bondholder will receive if the bond is held to maturity.
"promised yield".
call provision - (answer)a provision in a bond contract that gives the issuer the right to redeem the
bonds under specified terms prior to the normal maturity date.
*Companies like these incase interest rates go down! Investors don't!
call premium - (answer)Penalty paid by the corporation is a bond is called (amount in excess of par-
value).
Bond investors require higher yields
Typically requires 5 to 10 years to call
