Finance 300 ( CSULB Yulong Ma) Exam 1 Chpt
1, 4, 5 Questions And Answers Verified 100%
Correct
What does it mean to compound interest? - ANSWER -interest on interest. The
addition of interest to the principal sum of a loan or deposit.
simple interest - ANSWER -interest paid on the principal alone
What do we mean by the present value of an investment? - ANSWER -Present
value (PV) is the current value of a future sum of money or stream of cash.
The process of discounting a future amount back to the present is the opposite of
doing what? - ANSWER -Compounding a current amount for future value.
What do we mean by discounted cash flow valuation? - ANSWER -A valuation
method used to estimate the value of an investment based on its future cash flows.
Discounted cash flow (DCF) is a valuation method used to estimate the value of an
investment based on its future cash flows.
What is the basic present value equation? - ANSWER -PV = FV / (1 + r) ^t
What is the Rule of 72? - ANSWER -a shortcut to estimate the number of years
required to double your money at a given annual rate of return.
Jamie earned $14 in interest on her savings account last year. She has decided to
leave the $14 in her account so that she can earn interest on the $14 this year. The
interest earned on last year's interest earnings is called: - ANSWER -Compound
interest
Lester had $6,270 in his savings account at the beginning of this year. This
amount includes both the $6,000 he originally invested at the beginning of last year
, plus the $270 he earned in interest last year. This year, Lester earned a total of
$282.15 in interest even though the interest rate on the account remained constant.
This $282.15 is best described as: - ANSWER -simple interest
Katlyn needs to invest $5,318 today in order for her savings account to be worth
$8,000 six years from now. Which one of the following terms refers to the $5,318?
- ANSWER -Present value
The interest rate used to compute the present value of a future cash flow is called
the: - ANSWER -Discount Rate
Given an interest rate of zero percent, the future value of a lump sum invested
today will always: - ANSWER -remain constant, regardless of the investment time
period.
All else held constant, the future value of a lump sum investment will decrease if
the: - ANSWER -interest is changed to simple interest from compound interest.
Which one of the following will increase the present value of a lump sum future
amount to be received in 15 years? - ANSWER -Changing to compound interest
from simple interest
Travis invests $5,500 today into a retirement account. He expects to earn 9.2
percent, compounded annually, on his money for the next 13 years. After that, he
wants to be more conservative, so only expects to earn 6 percent, compounded
annually. How much money will he have in his account when he retires 25 years
from now, assuming this is the only deposit he makes into the account? -
ANSWER -
Eleven years ago, you deposited $3,200 into an account. Seven years ago, you
added an additional $1,000 to this account. You earned 9.2 percent, compounded
annually, for the first 4 years and 5.5 percent, compounded annually, for the last 7
years. How much money do you have in your account today? - ANSWER -
1, 4, 5 Questions And Answers Verified 100%
Correct
What does it mean to compound interest? - ANSWER -interest on interest. The
addition of interest to the principal sum of a loan or deposit.
simple interest - ANSWER -interest paid on the principal alone
What do we mean by the present value of an investment? - ANSWER -Present
value (PV) is the current value of a future sum of money or stream of cash.
The process of discounting a future amount back to the present is the opposite of
doing what? - ANSWER -Compounding a current amount for future value.
What do we mean by discounted cash flow valuation? - ANSWER -A valuation
method used to estimate the value of an investment based on its future cash flows.
Discounted cash flow (DCF) is a valuation method used to estimate the value of an
investment based on its future cash flows.
What is the basic present value equation? - ANSWER -PV = FV / (1 + r) ^t
What is the Rule of 72? - ANSWER -a shortcut to estimate the number of years
required to double your money at a given annual rate of return.
Jamie earned $14 in interest on her savings account last year. She has decided to
leave the $14 in her account so that she can earn interest on the $14 this year. The
interest earned on last year's interest earnings is called: - ANSWER -Compound
interest
Lester had $6,270 in his savings account at the beginning of this year. This
amount includes both the $6,000 he originally invested at the beginning of last year
, plus the $270 he earned in interest last year. This year, Lester earned a total of
$282.15 in interest even though the interest rate on the account remained constant.
This $282.15 is best described as: - ANSWER -simple interest
Katlyn needs to invest $5,318 today in order for her savings account to be worth
$8,000 six years from now. Which one of the following terms refers to the $5,318?
- ANSWER -Present value
The interest rate used to compute the present value of a future cash flow is called
the: - ANSWER -Discount Rate
Given an interest rate of zero percent, the future value of a lump sum invested
today will always: - ANSWER -remain constant, regardless of the investment time
period.
All else held constant, the future value of a lump sum investment will decrease if
the: - ANSWER -interest is changed to simple interest from compound interest.
Which one of the following will increase the present value of a lump sum future
amount to be received in 15 years? - ANSWER -Changing to compound interest
from simple interest
Travis invests $5,500 today into a retirement account. He expects to earn 9.2
percent, compounded annually, on his money for the next 13 years. After that, he
wants to be more conservative, so only expects to earn 6 percent, compounded
annually. How much money will he have in his account when he retires 25 years
from now, assuming this is the only deposit he makes into the account? -
ANSWER -
Eleven years ago, you deposited $3,200 into an account. Seven years ago, you
added an additional $1,000 to this account. You earned 9.2 percent, compounded
annually, for the first 4 years and 5.5 percent, compounded annually, for the last 7
years. How much money do you have in your account today? - ANSWER -
