The interest rate used in time value of money calculations is also referred to as:
a. a discount rate, rate of return or yield
b. a discount rate, accounting return or yield
c. a compound rate, rate of return or market return
d. a compound rate, accounting return, or yield
a. a discount rate, rate of return or yield
Future value of an amount allowed to grow at a given interest rate over a period of time is known as the:
a. future value - single amount
b. present value - single amount
c. future value - annuity
d. present value - annuity
a. future value - single amount
An effective rate of return captures:
a. the time period
b. present values
c. compounding effects
d. tax consequences
c. compounding effects
The value today of an amount to be received at some point in the future is known as:
a. present value - annuity
b. future value - annuity
c. present value - single amount
d. future value - single amount
c. present value - single amount
A series of consecutive cash flows of equal amounts is known as:
a. a present value
b. a compound sum
c. a present sum
d. an annuity
d. an annuity
Annuity payments are generally assumed to occur:
a. during the period
b. at the beginning of the period
c. at the end of the period
d. it doesn't matter when they occur
c. at the end of the period
The value in five years of a stream of payments received over the five year period is known as:
a. future value - annuity
b. present value - annuity
c. compound sum - single amount
d. present value - single amount
a. future value - annuity
The value today of a stream of payments received over the five year period is known as:
a. future value - annuity
b. present value - annuity
c. compound sum - single amount
d. present value - single amount
b. present value - annuity
A series of payments required to accumulate a given amount is known as:
a. future value - annuity
b. present value - annuity
c. annuity equalling a future amount
d. annuity equalling a present amount
c. annuity equalling a future amount
A series of payments that can be drawn from a given amount is known as:
a. future value - annuity
b. present value - annuity
c. annuity equalling a future amount
d. annuity equalling a present amount
d. annuity equalling a present amount
A payoff schedule for a loan is known as:
a. a mortgage
b. an interest schedule
c. a principal
d. an amortization schedule
d. an amortization schedule
If interest or compounding is done on other than an annual basis, adjust by:
a. dividing the number of years by the number of compounding periods
b. multiplying the number of years by the number of compounding periods
c. dividing the interest rate by the number of compounding period
d. multiplying the years and dividing the interest rate by the number of compounding periods
d. multiplying the years and dividing the interest rate by the number of compounding periods
To an investor, the most desirable compounding period is:
a. Annually
b. semi-annually
c. monthly
d. daily
d. daily
Canadian mortgages have interest compounded:
a. annually
b. semiannually
c. monthly
d. it depends on the payment period
b. semiannually
The time value of money plays an important role in which of the following:
a. understanding the effective rate on a business loan
b. understanding the composition of a mortgage payment
c. determining the true rate of return on an investment
d. all of the above
d. all of the above
annuity:
A series of consecutive payments or receipts of equal amount.
annuity in advance:
A series of equal payments at the beginning of each period.
compounded semiannually:
A compounding period of every six months. For example, a five-year investment in which interest is compounded semiannually would indicate an n value equal to 10 and an i value at one-half the annual rate.
discount rate:
The interest rate at which future sums or annuities are discounted back to the present.
effective rate of interest:
Yield that includes compounding effects over a given time period.
future value:
The value that a current amount grows to at a given interest rate over a given time period.
future value of an annuity:
The sum of the future value of a series of consecutive equal payments.
interest factor:
The tabular value to insert into the various formulas. It is based on the number of periods (n) and the interest rate (i).
nominal interest rate:
Yield expressed without compounding effects over a given time period. Includes real return, inflation premium, and risk premium.
present value:
The current or discounted value of a future sum or annuity. The value is discounted back at a given interest rate for a specified time period.
present value of an annuity:
The sum of the present value of a series of consecutive equal payments.
yield:
The interest rate that equates a future value or an annuity to a given present value.
