Quiz Ch 05 – Interest Terminology
Fundamentals of Corporate Finance
Ross, Westerfield, and Jordan
13th Edition
What is the term used to describe the interest earned on both the initial principal and the interest reinvested from prior periods?
What is the term used to describe the interest earned on both the initial principal and the interest reinvested from prior periods?
Jared invested $100 two years ago at 8 percent interest and reinvested the interest earned in the first year. In the second year, he earned an additional $8.64 in interest. What is the term used to describe the extra $.64 he earned in interest?
Cullen invested $5,000 five years ago and earns 6 percent annual interest. By keeping his interest earnings in the account, what is the term used to describe how his investment grows over time?
Miles invested $5,000 ten years ago with the expectation of having $10,000 today, but due to compound interest reinvestment, he only has $8,400. Which statement is necessarily true?
What can be inferred about Nirav’s savings account if he just opened an account with a 2 percent interest rate, compounded annually, and it will be worth $5,000 after four years with no additional deposits or withdrawals?
How can you calculate the per-period interest rate when interest is paid m times per year?
If Caroline will receive an award of $20,000 in six years, and Jiexin will receive an award of $20,000 in nine years, which statement is true if both apply a discount rate of 7 percent?
If your aunt has promised to give you $5,000 upon your college graduation in three years and you speed up your plans to graduate in two years, what will happen to the present value of the gift?
Assuming all other variables remain constant, which option will result in the smallest present value for a lump sum?
What is the formula to calculate the present value of $1 received in five years given that the five-year discount factor is denoted as “d”?