Ch 2 -Time value of money Flashcards
1
Q
FV=?
A
PV(1+r)^n
2
Q
PV=?
A
FV/(1+r)^n
3
Q
What is compound interest?
A
Interest is paid on the entire current balance of the bank a/c not just the initial deposit (simple int)
4
Q
How do you calculate account balance with simple int?
A
X(1+rT)
5
Q
How do you calculate account balance with compound int?
A
X(1+r)^T
6
Q
Compound int is good for _____ but bad for _____
A
Savers, borrowers
7
Q
In a world of positive int rate, PV is always _____ than the actual future CF
A
Smaller
8
Q
PV will be smaller when the int rate are _______ and the CFs is to be received ________
A
Higher, long time from today
