Ch 5- Class Notes Flashcards
1
Q
the government is the most trust worthy borrower, if they offer you 5% interest on loans, then the other borrowers in the market must
A
offer 5% or more!
2
Q
what is the time value of money
A
the idea that the value of te money can change over time
3
Q
PV
FV
IR
A
earlier money on a time line
later money on a time linne
wha tthe excahnge rate between earlier and later money
4
Q
what are other names of the interest rate
A
discount rate
cost of capital
opporutunity cost of capital
required return
5
Q
Why is money worth more tooday then tomorrow
A
- inflation
- risk: of people not paying
- effort: you need to be paid for the loaning
- competiiton
6
Q
When solving financial calculator quesitons for accruing interest, what do you put in the payment box
A
0
7
Q
The higher interest rate the lower the PV
A
This is good because it means you need to invest less up front
8
Q
A
