Chapter 12 (Time Value of Money)

Question 1

Time Value of Money
- Money can grow over time because it can earn ________

Present Value
- Amount in the future is worth today assuming it earns interest at a given compound interest rate
- Present value = (1 / (1+i)^t)) * __

Answer 1

interest
FV (future value)

Question 2

Interest Rates
- Usually quoted on an ______ basis
- If compounded quarterly, then the period equals _ * per year, and the interest rate is divided by _

Annuity
- A series of consecutive equal ________ payments

Future Value
- Sum to which an amount will increase as the result of compound interest
- Future Value of an Annuity: Equal payments are made each period (opposed to lump-sum).

Answer 2

annual
4 (x2)
periodic