chapter 2

Question 1

refers to wealth in the form of money or property
that can be used to produce more wealth.

Answer 1

capital

Question 2

refers to wealth in the form of money or other
assets owned by a person or organization that can be used for
a particular purpose such as starting a company or investing.

Answer 2

Capital

Question 3

owned by individuals who have invested
their money or property in a business project or venture in the
hope of receiving a profit

Answer 3

.Equity Capital-

Question 4

obtained from lenders for investment,
with a promise to repay the principal amount and interest on a
specific date.

Answer 4

Borrowed Capital

Question 5

Types of
Capital

Answer 5

Equity Capital-
Borrowed Capital
3. Human Capital
4. Social Capital
5. Natural Capital

Question 6

a graphical representation of cash flows drawn on a time scale.

Answer 6

Cash Flow
Diagram

Question 7

Represents thetime with progression of time
moving from left to right (i.e. month, year).

Answer 7

Horizontal line.

Question 8

Represents cash flows.

Answer 8

Arrows

Question 9

receipts (positive cash flow or cash inflow i.e income)

Answer 9

arrow up

Question 10

disbursements (negative cash flow or cash outflow i.e expenses)

Answer 10

arrow below

Question 11

simplest case involves the equivalence of a single present amount (P)and its future worth (F)

Answer 11

Single Cash Flows

Question 12

transactions arranged as a
series of equal cash flows at regular intervals.

Answer 12

Equal Uniform Series

Question 13

cash flow
that increase or decrease by uniform
amount each periods.

Answer 13

Linear Gradient Series

Question 14

cash
flows that increase or decrease by a
fixed percentage.

Answer 14

Geometric Gradient Series

Question 15

consists of cash flow
that change with no pattern.

Answer 15

.Irregular Series

Question 16

Types of Cash
Flows

Answer 16

Single Cash Flows
Equal Uniform Series
Linear Gradient Series
Geometric Gradient Series-
.Irregular Series

Question 17

the amount of money paid for the use of borrowed capital or income produced by
money which has been loaned

Answer 17

Interest-

Question 18

the interest on a loan that is based only on the principal. Usually
used for short-term loans where the period is measured in days rather than years.

Answer 18

SIMPLE INTEREST

Question 19

interest is computed based on the exact
number of days in a given year which is 365 days for a normal year and 366
days during a leap year (which occurs every 4 years, or if it is a century year, it
must be divided by 400).

Answer 19

EXACT SIMPLE INTEREST

Question 20

discount in simple terms is the interest deducted in advance. It is
the difference between the amount a borrower receives in cash (present worth) and
the amount he pays in the future (future worth).

Answer 20

DISCOUNT

Question 21

interest which is based on the principal plus the previous
accumulated interest. It may also be defined as ‘interest on top of
interest.” This is usually used in commercial practice especially for
longer periods.

Answer 21

Compound
Interest

Question 22

-the cost of borrowing money or the amount earned by a unit principal
per unit time

Answer 22

Rate of
Interest

Question 23

TYPES OF RATES OF INTEREST

Answer 23

nominal rate
effective

Question 24

this type of annuity is one where the first payment is made several periods
after the beginning of the annuity.

Answer 24

Deferred
Annuity

Question 25

when payments are made at the beginning of the
payment period.

Answer 25

ANNUITY DUE

Question 26

is an annuity where the payment period extends forever, which means that the periodic payments continue indefinitely.

Answer 26

PERPUITY

Question 27

s one wherein the cash flow changes
(increase or decreases) by the same amount in each cash flow period.

Answer 27

An arithmetic gradient cash flow

Question 28

An arithmetic gradient cash flow

Answer 28

geometric gradient

Question 29

this is one of the most important applications of perpetuity.

Answer 29

this is one of the most important applications of perpetuity.

Question 30

is any mode of paying debt, the principal and the interest included, usually by a series of uniform amount every period.

Answer 30

Amortization

Question 31

a table showing the payments throughout the total interest period.

Answer 31

Amortization schedule-