Chapter 5

Question 1

compound interest

Answer 1

interest paid on the investment during the first period is added to the principal, then interest is earned on the new sum

Question 2

future value

Answer 2

the amount to which your investment will grow, or a future dollarr amount

Question 3

future value factor

Answer 3

the value of (1+r)^n used as a multiple to determine future value

Question 4

simple interest

Answer 4

if you only earn interest on your initial inverstment

Question 5

N key on BAII Plus

Answer 5

Stores or calculates the total number of payments or compounding periods

Question 6

I/Y key on BAII Plus

Answer 6

Store or calculates the interest (or discount or growth) rate per period

Question 7

PV key on BAII Plus

Answer 7

Stores (or calculates) the present value of a cash flow (or series of cash flows)

Question 8

FV key on a BAII Plus

Answer 8

Stores (or calculates) the future value, that is, the dollar amount of a final cash flow (or the compound value of a single flow or series of cash flows).

Question 9

PMT key on BAII Plus

Answer 9

Stores (or calculates) the dollar amount of each annuity (or equal) payment deposited or received

Question 10

=PV(rate,per,pmt,fv)

Answer 10

Present Value

Question 11

=FV(rate,per,pmt,pv)

Answer 11

Future Value

Question 12

=PMT(rate,per,pv,fv)

Answer 12

Payment

Question 13

=NPER(rate,pmt,pv,fv)

Answer 13

Number of periods

Question 14

RATE(per,pmt,pv,fv)

Answer 14

Interest Rate

Question 15

present value

Answer 15

the value in today’s dollars of a future payment discounted back to present at the required rate of return