Chapter 5: Time Value Money part 2

Question 1

what is a compound return also called

Answer 1

geometric return

Question 2

what is the basis point

Answer 2

looking at a return down to its 1/100 of 1%

Question 3

what is PVIF

Answer 3

a formula that determine the PV of $1 to be received at some time in the future n based on a given interest rate k

Question 4

PVIF are always what (well most of the time)

Answer 4

less than 1 as long as the discount rates are positive - means that future dollars are usually worth less than the same dollars today

Question 5

what are discount factors

Answer 5

are the reciprocals of their corresponding compound factors and vise versa (PVIF - 1/CVIF) - the greater the discount rate the greater the CVIF (and FV) and the smaller the PVIF (and PV) and vise versa

Question 6

definition of annuity

Answer 6

regular payments on an investment that are for the same amount and are paid at the same interval

Question 7

definition cash flows

Answer 7

the actual cash generated from an investment

Question 8

definition ordinary annuity

Answer 8

equal payments that are made at the end of each period

Question 9

PMT

Answer 9

for the regular annuity payment or receipt

Question 10

What type of annuity is this

Answer 10

Ordinary annuity

Question 11

What type of annuity is this>?

Answer 11

Annuity due because it offers payments at the BEGINING of each period