Chapter 6- Accounting and the Time Value of Money

Question 1

How do you calculate simple interest?

Answer 1

P x i x n ( principal x rate of interest for a single period x number of periods) usually used for short term assets of < 1 year

Question 2

How do you calculate compounded interest?

Answer 2

Compound interest uses the accumulated balance (principal plus interest to date) at each year-end to compute interest in the succeeding year.

Question 3

What is the formula to determine FVF?(future value factor)

Answer 3

FVF = (1+i)^n

FVF= future value factor for n periods at i interest

n= number of periods

i= rate of interest for a single period

Question 4

How do you calculate the future value factor?

Answer 4

(1+i)^n

Question 5

How do you calculate future value factor of annuity?

Answer 5

     i

Question 6

How do you calculate present value factor?

Answer 6

(1+i)^(-n)

Question 7

How do you calculate present value factor of annuity?

Answer 7

   i

Question 8

What’s the formula for compound interest?

Answer 8

Pv X (1+i)^n