Chapter 9 : time value of money Flashcards
1
Q
interest and interest rates equation
A
F = P + I = P + Pi = P (1 + i)
future worth = present worth + interest
= present worth (1 + interest rate)
2
Q
the period over which an interest is calculated is called an
A
interest period
3
Q
what is simple interest?
A
interest w/out compounding, not added to principal at the end of each period
4
Q
simple or compound interest more often used?
A
compound
5
Q
effective interest rate is represented by
A
i_e
6
Q
subperiod interest rate is represented by
A
i_s
7
Q
what are the 3 types of equivalence in time value of money
A
- mathematical equivalence
- decisional equivalence
- market equivalence
