ECONOMICS

Question 1

Involves the analysis of problems for manufacturing a product or rendering a service based in present or immediate cost

Answer 1

Present economy

Question 2

A concept that explains the change in the amount of money over time for funds that are owned (invested) or owed (borrowed.

Answer 2

Time value of money

Question 3

Used to designate the rental for the use of money. Amount of money paid out as a result of borrowing funds or Amount of money received as a result of investment

Answer 3

Interest

Question 4

Economic concept that means that different sums of money at different time can be equal in economic value.

Answer 4

Equivalence

Question 5

The reward of the money borrowed or invested

Answer 5

Interest

Question 6

Are the amounts of money estimated for future projects or observed for projects or observed for project events that have taken place.

Answer 6

Cash flows

Question 7

Are the receipts, revenues, incomes, and savings generated by project and business activity

Answer 7

Cash inflows

Question 8

Are costs, disbursement, expenses, and taxes caused by projects and business.

Answer 8

Cash outflows

Question 9

Cash inflows - Cash outflows

Answer 9

Net cash flow.

Question 10

Means that all cash inflows and all cash outflows are assumed to take place at the end of the interest period in which they actually occur.

Answer 10

End of period convention

Question 11

When there is an interest in zero day.

Answer 11

Beginning of period convention

Question 12

Calculated using the principle only, ignoring any interest accrued in preceding interest period

Answer 12

Simple interest

Question 13

Computer on the basis of 12 months of 30 days each or 360 days a year.

Answer 13

Ordinary simple interest

Question 14

Based on exact no. of days in a year

Answer 14

Exact simple interest

Question 15

The interest accrued for each interest period is calculated on the principal plus the total amount of interest accumulated in all previous periods

Answer 15

Compound interest

Question 16

Formula for discrete compouding

Answer 16

F= P (1+i)^2

Question 17

The interest is compounded at the end of each finite length period such as a month, a quarter or a year

Answer 17

Discrete compouding

Question 18

It is assumed that cash payments occur ince a year, but the compounding is continuous throughout the year.

Answer 18

Continuous compounding

Question 19

Formula for continuous compounding.

Answer 19

F= Pe^rn

Question 20

Specifies the rate of interest and a no. of interest periods in one year

Answer 20

Nominal rate of interest

Question 21

The actual or exact rate of interest on the principal during one year

Answer 21

Effective rate of interest

Question 22

Formula for effective rate of interest

Answer 22

Ie = (1+i)^m -1 or

e^r -1 (continuous)

Question 23

An estimate of how much less something is worth if it us received in the future

Answer 23

Discount rate

Question 24

Measures the value of a currency in terms of the quantity and quality of goods or services that one unit of money will purchase

Answer 24

Purchasing power or buying power

Question 25

When _____ is present, the purchasing power of the monetary unit is greater in the future than at present.

Answer 25

Deflation

Question 26

An increase in the amount of money necessary to obtain the same amount of goods or services before the inflated price was present.

Answer 26

Inflation

Question 27

Formula for discount rate.

Answer 27

d = (i / (1+i) )

Question 28

Formula for inflation rate

Answer 28

Inflation rate = i + f + i (f)

Question 29

A series if equal payments occuring at equal periods of time

Answer 29

Annuity

Question 30

Annuity occurs in the following instances

Answer 30

• payment of a debt by a series of equal payments at equal intervals of time
• accumulation of a certain amount by setting equal amounts periodically
• substitution of a series of equal amounts periodically in lieu of a lumps sum at retirement of an individual

Question 31

One where the equal payments are made at the end of each payment period starting from the first period

Answer 31

Ordinary annuity

Question 32

Formula for the Uniform present worth. (P/A,i,n)

Answer 32

P=A[(1+i)^n -1] / i(1+i)^n

Question 33

Formula for Capital Recovery (A/P,i,n)

Answer 33

A=P[i(1+i)^n]/ (1+i)^n -1

Question 34

Uniform series compound amount

(F/A,i,n)

Answer 34

F=A[(1+i)^n -1] / i

Question 35

Formula for sinking fund

A/F,i,n

Answer 35

A=F (i) /[ (1+i)^n -1]

Question 36

One where the first payment is made several periods after the beginning of the annuity.

Answer 36

Deferred Annuity