Interest Rate

Question 1

Interest Rate

Answer 1

cost of borrowing money or the return on lending money, affects ROI

Question 2

Principle #6 : Rate of Time Preference

Answer 2

Other things equal, people always prefer a good today rather than in the future

Question 3

Discounting

Answer 3

deduct an amount from (the usual price of something).

Question 4

Discount Rate

Answer 4

the rate of return used to discount future cash flows back to their present value.

Question 5

Investment Productivity

Answer 5

Investment productivity measures the efficiency of investment generated returns.

Question 6

Future Value

Answer 6

agree on contract today to deliver a certain quantity at a given price in the future

Question 7

Present Value

Answer 7

PV = FV/(1 + i) (PV of a lump sum)

Question 8

Stream of Payoffs (income)

Answer 8

financial return or reward (especially returns equal to the initial investment)

Question 9

Income

Answer 9

flow of dollars from a stock of capital

Question 10

Assets

Answer 10

anything of value that can be converted into cash—it includes things like cash itself, real estate holdings, investments, and personal property.

Question 11

Wealth

Answer 11

Assets - liabilities + the PV of the future income stream

Question 12

Liability

Question 13

Rate of Return

Question 14

Rate of Return & Interest Rate in Equilibrium

Question 15

Differences in Rates of Financial Returns

Question 16

Equilibrium Interest Rate

Question 17

Nominal Interest Rate

Question 18

Real Interest Rate

Question 19

High Investment Productivity

Answer 19

leads to higher economic growth and higher living standards, produces more goods and services, leads to lower costs and higher profits.

Question 20

Low Investment Productivity

Answer 20

leads to slower economic growth and lower living standards, less return on investments.