MODULE 2

Question 1

concept in finance that states that money in the
present is worth more than the same amount of money in the future.

Answer 1

Time value of money (TVM)

Question 2

The current value of a future sum of money, taking into account the time
value of money and a specified interest rate.

Answer 2

Present value:

Question 3

The value of a sum of money at a future date, taking into account the
time value of money and a specified interest rate.

Answer 3

Future value:

Question 4

The percentage at which money earns interest over a specified period of
time.

Answer 4

Interest rate:

Question 5

The amount of money paid for the use of borrowed capital or the income
produced by money which has been loaned.

Answer 5

Interest

Question 6

Calculated using the principal only, ignoring any interest that had been
accrued in preceding periods.

Answer 6

Simple interest

Question 7

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

Answer 7

Ordinary simple interest

Question 8

based on the exact number of days in a year, 365 days for an ordinary year and 366 days for a leap year.

Answer 8

Exact simple interest is

Question 9

a visual representation of the inflow and outflow of money in a
business or personal finance scenario.

Answer 9

cash flow diagram

Question 10

a type of interest that is calculated on the principal amount and
the accumulated interest of a previous period.

Answer 10

Compound interest is

Question 11

calculates the present value of a single lump sum payment to be received at a future date. It is used to determine the value of future cash
flows discounted to their present value.

Answer 11

Single Payment Compound Factor (SPCF)

Question 12

used in finance to calculate
the present value of a future lump sum payment, which is a one-time payment
received or paid at a future date. This factor is also known as the present value
factor or the discount factor.

Answer 12

SPPWF: The single payment present worth factor

Question 13

is the cost of borrowing money, or the rate at which money can be invested to earn a profit.

Answer 13

Interest rate

Question 14

is the stated or named interest rate on a loan or
an investment that does not take into account the effect of compounding.

Answer 14

A nominal interest rate

Question 15

obtained by setting the sum of the values on a certain
comparison or focal date of one set of obligations equal to the sum of the values on the
same date of another set of obligations.

Answer 15

equation of value

Question 16

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

Answer 16

discrete compounding,

Question 17

it is assumed that cash payments occur once per year, but the compounding is continuous throughout the year.

Answer 17

continuous compounding,

Question 18

a term used to describe the rate at which the general level of prices for goods and services is rising, and, as a result, the purchasing power of money is decreasing

Answer 18

Inflation is