PV and Annuities

Question 1

All are concerned with the use of money over a period of time, which is referred to as the time value of money.

Answer 1

Problems involving interest
Annuities
Present Values

Question 2

A large number of business transactions involve multiple payments or receipts is the definition of

Answer 2

Annuities

Question 3

What are two examples of annuities

Answer 3

Bond interest payments

Lease rental payments

Question 4

The only difference b/w an ordinary annuity and an annuity due is

Answer 4

The timing of payments

Question 5

In calculating the present value of an ordinary annuity, the # of payments is equal to

Answer 5

The number of interest periods.

Question 6

Is the amount that must be invested now at a specific interest rate so that $1 can be paid or received in the future

Answer 6

PV of $1(Ex: U.S. Saving Bonds)

Question 7

Is the amount that would accumulate at a future point in time if $1 were invested now

Answer 7

FV of $1(Ex:Bank Savings Acct)

Question 8

Is the current worth of a series of identical periodic payments to be made in the future

Answer 8

PV of an ordinary annuity(Ex: Winning the lottery)

Question 9

Is the sum, to be received at some point in the future, of identical periodic investments made from the present until that future point

Answer 9

FV of an Ordinary Annuity(Ex: Investing in an IRA)