Revision (CH4) Flashcards
1
Q
List the two types of annuities.
A
Ordinary annuity
Annuity due
2
Q
Definition: Ordinary annuity
A
If it consists of amounts received or deposited at the end of each period.
3
Q
Definition: Annuity due
A
If it consists of amounts received or deposited at the beginning of each period.
4
Q
Definition: Net Present Value (NPV)
A
Measures in monetary terms how much value an investment will generate.
5
Q
NPV > 0
A
the investment is acceptable.
6
Q
NPV < 0
A
indicates that the investment will not add any value / value will be lost.
7
Q
What makes an investment acceptable?
A
Internal Rate of Return (IRR) > Required Rate of Return (RRR)
