Time Value of Money

Question 1

PV

Answer 1

=FV/(1+(.10)^n

Question 2

FV

Answer 2

=PVX(1+.10)^n

Question 3

Difference between an ordinary annuity and an annuity due

Answer 3

The PV of an ordinary annuity is less than the PV of an annuity due
Ordinary annuity has one less payment

Question 4

Debentures

Answer 4

unsecured bonds

Question 5

Mortgage bonds

Answer 5

secured by real property

Question 6

Collateral trust bonds

Answer 6

secured bonds

Question 7

convertible bonds

Answer 7

convertible into common stock

Question 8

Participating bonds

Answer 8

stated rate of interest but participate in income if certain earnings levels are obtained

Question 9

Term bonds

Answer 9

bonds that have a single fixed maturity date. The entire principal is paid at the end of this term/period

Question 10

serial bonds

Answer 10

prenumbered bonds that the issuer may call and redeem a portion by a serial number

Question 11

income bonds

Answer 11

only pay interest if certain income objectives are met

Question 12

Zero coupon bonds

Answer 12

bonds sold with no stated interest

Question 13

commodity backed bonds

Answer 13

bonds that are redeemable either in cash or a stated volume of a commodity whichever is greater