ECON

Question 1

Amount of money earned by a given capital

Answer 1

Interest

Question 2

Interest directly proportional to the length of time and the amount of principal borrowed

Answer 2

Simple Interest

Question 3

Computed on the basis of one banker’s year

Answer 3

Ordinary Simple Interest

Question 4

Computed based on exact number of days

Answer 4

Exact Simple Interest

Question 5

Interest is computed every end each interest period and the interest earned for that period is added to the principal

Answer 5

Compound Interest

Question 6

Specifies the rate of interest and the number of interest periods per year

Answer 6

Nominal Rate of interest

Question 7

The actual rate of interest on the principal for one year

Answer 7

Effective Rate of Interest

Question 8

Consists of a series of equal payments made at equal intervals of time

Answer 8

Annuity

Question 9

Equal payments are made at the end of each payment period starting from the first period

Answer 9

Ordinary Annuity

Question 10

Payment of the first amount deferred a certain number of period after the first

Answer 10

Deferred Annuity

Question 11

Payments are made at the start of each period, beginning from the first period

Answer 11

Annuity Due

Question 12

Periodic payments continue indefinitely

Answer 12

Perpetuity

Question 13

A sequence consisting of end-of-period payments, where each payment increases or decreases by a constant value

Answer 13

Uniform Arithmetic Gradient

Question 14

A sequence consisting of end-of-period payments, where each payment increases or decreases by a fixed percentage

Answer 14

Geometric Gradient

Question 15

Sum of the first cost and the present worth of all future payments and replacements which is assumed to continue forever

Answer 15

Capitalized Cost

Question 16

Increases un the amount of money needed to purchase same amount of goods or services

Answer 16

Inflation

Question 17

Results in a decrease in purchasing power

Answer 17

Inflation

Question 18

Decreases in the value of an asset due to usage or passage of time

Answer 18

Depreciation

Question 19

Sum of the first cost and the present worth of all future payments and replacements which is assumed to continue forever

Answer 19

Capitalized Cost

Question 20

A method of determining when costs exactly equal revenue

Answer 20

Break-Even Analysis

Question 21

Attempts to identify the relationship between the cost and benefits of a proposed project

Answer 21

Benefit-Cost Ratio

Question 22

The break-even interest rate which equates the present worth of a project’s cash outflows to the present worth of its cash inflows

Answer 22

Rate of Return

Question 23

Measures the yield as a percentage of investment over the life of a project

Answer 23

Rate of Return

Question 24

A minimum return the company will accept on the money it invests (usually calculated by financial analysts)

Answer 24

Minimum Attractive Rate of Return (MARR)

Question 25

The same as the interest rate used for Present Worth, Annual Worth, and Future Worth analysis

Answer 25

Minimum Attractive Rate of Return (MARR)

Question 26

The period required to recover the total investment

Answer 26

Recovery Period

Question 27

The length of time required to recover fixed capital

Answer 27

Payback Period

Question 28

A type of security that signifies ownership in a corporation and represents a claim on part of the corporation’s assets and earnings

Answer 28

Stock

Question 29

An interest transaction where the price of the corresponding load is set down by subtracting the so-called discount from the amount due

Answer 29

Simple Discount Rate

Question 30

The corresponding interest is credited at the beginning of the discount period (interest in advance), while in the simple interest model the interest is credited in arrears at the end pf the interest period

Answer 30

Simple Discount Rate