5.3 - Long-term Liabilities

Question 1

This is the use of money over a period of time:

Answer 1

Time value of money

Question 2

This annuity, payments are made at the end of each period
This annuity, payments are made at the beginning of each period

Answer 2

1. Ordinary annuity
2. Annuity due

Question 3

What is the formula to calculate the PV of $1?

Answer 3

Future value / (1+R)^n

Question 4

What is the formula to calculate the fair value of $1?

Answer 4

Present value X (1+R)^n

Question 5

What is the formula to calculate the present value of an ordinary annuity?

Answer 5

Annuity payment X PV factor of ordinary annuity

Question 6

What is the formula to calculate the present value of annuity due?

Answer 6

Present value of ordinary annuity X (1+R)

Question 7

The PV of an annuity due for3 periods is the same as the PV of an ordinary annuity for how many periods?

Answer 7

2

Question 8

What is the difference between liabilities and equity?

Answer 8

Liabilities have a maturity date, equity does not

Question 9

A method under which each payment on aa note is allocated to interest and principal as though the note had a constant effective stated rate of interest

Answer 9

Effective interest method