Flashcards in Chp3-Quiz Deck (13):
An increase in risk should carry with it an increase in return
Ellen Hopkins is saving for a new car that costs $34,000. Approximately how many money must Ellen set aside now to have $34,000 in 3 years if the annual compound interest rate is 8%
Jaker Cherson is saving for a new tractor that costs $60,000. Approximately, how much money must he set aside now to have $60,000 in 5 years if the annual compound interest rate is 10%.
In every case, with total returns being equal, the investment which provides cash flow sooner is the superior choice
Which of the following decreases the present value
Increasing discount rate
Lily Jones places $10,000 in a savings account that compounds interest at 4%. How much money will she have in 5 years.
Compounding is the opposite of discounting
By selecting the proportions of debt and equity in the most efficient way, a manager can add value to the firm.
The present value equation is a rearrangement of the future value equation.
Bruce Sterling places $5,000 in a savings account that compounds interest at 8%. How much money will Bruce have in 10 years?
Present Value Formula
Future Value / (1 + i)^n
Future Value Formula
(1 + i)^n x initial investment