Bcor 2204: Quiz # 2 Updated Actual Questions And Correct Answers

BCOR 2204: QUIZ # 2 UPDATED ACTUAL QUESTIONS
AND CORRECT ANSWERS

Question:
1. Compounding

Answer:
predict a future value from present value

Question:
2. Discounting

Answer:
value a dollar from a future amount

Question:
3. Lump sum

Answer:
single amount of money either held currently or expected at some future point

Question:
4. Annuity

Answer:
periodic stream of cash flows

Question:
5. Mixed stream

Answer:
random stream of cash flows

Question:
6. Discounting cash flows with interest rate

Answer:
lower interest rate = higher present value

Question:
7. Compounding cash flows with interest rate

Answer:
higher interest rate = higher present value

, Question:
8. Ordinary annuity

Answer:
annuity where cash flow occurs at the end of a period

Question:
9. Annuity due

Answer:
annuity where cash flow occurs at the beginning of a period

Question:
10. Which is going to be valued more? Annuity due or
ordinary annuity

Answer:
Annuity due

Question:
11. perpetuity

Answer:
an annuity with an infinite life
calculated by dividing the amount by Growth rate - rate

Question:
12. Compounding more frequently

Answer:
higher effective interest rate and therefore a higher value

Question:
13. Discounting and compounding

Answer:
less frequent you compound, the higher the value will be

Question:
14. When making payments on a loan, the amount of each
payment going towards the principal _________ with time,
and the amount of each payment going towards interest
___________.

Answer:
increases and decreases