Principles of Managerial Finance –
Midterm Exam with Answers
Future Value - ✔✔The value at a given future date of an amount placed on deposit today and
earning interest at a specified rate.
Present Value - ✔✔The current dollar value of a future amount; the amount of money that
would have to be invested today at a given interest rate over a specified period to equal the
future amount.
Lump Sum - ✔✔A cash flow that has no equal cash flow in any adjacent time period
Annuity - ✔✔A stream of equal periodic cash flows over a specified time period. These cash
flows can be inflows of returns on investments or outflows of funds invested to earn future
returns.
Ordinary Annuity - ✔✔An annuity for which the cash flow occurs at the end of each period
Annuity Due - ✔✔An annuity for which the cash flow occurs at the beginning of each period.
Discount Rate - ✔✔The interest rate used to find the PV
Reinvestment Rate - ✔✔The interest rate used to find the FV
Portfolio - ✔✔A collection or group of assets
Midterm Exam with Answers
Future Value - ✔✔The value at a given future date of an amount placed on deposit today and
earning interest at a specified rate.
Present Value - ✔✔The current dollar value of a future amount; the amount of money that
would have to be invested today at a given interest rate over a specified period to equal the
future amount.
Lump Sum - ✔✔A cash flow that has no equal cash flow in any adjacent time period
Annuity - ✔✔A stream of equal periodic cash flows over a specified time period. These cash
flows can be inflows of returns on investments or outflows of funds invested to earn future
returns.
Ordinary Annuity - ✔✔An annuity for which the cash flow occurs at the end of each period
Annuity Due - ✔✔An annuity for which the cash flow occurs at the beginning of each period.
Discount Rate - ✔✔The interest rate used to find the PV
Reinvestment Rate - ✔✔The interest rate used to find the FV
Portfolio - ✔✔A collection or group of assets
