Finance 300 Final Exam Key Terms
Questions and Answers Graded A+
Bureau of Labor Statistics - Correct answer-A group within the United States
Department of Labor that is the primary fact-finding agency for the US
government in the fields of labor, statistics, and economics; serves as the principal
agency of the US Federal Statistical System.
compounding interest - Correct answer-The continual addition of interest to the
original principal sum of a loan or deposit, often referred to as interest on interest.
compounding period - Correct answer-The period between points in time when
interest is paid or added to the principal.
consumer price index (CPI) - Correct answer-A measure that examines the
weighted average of prices of a basket of consumer goods and services such as
transportation, food, and medical care.
discount rate - Correct answer-The interest rate used to determine the present value
of future cash inflows.
Federal Reserve - Correct answer-The central bank system of the United States.
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,financial instrument - Correct answer-An asset or bundle of assets, including
monetary contracts between parties, that can be bought, sold, or traded for financial
gain.
financial risk - Correct answer-The possibility of losing money or purchasing
power on an investment, business transaction, or venture or simply due to inflation.
Fisher effect - Correct answer-An economic theory created by economist Irving
Fisher that describes the relationship between inflation and both real and nominal
interest rates.
future value (FV) - Correct answer-The value that a current amount will grow to at
a given interest rate over a given period of time.
gross domestic product (GDP) - Correct answer-The total value of goods produced
and services provided in a country during one year.
growth rate - Correct answer-The percentage increase of a specific variable within
a specific time period; synonymous with interest rate in the context of the time
value of money.
Interest - Correct answer-The amount of money that is paid by a borrower to a
lender for the use of their money, typically calculated from an annualized rate.
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, Investment - Correct answer-An asset or item acquired with the goal of generating
financial gain through increased income or appreciation in value.
liquid asset - Correct answer-An asset that can be readily converted into cash
within a short period of time.
money market investments - Correct answer-Low-risk financial instruments such
as T-bills, federal notes, commercial paper, certificates of deposit (CDs),
repurchase agreements (repos), and bankers' acceptances, among others.
money supply - Correct answer-The total dollar value of legal tender that is
available to consumers within an economy at any single point in time.
opportunity cost - Correct answer-The loss of potential gain from other alternatives
when a single alternative is chosen.
present value (PV) - Correct answer-The current value of a future amount,
calculated by discounting the future value back at a known discount or interest rate
for a specified period of time.
real interest rate - Correct answer-A rate of interest that has been adjusted to
account for the effects of inflation.
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Questions and Answers Graded A+
Bureau of Labor Statistics - Correct answer-A group within the United States
Department of Labor that is the primary fact-finding agency for the US
government in the fields of labor, statistics, and economics; serves as the principal
agency of the US Federal Statistical System.
compounding interest - Correct answer-The continual addition of interest to the
original principal sum of a loan or deposit, often referred to as interest on interest.
compounding period - Correct answer-The period between points in time when
interest is paid or added to the principal.
consumer price index (CPI) - Correct answer-A measure that examines the
weighted average of prices of a basket of consumer goods and services such as
transportation, food, and medical care.
discount rate - Correct answer-The interest rate used to determine the present value
of future cash inflows.
Federal Reserve - Correct answer-The central bank system of the United States.
©COPYRIGHT 2025, ALL RIGHTS RESERVED 1
,financial instrument - Correct answer-An asset or bundle of assets, including
monetary contracts between parties, that can be bought, sold, or traded for financial
gain.
financial risk - Correct answer-The possibility of losing money or purchasing
power on an investment, business transaction, or venture or simply due to inflation.
Fisher effect - Correct answer-An economic theory created by economist Irving
Fisher that describes the relationship between inflation and both real and nominal
interest rates.
future value (FV) - Correct answer-The value that a current amount will grow to at
a given interest rate over a given period of time.
gross domestic product (GDP) - Correct answer-The total value of goods produced
and services provided in a country during one year.
growth rate - Correct answer-The percentage increase of a specific variable within
a specific time period; synonymous with interest rate in the context of the time
value of money.
Interest - Correct answer-The amount of money that is paid by a borrower to a
lender for the use of their money, typically calculated from an annualized rate.
©COPYRIGHT 2025, ALL RIGHTS RESERVED 2
, Investment - Correct answer-An asset or item acquired with the goal of generating
financial gain through increased income or appreciation in value.
liquid asset - Correct answer-An asset that can be readily converted into cash
within a short period of time.
money market investments - Correct answer-Low-risk financial instruments such
as T-bills, federal notes, commercial paper, certificates of deposit (CDs),
repurchase agreements (repos), and bankers' acceptances, among others.
money supply - Correct answer-The total dollar value of legal tender that is
available to consumers within an economy at any single point in time.
opportunity cost - Correct answer-The loss of potential gain from other alternatives
when a single alternative is chosen.
present value (PV) - Correct answer-The current value of a future amount,
calculated by discounting the future value back at a known discount or interest rate
for a specified period of time.
real interest rate - Correct answer-A rate of interest that has been adjusted to
account for the effects of inflation.
©COPYRIGHT 2025, ALL RIGHTS RESERVED 3
