FINANCE 301 EXAM 1 (MODULES 1-4)
QUESTIONS & A+ GRADED ANSWERS
ALL PASSED
Discounting - Correct Answer ✔✔ the process of turning future cash flows into current
cash flows (today)
Time value of Money - Correct Answer ✔✔ Dollars to be received or paid out through
time are different commodities that cannot simply be added together or subtracted from
each other
Compound interest - Correct Answer ✔✔ Simple interest + Interest earned over the
previous period
An annuity represents a stream of payments that occur at what time each year? -
Correct Answer ✔✔ at the end of each period
A bank just launched a new savings account that earns the rate of 6.85% compounded
daily. The bank points out that the rate of 6.85% is equivalent to earning 7.09%
compounded annually. What label do we give to the 7.09% in this example - Correct
Answer ✔✔ effective annual interest rate
In the context of calculating present values, what is another name for the interest rate? -
Correct Answer ✔✔ discount rate
Ray is in a situation where he needs to choose whether to go to graduate school or
accept a job at a local bank with $35000 annual salary. Suppose he chooses graduate
school. In this case, what do we call the $35,000? - Correct Answer ✔✔ opportunity
cost
What is the reverse action of discounting - Correct Answer ✔✔ compounding (at some
point in the future)
interest rate formula - Correct Answer ✔✔ = [FV/PV] to the power of (1/n) - 1
As the interest rate --- the present value ---. - Correct Answer ✔✔ increase, decreases
what is the primary objective of the corporation? - Correct Answer ✔✔ maximize
shareholder wealth
Which form of business organization contains the feature known as limited liability? -
Correct Answer ✔✔ Corporations
QUESTIONS & A+ GRADED ANSWERS
ALL PASSED
Discounting - Correct Answer ✔✔ the process of turning future cash flows into current
cash flows (today)
Time value of Money - Correct Answer ✔✔ Dollars to be received or paid out through
time are different commodities that cannot simply be added together or subtracted from
each other
Compound interest - Correct Answer ✔✔ Simple interest + Interest earned over the
previous period
An annuity represents a stream of payments that occur at what time each year? -
Correct Answer ✔✔ at the end of each period
A bank just launched a new savings account that earns the rate of 6.85% compounded
daily. The bank points out that the rate of 6.85% is equivalent to earning 7.09%
compounded annually. What label do we give to the 7.09% in this example - Correct
Answer ✔✔ effective annual interest rate
In the context of calculating present values, what is another name for the interest rate? -
Correct Answer ✔✔ discount rate
Ray is in a situation where he needs to choose whether to go to graduate school or
accept a job at a local bank with $35000 annual salary. Suppose he chooses graduate
school. In this case, what do we call the $35,000? - Correct Answer ✔✔ opportunity
cost
What is the reverse action of discounting - Correct Answer ✔✔ compounding (at some
point in the future)
interest rate formula - Correct Answer ✔✔ = [FV/PV] to the power of (1/n) - 1
As the interest rate --- the present value ---. - Correct Answer ✔✔ increase, decreases
what is the primary objective of the corporation? - Correct Answer ✔✔ maximize
shareholder wealth
Which form of business organization contains the feature known as limited liability? -
Correct Answer ✔✔ Corporations
