Unlock access to all the studying documents.
View Full Document
Appendix B Applying Present and Future Values Answer Key
True / False Questions
Present Value of an Annuity of 1
Future Value of an Annuity of 1
Interest is the borrower’s payment to the owner of an asset for its use.
Present Value of an Annuity of 1
Future Value of an Annuity of 1
From the perspective of an account holder, a savings account is a liability with interest.
Present Value of an Annuity of 1
Future Value of an Annuity of 1
An interest rate is also called a discount rate.
Present Value of an Annuity of 1
Future Value of an Annuity of 1
Present and future value computations enable companies to measure or estimate the
interest component of holding assets or liabilities over time.
Present Value of an Annuity of 1
Future Value of an Annuity of 1
The number of periods in a present value calculation may only be expressed in years.
Present Value of an Annuity of 1
Future Value of an Annuity of 1
The present value factor for determining the present value of $6,300 to be received three
years from today at 10% interest compounded semiannually is 0.7462.
Present Value of an Annuity of 1
Future Value of an Annuity of 1
The present value of 1 formula is often useful when a borrowed asset must be repaid in
full at a later date and the borrower wants to know the worth of the asset at the future
date.
Present Value of an Annuity of 1
Future Value of an Annuity of 1
In a present value or future value table, the length of one time period may be interpreted
as one year, one month, or any other length of time.
Present Value of an Annuity of 1
Future Value of an Annuity of 1
The present value of $2,000 to be received nine years from today at 8% interest
compounded annually is $1,000.
Present Value of an Annuity of 1