Acct 304 Ch 6 Questions - BE

Acct 304 Ch 6 Questions - BE - Question 6-1 Interest is the...

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Question 6-1 Interest is the amount of money paid or received in excess of the amount borrowed or lent. Question 6-2 Compound interest includes interest not only on the original invested amount but also on the accumulated interest from previous periods. Question 6-3 If interest is compounded more frequently than once a year, the effective rate or yield will be higher than the annual stated rate. Question 6-4 The three items of information necessary to compute the future value of a single amount are the original invested amount, the interest rate (i) and the number of compounding periods (n). Question 6-5 The present value of a single amount is the amount of money today that is equivalent to a given amount to be received or paid in the future. Question 6-6 Monetary assets and monetary liabilities represent cash or fixed claims/commitments to receive/pay cash in the future and are valued at the present value of these fixed cash flows. All other assets and liabilities are nonmonetary. Question 6-7 An annuity is a series of equal-sized cash flows occurring over equal intervals of time. Question 6-8 An ordinary annuity exists when the cash flows occur at the end of each period. In an annuity due the cash flows occur at the beginning of each period. Question 6-9 Table 2 lists the present value of \$1 factors for various time periods and interest rates. The factors in Table 4 are simply the summation of the individual PV of \$1 factors from Table 2.

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Answers to Questions (continued) Question 6-10
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This note was uploaded on 10/28/2008 for the course ACCT 304 taught by Professor Ed during the Spring '08 term at Brookdale.

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Acct 304 Ch 6 Questions - BE - Question 6-1 Interest is the...

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