ch06 - ch06 Student: _ 1. 2. 3. 4. Compound interest...

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ch06 Student: ___________________________________________________________________________ 1. Compound interest includes interest earned on interest. True False 2. When interest is compounded, the stated rate of interest exceeds the effective rate of interest. True False 3. The calculation of future value requires the removal of interest. True False 4. The company's credit-adjusted risk-free rate of interest is used when computing present value applying the expected cash flow approach. True False 5. The calculation of present value eliminates interest from future cash flows. True False 6. With an ordinary annuity, a payment is made or received on the date the agreement begins. True False 7. In the future value of an ordinary annuity, the last cash payment will not earn any interest. True False 8. An annuity consists of level principal payments plus interest on the unpaid balance. True False 9. With an annuity due, a payment is made or received on the date the agreement begins. True False 10. An annuity is a series of equal periodic payments. True False 11. Given identical current amounts owed and identical interest rates, annual payments of an ordinary annuity will be greater than annual payments of an annuity due. True False 12. Other things being equal, the present value of an annuity due will be less than the present value of an ordinary annuity. True False 13. A deferred annuity is one in which interest charges are deferred for a stated time period. True False 14. Monetary assets include only cash and cash equivalents. True False 15. Most, but not all, liabilities are monetary liabilities. True False
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16. Match each phrase with the correct term placing the letter designating the best term in the space provided by the phrase. 1. Time value of money A dollar now is worth more than a dollar later. __ __ 2. Future value of an ordinary annuity A series of equal periodic payments. __ __ 3. Annuity Accumulation of a series of equal payments with the last payment accruing interest. __ __ 4. Future value Accumulation of a series of equal payments with the last payment accruing no interest. __ __ 5. Future value of an annuity due Accumulation of an amount with interest. __ __ 17. Match each phrase with the correct term placing the letter designating the best term in the space provided by the phrase. 1. Simple interest Amount today equivalent to a specified future amount. __ __ 2. Present value of an annuity due Its amount is not fixed or determinable. __ __ 3. Nonmonetary asset Based on initial principal only. __ __ 4. Present value of a single amount Claim to a fixed amount of cash. __ __ 5. Monetary asset Current worth of a series of equal payments received at the beginning of a period. __ __ 18. Match each phrase with the correct term placing the letter designating the best term in the space provided
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This note was uploaded on 04/12/2011 for the course ACCT 201 taught by Professor Hyduke,n during the Spring '10 term at Community College of Baltimore County.

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ch06 - ch06 Student: _ 1. 2. 3. 4. Compound interest...

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