CHAPTER 4 FIN 101 CSUS - 2 The idea behind COMPOUNDING is...

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2. The idea behind COMPOUNDING is that interest is earned on interest. 3. The concept of the time value of money is based on the principle that a dollar today is worth MORE a dollar promised at some time in the future. 4. Which of the following methods can be used to calculate present value? A financial calculator An algebraic formula A time value of money table 5. What is the primary difference between time value of money data entries in your calculator and in a spreadsheet function? Ans: The interest rate in your calculator is entered as a whole number while in the spreadsheet function it is entered as a decimal. 6. If a firm’s sales are growing at %5 per year, how long will it take for the firm’s to triple? X * (1+1.05)>t = 3X (1+1.05)>t = 3 t=1.53 7. If the interest rate is %10 per year and there are 10 years, what is the present value discount factor? 0.3855 8. what is the primary difference between time value of money data entries in your calculator and in a spreadsheet function? The interest rate in your calculator is entered as a whole number while in the
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