Test 3 - Final Exam Terms
According to order of operations we work with exponents before parentheses.
False
Another name for an effective interest rate is Annualized Yield.
False
If an interest rate is a daily rate, it is acceptable to use a term in years.
False
If two banks have the same interest rate, but one compounds monthly and one compounds daily, as an investor, you would prefer to go with the bank that compounds daily.
False
Nominal rates make it easy to compare different rates and compoundings.
False
Notes are negotiable, meaning they can be bought and sold.
False
The Rule of 72 is used to find exact interest rates and terms.
False
To find your total interest we solve: PV - FV.
False
When converting from an annual interest rate to a monthly interest rate, we multiply the rate by 12
False
When interest is paid on the original principal only, it is called compound interest.
False
Consolidating
Replacing several loans with one new one is called
The face value of a discount note is its maturity value.
True
Present Value (PV)
A sum of money paid at the beginning of an annuity, to which the annuity's payments are accepted as equivalent, is called the annuities
Future Value (FV)
A sum of money to which an annuity's payments and interest accumulate in the end is called the annuity's
The main federal law in the U.S. that requires financial institutions to disclose the effective rate is known as Regulation T.
True
Annuity
The student loan's consistent and regular payments are an example of an
A 5% simple interest rate is equivalent to a 5% simple discount rate.
True
A debtor is someone to whom money is owed.
True
A payday lender gives you cash now in exchange for your full paycheck when you receive it.
True
Banker's Rule assumes that a year has 12 months having 30 days each for a total of 360 days in a year.
True
If two rates and compounding frequencies give the same result (Future Value), we say they are equivalent.
True
More frequent compounding leads to more interest.
True
The amount a business is owed to be paid in the near future is called a receivable.
True
The balance principal says you can make any change to one side of an equation as long as you make an equivalent change to the other side.
True
Sinking Fund
is an annuity for which the amount of the payments is determined by a desired future value
Annuity Due
is an annuity whose payments are made at the beginning of each time interval
Ordinary Annuity
is an annuity whose payments are made at the end of each time period
Refinancing
means paying off an existing debt by taking out a new loan, borrowing the money needed to pay off the old loan
Amortization table
shows how a loan is paid off
