Chapter 5--Time Value of Money

Cash flows or Free Cash Flows (FCF) can appear as: a. PV and FV b. PV, FV, and PMT(s) c. PV and PMT(s) d. FV and PMT(s) e. All of the above

e

In any Time Value of Money (TVM) related problem the following variables are always present a. PV, PMT, FV, n, i b. PV, FV, n, i c. PV, PMT, n, i d. FV, PMT, n, i e. None of the above

e

Compound interest is interest earned on the ______ principal and the _______ ________ from prior periods

initial, interest reinvested

Compounding is the same as earning _________ on interest

interest

One dollar today is worth _________ than one dollar tomorrow.

more

Simple interest is interest earned only on the __________ _________ invested.

original principle

Compounding is _________ the _________ earned on an asset.

reinvesting, interest

Future Value (FV) is the amount an investment (or an asset) is worth _______________.

sometime in the future/one or more periods

In Excel NPER stands for rate and RATE for number of periods

False

In Excel RATE stands for interest rate or return

True

Present Value (PV) is: _________ _________ of future cash flows discounted at an appropriate discount rate.

current value