Finance Ch.5 and Ch.6
APR
Quoted Rate
Balloon loan
a loan wherein the regular payments, including both interest and principal amounts, are insufficient to retire the entire loan amount, which then must be repaid in one lump sum?
Effective Annual Rate (EAR)
A monthly interest rate expressed as an annual rate would be an example of which one of the following rates?
the lower the present value
Given the interest rate, the longer the time period...
the smaller the present value
Given the time period, the higher the interest rate...
ordinary annuity
Equal payments paid at regular intervals over a stated time period
The principle is repaid in a lump sum at the end of the loan period
How is the principle amount of an interest-only loan repaid?
Simple Interest
Only receiving interest on initial investment is what kind of interest?
Annuity Due
Payments occur at the beginning of each period.
Pure Discount loan
The entire repayment of which loan is computed simply by computing a single future value?
Stated interest rate
The interest rate that is quoted by a lender is referred to as which one of the following?
Discounted cash flow valuation
The process of determining the present value of the future cash flows in order to know the worth today is called which of the following?
perpetuity
Unending equal payments paid at equal time intervals.
Annual percentage rate (APR)
What is the interest rate charged per period multiplied by the number of periods per year called?
The factors are reciprocals of each other
What is the relationship between present value and future value interest factors?
Interest-only loan
What term is used to describe a loan that calls for periodic interest payments and a lump sum principle payment?
Compounding
When calculating future value, the process is called
Discounting
When calculating present value, the process is called
The present value of a growing perpetuity will decrease if the discount rate is increased
Which one of the following statements related to growing annuities and perpetuities is correct?
Consol
Which term is used to identify a British perpetuity?
