Finance ch.5 quiz

future value

assume you are investing $100 today in a savings account. which one of the following terms refers to the total value of this investment one year from now?

interest on interest

jared invested $100 two years ago at 8 percent interest. The first year, he earned $8 interest on his $100 investment. He reinvested the $8. The second year, he earned $8.64 interest on his $108 investment. The extra $.64 he earned in interest the second year is referred to as:

discounting

madelyn is calculating the present value of a bonus she will receive next year. the process she is using is called:

compounding

cullen invested $5,000 five years ago and earns 6 percent annual interest. By leaving his interest earnings in her account, he increases the amount of interest he earns each year. His investment is best described as benefiting from:

present value

hayley won a lottery and will receive $1,000 each year for the next 30 years. the current value of these winnings is called the:

compound interest

the interest earned on both the initial principal and the interest reinvested from prior periods is called:

discounted cash flow valuation

the process of determining the present value of future cash flows in order to know their value today is referred to as: