chapter 5

the interest rate charged per period multiplied by the number of periods per year is equal to

annual percentage rate on a loan

in almost all multiple cash flow calculations, it is implicitly assumed that the cash flows occur at the

end of each period

in the excel setup pf a loan amortization problem, which of the following occurs?

To find the principal payment each month, you subtract the dollar interest payment from the fixed payment The payment is found with =PMT(rate, nper, -pv, fv)

The present value formula for a ________ is PV=C/r, where C is the constant and regularly timed cash flow to infinity and r is the interest rate

perpetuity

when entering variables in an Excel function (or a financial calculator) the sign convention can be critical to achieving a correct answer. The sign convention says that outflows are negative values; inflows are positive values. For which variables is this a consideration?

present value payment future value

Amortization is the process of paying off loans by regularly reducing the

principal

Which of the following is the simplest form of loan

pure discount loan

an interest rate expressed in terms of the interest payment made each period is called a

stated interest rate quoted interest rate