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Principles of Finance

Review Questions

Principles of FinanceReview Questions
1 .
All other things being the same, would you prefer a bank account that compounds interest quarterly or one that compounds interest semiannually?
2 .
Briefly describe the concept of future value within the context of the larger overall concept of the time value of money.
3 .
Which of the following two options will give you the greatest future value: (A) an initial deposit of $100 earning 20% per year, compounded annually and left to grow for 10 years, or (B) an initial deposit of $75 earning 12% per year, compounded monthly and left to grow for 15 years?
4 .
If a savings account pays interest on a quarterly basis and you are performing future value calculations on deposited amounts, how can you calculate the rate?
5 .
Briefly describe the relationship among consumer savings, purchasing power, and inflation.
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