1. Present Value The basic present value equation has four parts. What are they?

2. Compounding What is compounding? What is discounting?

3. Compounding and Period As you increase the length of time involved, what happens to future values? What happens to present values?

4. Compounding and Interest Rates What happens to a future value if you increase the rate r? What happens to a present value?

5. Ethical Considerations Take a look back at Example 5.7. Is it deceptive advertising? Is it unethical to advertise a future value like this without a disclaimer? To answer the next five questions, refer to the GMAC security we discussed to open the chapter.

6. Time Value of Money Why would GMAC be willing to accept such a small amount today ($500) in exchange for a promise to repay 20 times that amount ($10,000) in the future?