5-1 What is the difference between future value and present value? Which approach is generally preferred by financial managers? 5-2 Define and differentiate among the three basic patterns of cash flow: (1) a single amount, (2) an annuity, and (3) a mixed stream. 5-5 What is meant by "the present value of a future amount"? What is the general equation for present value? 5-6 What effect does increasing the required return have on the present value of a future amount? Why? 5-7 How are present value and future value calculations related? 5-10 What is the difference between an ordinary annuity and an annuity due? Which is more valuable? Why? 5-11 What are the most efficient ways to calculate the present value of an ordinary annuity? 5-12 How can the formula for the future value of an annuity be modified to find the future value of an annity due? 5-13 How can the formula for the present value of an ordinary annuity be modified to find the present value of an annuity due? 5-14 What is a perpetuity? Why is the present value of a perpetuity equal to the annual cash payment divided by the interest rate? Why doesn't this chapter provide an equation showing you how to calculate the future value of a perpetuity? -18 How do you calculate the future value of a mixed stream of cash flows? How do you calculate the present value of a mixed stream? 22 Differentiate between a nominal annual rate and an effective annual rate (EAR). Define annual percentage rate (APR) and annual percentage yield (APY)