Please answer questions 26-33

26. The time value of money plays an important role in which of the following:

a. understanding the effective rate on a business loan

b. understanding the composition of a mortgage payment

c. determining the true rate of return on an investment

d. all of the above

27. Process of calculating future value of money from present value is classified as

compounding

discounting

money value

stock value

28. Future value of interest if it is calculated once a year is classified as

One time compounding

annual compounding

semiannual compounding

monthly compounding

29. Earning interest on interest is called

Extra Interest

Simple Interest

Inflation Interest

Compound Interest

30. Lottery payoffs and payment for rental apartments are examples of

lump sum amount

deferred annuity

annuity due

payment fixed series

31. Interest paid (earned) on only the original principal borrowed (lent) is often referred to as __________.

a. present value

b. simple interest

c. future value

d. compound interest

32. If interest or compounding is done on other than an annual basis, adjust by:

a. dividing the number of years by the number of compounding periods

b. multiplying the number of years by the number of compounding periods

c. dividing the interest rate by the number of compounding period

d. multiplying the years and dividing the interest rate by the number of compounding periods

33. To investors (savings accounts, certificate of deposit, stocks), the most desirable compounding period is:

a. Annually

b. semi-annually

c. monthly

d. daily