Review Questions for Test 2 Chapter 5 Time Value of Money 1. What is the process called when a present value amount grows to a future value amount? 2. What is the process of taking an expected future value and determining the present value? 3. Explain the Rule of 72 4. What is an annuity? 5. Explain the difference between an ordinary annuity and an annuity due 6. How do you handle an annuity due on a financial calculator? 7. What is a perpetuity? 8. If a series of cash flows with quarterly payments has an effective annual rate of 6.42, what does this mean? Chapter 6 Interest Rates What is the expected relationship between an increase in inflation and the expected increase in the interest rate? 1