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1. Compound interest method refers to: Interest is calculated only on the original principle b. Interest is calculated on a d
5. An effective interest rate is: fa loan which does not account for compounding a. The sta The stated annual interest rate o
11. According to Fitch and S&Ps bond ratings, which rating is highest? a. AAAA b. Aa c. AAA d. BBB 12. The highest bond rati
for the year. 18. A capital budget summarizes the major a. Costs b. Income c. Variances d. Purchases
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Answer #1

Q1) C) interest is calculated on both the original principle and all the interest accumulated since the beginning of interest period.

Explanation:- Compound interest = p(1+r)^n

This formula shows that the interest is calculated on both the interest and principle.

Q2) D) converting future cash flows in their present value

Explanation :- Discounting = future value / (1+r)^n

This formula helps to get the future value of a payment to its present value.

Q3) B) through any given interest level and time period

Explanation :- CGR = (ending value / beginning value)^1/n - 1

= ( interest level) ^1/n - 1

Q4) C) concept that a dollar received today is worth more than the dollar received in the future.

Explanation :- Time value of money is a concept which teaches us that if we have the money today , we can invest it earn interest on it. Where as if received in future we lose out on the interest. Therefore the money received today is worth more than received in future.

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