BCOR 2204 Quiz 2: Financial Mathematics, Exams of Marketing Business-to-business (B2B)

Download BCOR 2204 Quiz 2: Financial Mathematics and more Exams Marketing Business-to-business (B2B) in PDF only on Docsity! BCOR 2204 Quiz 2 Exa m Questions and Answers for 2024 Update. Future Value (FV) - Correct answer Value at some future date Compound interest - Correct answer interest earned on both the principal amount and any interest already earned Principal - Correct answer the amount of money borrowed Simple interest - Correct answer Interest paid on principal alone Present value (PV) - Correct answer Value of future cash flow in today’s dollars Discount Cash Flow - Correct answer Process of finding present values, inverse of compound interest Annuities - Correct answer Stream of equal, periodic cash flows over a specific period of time Ordinary annuities - Correct answer annuities in which the cash flows occur at the end of each of the specified time periods Annuity due - Correct answer an annuity for which the cash flows occur at the beginning of the period Perpetuity - Correct answer Annuity with an eternal life Mixed Streams - Correct answer Stream of unequal periodic cash flows that reflect no pattern Nominal annual rate - Correct answer Contractual annual rate of interest charged by lender or promised by borrower Effective Annual Rate (EAR) - Correct answer the total amount of interest that will be earned at the end of one year Annual Percentage Rate (APR) - Correct answer The nominal annual rate of interest, found by multiplying the periodic rate by the number of periods in one year, that must be disclosed to consumers on credit cards and loans as a result of "truth-in-lending laws." Annual Percentage Yield - Correct answer the effective annual rate of interest that must be disclosed to consumers by banks on their savings products as a result of "truth-in- savings laws." Loan Amortization - Correct answer the determination of the equal periodic loan payments necessary to provide a lender with a specified interest return and to repay the loan principal over a specified period Interest rate - Correct answer Percentage of amount borrowed to be added to the amount loaned and paid back - cost of borrowing funds Required return - Correct answer usually applied to equity instruments such as common stock; the cost of funds obtained by selling an ownership interest Inflation - Correct answer rising trend in prices Liquidity preference - Correct answer A general tendency for investors to prefer short- term (that is, more liquid) securities. Nominal rate of interest - Correct answer the actual rate of interest charged by the supplier of funds and paid by the demander Real rate of interest - Correct answer the nominal rate of interest minus the anticipated rate of inflation. Term structure of interest rates - Correct answer the relationship between yields to maturity and terms to maturity across bonds Yield curve - Correct answer a graph of yield to maturity as a function of term to maturity Yield to Maturity (YTM) - Correct answer the rate of return earned on a bond if it is held to maturity Normal Yield Curve - Correct answer an upward-sloping yield curve indicates that long- term interest rates are generally higher than short-term interest rates. Flat Yield Curve - Correct answer a yield curve that indicates that interest rates do not vary much at different maturities Expectations Theory - Correct answer the proposition that the interest rate on a long- term bond will equal the average of the short-term interest rates that people expect to occur over the life of the long-term bond Liquidity Preference Theory - Correct answer the theory that, all else being equal, lenders prefer to make short-term loans rather than long-term loans; hence, they will lend short-term funds at lower rates than they lend long-term funds. Market Segmentation Theory - Correct answer the theory that the shape of the term structure of interest rates implies that the rate of interest for a particular maturity is