Question

TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.

6) Compounding always requires the use of a financial calculator.

7) In the compound interest formula, i stands for periodic interest rate.

8) Interest calculated on a balance every three months is said to be compounded quarterly.

9) The present value of an annuity looks from the present to the future.

10) Annuities certain have a specific stated number of payments.

11) A bond quote of 74.375 is $743.50.

12) When Jessica was born in 1984, her grandparents invested $4,000 in a 5-year 5% certificate of deposit with monthly compounding. FV = 4,000(1 + .05 ÷ 12)60 can be used to find the value of the investment at maturity.

13) The value of an annuity is the series of payments and interest.

Answer 1

6) Compounding always requires the use of a financial calculator.: True

Compounding means that interest gets paid (or is earned) on previously unpaid interest.

For example, if the interest rate is 2% and you start with $1,000 after the end of a year, you'll earn or owe $20 in interest (using annual compounding). Then at the end of two years, assuming there have been no withdrawals (or payments) you earn $20.40, not $20. The previous period's interest earned interest as well.

This pattern is called compounding, and it repeats as long as the money stays invested, or the debtor owes on the debt.

7) In the compound interest formula, i stands for periodic interest rate.:True

A= P*(1+i/100)^n

P:Principal

i: Interest

n: Tenure

Interets can be anything annually, semi annually, ,quarterly,monthly etc.

8) Interest calculated on a balance every three months is said to be compounded quarterly.:True

When Interest is calculated on quarter basis then it is said to be calculated quarterly

9) The present value of an annuity looks from the present to the future:True

Present Value of Annuity means that fixed amount depoisted at fixed interval for a fixed period then discounting them to get the present value ,hence it is correct to say that annuity looks into from present to the future

10) Annuities certain have a specific stated number of payments.True

Annuities are always for a fixed tenure for which period they will be paid throughout that period

11) A bond quote of 74.375 is $743.50.:False

12) When Jessica was born in 1984, her grandparents invested $4,000 in a 5-year 5% certificate of deposit with monthly compounding. FV = 4,000(1 + .05 ÷ 12)60 can be used to find the value of the investment at maturity.

True, The above mentioned formula is for the compounding calculated on monthly basis

13) The value of an annuity is the series of payments and interest.: True

Annuity :P*R*(1+R)^n/{(1+r)^N-1}