APSC 221 Chapter 3 Questions with complete solution 2024/2025
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Course
APSC 221
Institution
APSC 221
APSC 221 Chapter 3 Questions with complete solution 2024/2025 APSC 221 Chapter 3: Time Value of Money
Interest, I - correct answer The difference between the amount of money lent and the amount of money later repaid. It is the compensation for giving up the use of money for the duration of th...
APSC 221 Chapter 3: Time Value of
Money
Interest, I - correct answer ✔The difference between the amount of money
lent and the amount of money later repaid. It is the compensation for giving up
the use of money for the duration of the loan.
Principal amount, P - correct answer ✔An amount of money today
Future amount, F - correct answer ✔Value of a current asset in the future
based on a certain growth rate
Annual Percentage Rate of Charge - correct answer ✔An effective interest
rate for the entire year that a borrower will pay to banks or financial institutions
for a loan or on credit card debt.
Disbursement - correct answer ✔Money paid out or spent
Fixed Term Investment: - correct answer ✔An investment mechanism in
which the investor is paid his/her initial investment, plus a specific amount of
interest after a fixed period. The investor cannot withdraw his or her money
before the fixed period without facing penalties.
GIC - correct answer ✔A Guaranteed Investment Certificate is a specific
fixed-term investment, usually issued by a Canadian bank or Trust Company
Interest periods - correct answer ✔Most commonly used interest period is
one year but other common interest periods are as follows:
, Semi-annually = Twice per year or once every 6 months
Quarterly = Four times a year or Once every 3 months
Monthly = 12 times per year
Weekly = 52 times per year
Daily = 365 times per year
Continuous = For infinitesimally small periods.
Compound Interest - correct answer ✔interest earned on both the principal
amount and any interest already earned
Compounding - correct answer ✔the process of accumulating interest on an
investment over time to earn more interest
Compounding period - correct answer ✔The interest period used with the
compound interest method
Simple Interest - correct answer ✔Method of computing interest where
interest earned during an interest period is not added to the principal amount
used to calculate interest in the next period.
Nominal Interest rate - correct answer ✔Conventional method of stating the
annual interest rate. Calculated by multiplying the interest rate per
compounding period by the number of compounding periods per year.
Effective interest rate - correct answer ✔Actual (but not usually stated)
interest rate, found by converting a given interest rate with an arbitrary
compounding period (normally less than a year) to an equivalent interest rate
with a one-year compounding period.
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