When computing an interest or growth rate, the rate will increase the smaller the future value, holding present value and the number of periods constant.
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When computing an interest or growth rate, the rate will increase the smaller the
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- The future value of a single sum A. is generally larger than the present sum. B. decreases as the number of periods increases. C. does not depend upon the number of periods. D. decreases as the interest rate increases.What would cause the annual interest rate to be different from the annual effective rate or yield?Will the actual realized yields be equal to the expected yields if interest rates change? If not, how will they differ?
- Why do we discount the future in valuing investments today that are expected to provide returns in the future? Explain with examples. Define & explain Annual Percentage Rate (APR) & the Effective Annual Rate (EAR). What is the relationship between APR & EAR? The discounting of the future is assumed to be exponential. What does behavioral finance have to say about this assumption? What is hyperbolic discounting?Which of these will increase the present value of an amount to be received sometime in the future? Group of answer choices Increase in the discount rate. Increase in the time until the amount is received. Decrease in the interest rate Decrease in the future valueIf intrest rates change from i to i' after the inital period. What is the initial value of the consol and what is the yield from selling it after one period?
- Will the actual realized yields be equal to the expected yields if the interest rates change? If not, how will they differ? Kindly elaborate your answer.What effect do interest rates have on the calculation of future and present value? How does the length of time affect future and present value? How do these two factors correlate?If the inflation rate is expected to remain constant at the current level in the future,would the yield curve slope up, slope down, or be horizontal? Consider all factorsthat affect the yield curve, not just inflation.
- Suppose investors expect interest rates to increase substantially in the future. Currently, should they prefer to purhcase short-term or long-term investments? Explain your asnwer.Using the liquidity effect and income effect, explain the outcome on interest rates of a higher rate of growth of the money supplyWhich one of these statements related to growing annuities and perpetuities is correct? In computing the present value of a growing annuity, you discount the cash flows using the growth rate as the discount rate. You can compute the present value of a growing annuity but not a growing perpetuity. The future value of an annuity will decrease if the growth rate is increased. An increase in the rate of growth will decrease the present value of an annuity. The present value of a growing perpetuity will decrease if the discount rate is increased.
