Question 1
When the amount earned on a deposit has become part of the principal at the end of a specified time period the concept is called
◦ discount interest.
◦ compound interest.
◦ primary interest.
◦ future value.
Question 2
Which of the following problems could not be addressed by using compounding or discounting techniques?
◦ Finding an amount to be invested today to provide a given level of income during retirement
◦ Determining how long it should take the population of China to double
◦ Finding the growth rate in a firm's dividend payments
◦ Calculating the length of time needed for the supply and demand for lendable funds to equate if interest rates are above the equilibrium level
◦ Deciding whether a bank paying interest compounded annually is giving you a better deal than a rate that compounds daily
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