<p> FIN 301 – Porter 4/26/18</p><p>TERMS: Match the following terms with their corresponding definition</p><p>B. The estimate of a stock’s ‘true’ value </p><p> based on accurate risk and return data. </p><p>1. Annuity Due C. An annuity whose payments occur at the end </p><p> of each period. </p><p>2. Corporation D. An unincorporated business owned by two or</p><p> more persons with no income taxes and a </p><p>3. Finance limited life. </p><p>E. The ease of selling an asset and converting it </p><p>4. Intrinsic Value to cash at a fair market value.</p><p>F. An annuity whose payments occur at the </p><p>5. Liquidity beginning of each period.</p><p>G. The science of the management of money and</p><p>6. Ordinary Annuity other assets</p><p>H. A legal entity created by a state, separate and </p><p>7. Partnership distinct from its owners and managers, </p><p> having unlimited life, easy transferability of </p><p>8. Perpetuity ownership, and limited liability.</p><p>I. A stream of equal payments at fixed intervals </p><p>9. Proprietorship expected to continue forever.</p><p>A. J. An unincorporated business owned by one </p><p> individual with unlimited liability yet easy to </p><p> form. FIN 301 – Porter 4/26/18</p><p>Match the portions of the time line with their location on the time line. _____ Cash Flow A A A _____ Period B _____ Interest Rate</p><p>C C C</p><p>Equations:</p><p>5 Magic Buttons:</p><p>N = </p><p>I/Y = </p><p>PV = </p><p>PMT = </p><p>FV = </p><p>+ Number = </p><p>- Number = </p><p>Future Value:</p><p>FV = </p><p>Rule of 72:</p><p>N = </p><p>Perpetuity:</p><p>PV = FIN 301 – Porter 4/26/18</p><p>Problems:</p><p>1. Today you invest $10,000 at 8% interest and will contribute $3,500 at the end of each year. How many years will it take for the account to reach $50,000?</p><p>2. You borrow $85,000 and the annual loan payments are $8273.59 for 30 years. What is the interest rate you are being charged? FIN 301 – Porter 4/26/18</p><p>3. What is the present value of a security that will pay $5000 in 20 years if it earns a 7% annual rate?</p><p>4. You are trying to save money for your 5-year-old child’s college fund. Today you have $15,000 but you expect their education to cost $120,000 in 13 years when you will need the money. You are investing at a 9% interest rate. What will you have to contribute to the fund each year to reach $120,000? FIN 301 – Porter 4/26/18</p><p>5. If you have a perpetuity that pays $300 each month forever at an interest rate of 10% what is the present value of that perpetuity?</p><p>6. What is the future value of a 7%, 5-year ordinary annuity that pays $400 each year? </p><p>If this were an annuity due, what would the difference be? FIN 301 – Porter 4/26/18</p>