Business Finance – Exam 2, 2026 – Study
Material and Practice Questions
FV - ANS✔✔ amt. of $ an investment will grow to at a given interest rate
Compounding - ANS✔✔ leaving your money and any accumulated interest in
an investment for more than one period
another name for compounding - ANS✔✔ reinvesting interest
compound interest - ANS✔✔ earn interest on a reinvestment of an interest
payment (interest on interest)
Formula for FV - ANS✔✔ PV(1+r)^t
why put a negative in front of the present value? - ANS✔✔ B/c PV represents
cash outflow amt. you give up today to get cash inflow in the future
What will my $2,000 investment grow to if it earns a 6.5 percent return every
year for the next six years? - ANS✔✔ -2000 PV, 6.5 I/Y, 6 N, CPT FV = $2,918
Suppose you need to have $10,000 in 10 years, and you can earn 6.5
percent on your money - ANS✔✔ -10000 FV, 6.5 I/Y, 10 N, CPT PV =
$5,327.26
You would like to buy a new automobile. You have $50,000, but the car costs
$68,500. If you can earn 9 percent, how much do you have to invest today to
buy the car in two years? - ANS✔✔ -68500 FV, 9 I/y, 2 N, CPT PV =$57655.08
PV - amt you have (50,000) = 7,655.08 short
