U2 STUDY GUIDE ***PLEASE DO ALL ***

Answer each question with a minimum of two to three (2-3) sentences 1. Why does money have a time value? (10 points) 2. What is an ordinary annuity? An annuity due? And a deferred annuity? Be sure to discuss when the stream of payments will occur. (15 points) 3. What are three (3) different financial applications of the time value of money? (15points) 4. As an investor, if you had a choice of daily, monthly, or quarterly compounding, which would you choose? Why? (10 points) 5. How are present values affected by changes in interest rates? (25 points) 6. The interest on your home mortgage is tax deductible. Why are the early years of the mortgage more helpful in reducing taxes than in the later years? (25 points)