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AGEC 330 (2)
Lecture 5

# AGEC 330 Lecture 5: agec 330 lectures ones previous to lecture 9 so up to 8

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School
Texas A&M University
Department
Agricultural Economics
Course
AGEC 330
Professor
David Leatham
Semester
Spring

Description
What is SWOT an acronym for? ~ A firm’s strength, weakness, opportunities, and threats Which item is included in a mission statement? ~ Definition of the business Financial management involves the acquisition and use of financial resources by economics units and the protection of the units' equity capital from business and financial risk ~true Given that the total farm assets is 278.48 and the total farm debt is 48.8, what is the value of the equity capital? ~229.68 Which of the followings are significant tools of financial management? ~ Cash Flows/ Information Flows/ Strategic Management/ Capital Budgeting Assuming that an annual interest rate is 6%, an investor would be indifferent between \$500 today and \$12,000 in 55 years from today. ~False Response Feedback: Calculation: N=55 %=6 PV=500 PMT= 0 FV=? What interest rate would a bank have to pay on a \$25,000 deposit if you wanted to withdraw \$56,305 from your bank account in 12 years? Assuming that interest is compounded yearly. ~ 7% Response Feedback: Calculation: N=12 %=? PV=25000 PMT= 0 FV=56305 With compounded interest each time interest is paid, it is added to or compounded into the principal and earns interest over the life of the loan. ~true What interest rate would a bank have to pay on a \$10,000 deposit if you wanted to withdraw \$96,463 from your bank account in 20 years? Assuming that interest is compounded yearly. ~ 12% Response Feedback: Calculation: N=20 %=? PV=10,000 PMT=0 FV= 96,463 Discounting converts a present amount into an equivalent future amount ~false Net Present Value is compensation for foregone investments or consumption. ~false Compound Interest means each time interest is paid, it is added to or compounded into the principal but does not earn interest. ~false Compounding converts a present amount into an equivalent future amount. ~true The future value of a single sum can be found with VN=V0(1+r)N. V0 is the present value, VN is the future value in N periods, r is the rate, and N is the number of periods. ~true What is the future value of \$750 today if it draws interest at 10% compounded annually for 12 years? ~ \$2,354 Response Feedback: Calculation: N=12 %=10 PV=750 PMT=0 FV=? Future Value is how much a current sum of money will be worth at a future date assuming a certain ____ rate. ~interest What is the present value of \$1,000 that is to be received 5 years from today and interest rates are 12% compounded annually? ~ \$567 Response Feedback: Calculation: N=10 %=8 PV=1000 PMT=0 FV=? _______________ is the period of time that principal accrues interest before interest is added to principal (e.g., daily, monthly, quarterly, and annually). ~conversion period Net Present Value is compensation for
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