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AGEC 330
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David Leatham
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Lecture 5

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

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Texas A&M University

Agricultural Economics

AGEC 330

David Leatham

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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