Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

10. Time Value of Money

Time Value of Money Equations

Financial Accounting

10. Time Value of Money

Time Value of Money Equations

Previous problemNext problem

Struggling with Financial Accounting?

Join thousands of students who trust us to help them ace their exams!Watch the first video

Multiple Choice

If a credit card has an APR (Annual Percentage Rate) of 24\%, what does this rate represent?

The effective annual rate (EAR) after compounding monthly.

The monthly interest rate charged on the credit card balance.

The yearly interest rate charged on outstanding balances, not accounting for compounding within the year.

The total amount of interest you will pay in one month, including all fees.

Previous problemNext problem

Verified step by step guidance

Understand the concept of APR (Annual Percentage Rate): APR represents the yearly interest rate charged on outstanding balances, not accounting for compounding within the year. It is a standardized way to express interest rates for comparison purposes.

Clarify the difference between APR and EAR (Effective Annual Rate): APR does not include the effects of compounding, while EAR accounts for compounding and represents the actual annual interest rate paid or earned.

Identify the monthly interest rate: To calculate the monthly interest rate from the APR, divide the APR by 12 (the number of months in a year). For example, if APR is 24%, the monthly interest rate would be \( \text{Monthly Rate} = \frac{24\%}{12} \).

Explain the compounding effect: If compounding occurs monthly, the EAR will be higher than the APR because interest is calculated on the accumulated balance each month. The formula for EAR is \( \text{EAR} = (1 + \text{Monthly Rate})^{12} - 1 \).

Summarize the correct interpretation: The APR of 24% represents the yearly interest rate charged on outstanding balances without accounting for compounding within the year. It does not directly indicate the monthly interest rate or the total amount of interest paid in one month.