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

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Multiple Choice

Given a loan with a nominal (stated) annual interest rate compounded quarterly, which of the following best describes how to calculate the Annual Percentage Rate (APR)?

Divide the quarterly rate by 4.

Add 4% to the quarterly rate.

Raise the quarterly rate to the 4th power.

Multiply the quarterly rate by 4.

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Verified step by step guidance

Understand the concept of Annual Percentage Rate (APR): APR represents the annualized interest rate, taking into account the nominal interest rate and the compounding frequency. It is calculated by multiplying the periodic interest rate by the number of compounding periods in a year.

Identify the periodic interest rate: Since the nominal annual interest rate is compounded quarterly, the quarterly interest rate is obtained by dividing the nominal annual interest rate by 4 (the number of quarters in a year).

Determine the number of compounding periods in a year: For quarterly compounding, there are 4 compounding periods in a year.

Calculate the APR: Multiply the quarterly interest rate by 4 (the number of compounding periods in a year). This step annualizes the quarterly rate to reflect the APR.

Verify the calculation: Ensure that the APR calculation aligns with the definition and formula for APR, which is the periodic rate multiplied by the number of compounding periods in a year.