Sandra Has a Savings Account That Has Accumulated to $50,000

question 42

True/False

Sandra has a savings account that has accumulated to $50,000. She started with $28,225, and earned interest at 10% compounded annually. It took her five years to accumulate the $50,000.
Calculation: $28,225/$50,000 = 0.5645. This is the present value of 1 factor, 10%, 6 periods.

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Definitions:

Expectations Theory

A theory suggesting the shapes of yield curves on government securities are determined by investors' expectations about future interest rates.

Term Structure

The relationship between the interest rates or yields of securities and their maturities, often illustrated by a yield curve.

Yield Curve

A graph showing the relationship between bond yields and maturities, often used as a predictor of economic conditions.

Junk Bonds

High-risk, high-yield bonds issued by entities considered more likely to default, offering potentially higher rewards to compensate for the increased risk.