Your grandmother places $13,000 into an account earning an interest rate of 7% per year. After 5 years the account will be valued at $18,233.17. Which of the following statements is correct?
A) The present value is $13,000, the time period is 7 years, the present value is $18,233.17, and the interest rate is 5%.
B) The future value is $13,000, the time period is 5 years, the principal is $18,233.17, and the interest rate is 7%.
C) The principal is $13,000, the time period is 5 years, the future value is $18,233.17, and the interest rate is 7%.
D) The principal is $13,000, the time period is 7 years, the future value is $18,233.17, and the interest rate is 5%.
Answer: C
Explanation: C) The $13,000 is the principal or present value, the interest rate is stated as 7%, the time period is identified as 5 years, and the future value is $18,233.17.
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Fill in the blank(s) with the appropriate word(s).
Adjustment made when at the end of a period in which a company sold securities, to ensure that gains and losses are not counted twice in comprehensive income. Without such an adjustment, a company might report realized gains or losses as part of net income but also show the gains or losses as part of other comprehensive income in the current or previous periods. Companies generally report reclassification adjustments in the notes to the financial statements.
(a) underlying (b) option contract (c) documentation (d) reclassification adjustment