ACC 301 Lecture Notes - Lecture 1: Credit Risk
Document Summary
2 basic principles to measurement: accuracy: assessment of whether measurement is correct, precision: assessment of how different measurements are. It is possible to be precise but not accurate, and vice versa: accounting numbers may be precisely calculated, but precision does not imply accuracy. Assume the car is worth ,000 and the annualized interest rate is 6%. 25000/48 = 520. 83 per month * 3 months = 1562. 50 reduction from dealership. 520. 83 * 45 months = 23437. 35 total paid for car (not pv) Pv of 3 months paid: 520. 83 * 40. 20696 (ordinary annuity factor) = 20940. 99 * . Pv of k discount: 25000 5000 = ,000. Present value concepts are important to understand in accounting. Here are some key terms: principal: amount borrowed or invested, interest: cost of borrowing or return from lending. Inflation: a decline in purchasing power: purchasing power: 1/inflation index = 1/(1+inflation rate)
