Intermediate Accounting

1. What are the components of an interest rate? Why is it important for accountants to understand these components?

2. Distinguish between simple interest and compound interest and provide an example when each method would be used?

3. What is the time value of money? Why should accountants have an understanding of compound interest, annuities, and present value concepts?

4. Briefly explain the accounting treatment of the present value of a deferred annuity and how the present value is calculated?