Financial principal exam 1
How long will it take for $40 to go up to 240 at an interest rate of 6.53% compounded annually
28.33 years
Suppose we invest $100 now and get back $236.74 in 10 years. What rate of interest will be achieve
9.0%
Future value is the ___________value of an investment at sometime in the future
Cash
True or false. When using the time value of money features of a calculator, you should keep in the interest rate as a decimal.
False
Which type of amortization is most costly used in the real world for mortgages and car loans
Fixed payment
basic present value equation
PV = FV/(1+r)^t
APR
The interest rate per period Multiplied by the number of. In the year
If you invest for a single. Add an interest rate of our, your money will grow to___________per dollar invested
(1+r)
Palmer company had the following returns 2009 = 12% 2010 = 10% 2011 = -8% 2012 = 4% 2013 = 22%. What is the variance of palmers returns returns
0.0122
Using a time value of money table, what is the future value interest factor for 10% for two years
1.21
Which formula below represents a present value factor?
1/(1+r)^t
Assuming the interest rate offered for a 10 year investment plan is same as for the four year investment plan. For an investor to achieve the same future value which of these two plans would require a smaller savings amount to be deposited today
10yr investment
What is the future value of $100 at 10% simple interest for two years
120$
You are planning to buy a CD for $1352. You will receive $1500 in 2 years. Use a financial calculator to find the interest rate you will receive on that investment assuming annual compounding
5.33%
If the annual stock market returns for Barry company were 19% 13% and -8% what was that arithmetic mean for those three years
8%
In an efficient market
All investments have NPV = zero and assess our price at the present value of their future cash flows
A five-year $10,000 loan with a 15 year amortization. Requires monthly payments at 10% interest compounded monthly. The monthly payments will be
$107.46
What is the future value of $1000 invested for eight years at 6%
$1593.85
What is the Present value of an ordinary annuity that pays $100 per year for three years if the interest rate is 10% per year
$248.69
Ralph has $1000 in an account that pays 10% per year. Ralph wants to give us money to his favorite charity by making three equal donations at the end of the next three years. How much will Ralph give to the charity each year
$402.11
Supposed paid off $500 loan by paying $400 and principal each year +10% annual interest over a three-year period. What is the total payment interest plus principal in year three
$440
Amy took out a mortgage of $100,000 at 4.5% with monthly payments for 30 years. What is her payment to principal and interest each month
$506.69
What is the maximum capital loss that you can incur if you bought 200 shares of TP ink for $32
$6400
If you plan to put 10,000 down payment on a house in five years and you can on 6% per year how much will you need to deposit today
$7472.58
Suppose you paid a $1200 loan off by paying $400 in principle each year +10% annual interest. How much is the interest payment and the second year of the loan
$80
What is the present value of an ordinary annuity that pays $100 per year for 20 years if the interest rate is 10% per year
$851.36
The different yield for a one year. Is equal to the annual dividend amount divided by the
Beginning stock price
If you are forecasting a few decades in the future you should calculate the expected return using
Blume's formula
The effective annual rate (EAR) takes into account the___________of interest that occurs within a year year
Compounding
The idea behind ______ is that interest is earned on interest
Compounding
Which of the following can be determined using the future value approach to compound gross developed in this chapter
Dividend and sales growth
Which of the following are ways to make money by investing in stocks
Dividends and capital gains
What is the Correct mathematical formula for calculation of the future value of $100 invest in today for three years at 10% per year
FV= 100 x (1.10)^3
True or false. Small changes in the interest rate affects the future value of a small term investment more than they would affect the value of a long-term investment
False
True or false. The correct mathematical formula for finding the future value of $68 present value in 12 years at 9% annual interest is FV = $68 x ( 1.12^9)
False
correct spreadsheet functions
Future value = FV(rate,Nper, pmt, pv ) Discount rate= RATE(nper,pmt,pv,fv) Present value= PV (rate,nper,pmt,fv)
The second lesson from studying capital market history is that risk is
Handsomely rewarded
Dividends are the __________component of the total return from investing in the stock
Income
The capital gains yield can be found by finding the difference between the ending stock price and the initial stock price and dividing it by the
Initial stock price
Which of the following investments would result in a higher future value? Investment a 12% APR for 10 years investment b 12% APR for 12 years
Investment B
The Ibbotson-Sinquefield data shows that returns from 1925 to the recent past for
Large-cap stocks small-cap stocks and US T bills
The basic present value equation underlies many of the
Most important ideas in corporate finance
Studying market history can reward us by demonstrating that
On average, investors will earn a reward for bearing risk in the grade of the potential reward is the greater the risk
What is the order of investments ascending order from lowest to circle risk premium at the top two highest historical risk premium at the bottom
One US treasury bills 2 long-term corporate bonds three large company stocks 4 small company stocks
Highest to lowest return based on what our study of capital market history has revealed about premium risk
One small company common stock 2 long-term corporate bonds three US treasury bills
If you want to know how much money you need to invest today at 12% compounded annually in order to have $4000 in five years, you will need to find a ____________value
Present
Amortization is the process of paying off loans by regularly reducing the
Principal
Suppose present value is $100 future value is $1000 and N is 10 years. Which formula below is used to find the decimal interest rate
R= (1000/100)^(1/10) -1
The arithmetic average rate of return measures the
Return an average year over and given period
Mono corporation has a variance of returns of 343 while Scott corporation has a variance of returns of 888. Which companies actual returns vary more from their mean return
Scott Corporation
Difference between ____________interest and compound interest is that the amount of compound interest earned gets_________every year
Simple, bigger
That Ibbotson Sinquefield data show that over the long term
Small company sucks generated the highest average return. Small company stocks had the highest risk level. T-bills which are the lowest risk generated the lowest return
A normal distribution has a
Symmetrical shape
EAR
The interest rate stated as though it were compounded once per year
Which of the following are true about a partial amortization loan
The monthly payments do not fully pay off the loan by the end of the loan. The monthly payment is based on a longer amortization period Then the maturity of a loan. The amortization period is Longer than that loan period. The borrower makes a large balloon payment at the end of the loan.
Which of the following are needed to describe the distribution of stock returns
The standard deviation of returns and the mean return
What are the following methods can be used to calculate present value
Time value of money table, a financial calculator, and algebraic formula
Why is a dollar received today worth more than a dollar received in the future
Today's taller can be reinvested yielding a greater amount in the future
Common socks may experience negative returns and T-bill sometimes out perform common stock
True
True or false. Discounting is the opposite of compounding
True
True or false. Given the same rate of interest, more money can be earned with compound interest in with simple interest
True
