Flashcards in Old Test Questions Deck (7)
Describe the process used to determine the theoretical value (fair market value) of any financial asset.
Discount all future cashflows to T=0 and then add them up.
The yield curve does not tell you what interest rates will be in the future (more on this later)
True or false
False - they give a general prediction but can not tell the exact future
What are the two questions you want to ask when making a borrowing decision?
Should I borrow now or later?
Should I borrow long or short?
An investment that has an APR of 12% and provides quarterly payments actually pays how much per period?
What is the actual rate of return being earned or paid per year, when compounding is factored in?
The Effective annual rate
What is the minimal rate of return you can expect from any investment.
The minimal rate should be equal to opportunity cost and inflation