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Flashcards in Old Test Questions Deck (7)
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1

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.

2

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

3

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?

4

An investment that has an APR of 12% and provides quarterly payments actually pays how much per period?

(12%)/(4quarters)=3%

5

What is the actual rate of return being earned or paid per year, when compounding is factored in?

The Effective annual rate

6

What is the minimal rate of return you can expect from any investment.

The minimal rate should be equal to opportunity cost and inflation

7

What is an amortized loan?

In banking and finance, an amortizing loan is a loan where the principal of the loan is paid down over the life of the loan (that is, amortized) according to an amortization schedule, typically through equal payments.