Quiz 6 Flashcards
_____ is the sum of the cash flows, excluding the initial investment, divided by the investment value
Return on investment (ROI)
Simple interest is equal to _____ multiplied by the interest rate per time period multiplied by the number of time periods.
principal
Adding interest earned each period to the principal and then computing interest for the next period is _____ interest.
compound
A deposit of $10,000 in a certificate of deposit that pays simple interest of 2% per year for a period of 4 years would be owed _____ interest at the end of the 4 years.
$800
When using the PMT function, the argument which represents the total number of periods is _____.
nper
The payment Type does not affect lump sum amounts…it only applies to periodic payments (located in the PMT box).
True
When making loan payments, a proportion of each payment goes to pay off the interest accrued each period, and a proportion of each payment goes to reduce the principal (amount owed on the loan).
True
When using financial functions, changing the value for the “Payments per Year” assumption will affect the interest compoundng frequency.
True
When calculating loan payments, to show a down payment toward the purchase of an asset, you must adjust the _____ argument of the financial function..
pv
You can define a range name for a value not listed in any worksheet.
True
_____ is the process by which a company spreads the expense of an asset over its useful life.
Depreciation
In the Unites States, a company can deduct amounts paid towards both the interest and the principal as expenses (whch effectively reduces the amount of income taxed).
False
In order to calculate the Future Value of a stream of monthly cash flows which start immediately, and also include an additional lump sum at the beginning of the transaction, the value in the PMT argument should equal the Lump Sum amount plus the monthly Payment amount.
False
Cash paid out in a transaction is considered a _____ cash flow.
negative
The “values” argument in the formula =IRR(values,guess) is a list of positive and negative cash flows.
True
When calculating a future value, enter beginning lump sum amounts and beginning balances in the PV argument box.
True
“Simple interest” is when you add interest earned each period to the principal and then use that value to compute interest for the next period.
False
If there is not a FV argument box (such as when you’re calculating Future Value), add the Ending Lump Sum to the end of the formula (added outside of the FV function).
True
In financial functions, an argument Type of _____ indicates payments are made at the end of each period.
0
When calculating taxes in the United States, a company can expense or subtract from income only the _____ portion of a loan payment.
interest
Cash received is considered a _____ cash flow.
positive
The _____ argument of the PMT function refers to the original principal value at the beginning of the transaction.
pv
The _____ argument of the PMT function refers to the value at the end of the transaction.
fv
Payments made at the beginning of each period are indicated by a Payment_type of _____.
1
