Quiz 6

Question 1

_____ is the sum of the cash flows, excluding the initial investment, divided by the investment value

Answer 1

Return on investment (ROI)

Question 2

Simple interest is equal to _____ multiplied by the interest rate per time period multiplied by the number of time periods.

Answer 2

principal

Question 3

Adding interest earned each period to the principal and then computing interest for the next period is _____ interest.

Answer 3

compound

Question 4

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.

Answer 4

$800

Question 5

When using the PMT function, the argument which represents the total number of periods is _____.

Answer 5

nper

Question 6

The payment Type does not affect lump sum amounts…it only applies to periodic payments (located in the PMT box).

Answer 6

True

Question 7

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).

Answer 7

True

Question 8

When using financial functions, changing the value for the “Payments per Year” assumption will affect the interest compoundng frequency.

Answer 8

True

Question 9

When calculating loan payments, to show a down payment toward the purchase of an asset, you must adjust the _____ argument of the financial function..

Answer 9

pv

Question 10

You can define a range name for a value not listed in any worksheet.

Answer 10

True

Question 11

_____ is the process by which a company spreads the expense of an asset over its useful life.

Answer 11

Depreciation

Question 12

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).

Answer 12

False

Question 13

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.

Answer 13

False

Question 14

Cash paid out in a transaction is considered a _____ cash flow.

Answer 14

negative

Question 15

The “values” argument in the formula =IRR(values,guess) is a list of positive and negative cash flows.

Answer 15

True

Question 16

When calculating a future value, enter beginning lump sum amounts and beginning balances in the PV argument box.

Answer 16

True

Question 17

“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.

Answer 17

False

Question 18

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).

Answer 18

True

Question 19

In financial functions, an argument Type of _____ indicates payments are made at the end of each period.

Answer 19

0

Question 20

When calculating taxes in the United States, a company can expense or subtract from income only the _____ portion of a loan payment.

Answer 20

interest

Question 21

Cash received is considered a _____ cash flow.

Answer 21

positive

Question 22

The _____ argument of the PMT function refers to the original principal value at the beginning of the transaction.

Answer 22

pv

Question 23

The _____ argument of the PMT function refers to the value at the end of the transaction.

Answer 23

fv

Question 24

Payments made at the beginning of each period are indicated by a Payment_type of _____.

Answer 24

1

Question 25

The equivalent yearly simple interest rate that takes into account compounding is the _____.

Answer 25

annual percentage yield (APY)

Question 26

A _____ is additional money required from the borrower at the end of a loan.

Answer 26

balloon payment

Question 27

When making loan payments, as the principal owed on the loan is slowly lowered, the proportion of the payment amount applied to interest increases.

Answer 27

False

Question 28

Setting up a loan amortization table is a standard method of detailing the transactions of a loan.

Answer 28

True

Question 29

In financial functions, if the Type argument is left blank, the function will assume that payments will start at end of the first payment period.

Answer 29

True

Question 30

The lower the net present value (NPV), the more profitable the project.

Answer 30

False

Question 31

The _____ is the time it will take to earn sufficient profits so that the loan can be repaid.

Answer 31

payback period