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Finance > Time Value of Money > Flashcards

Time Value of Money Flashcards

1
Q

Someone is going to give you $5k in 1 year from today, interest rates are 2%, what is the present value of this future money?

A

$5k * 0.98 = $4900

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2
Q

ROA =

A

= return on Assets = net income / Assets * 100%

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3
Q

ROI =

A

Return on Investments = Net income / Investment * 100%

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4
Q

ROE =

A

Return on Equity = Net Income / Stockholder’s Equity

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5
Q

ROA / (1 - Debts/Assets) =

A

ROE

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6
Q

If the interest rate goes up, present value goes

A

DOWN

one reason why stocks tend to go down when Fed discusses raising interest rates

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7
Q

With simple PV, if time increases, then PV goes

A

DOWN

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8
Q

PV of $1 =

A

1 / ( (1+r)^n )

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9
Q

In these cases, lottery payouts, car loans, mortgages, anticipate using…

A

PV of Annuity

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10
Q

Yearly Payment of a Loan =

A

= Amount of Loan / PVIFA = Yearly Principal + Interest Payment (P&I)

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11
Q

The P&I payed per period on an amortized loan is…

A

constant

(Principal + Interest) - it will be the same each period

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12
Q

Amortization: Amount of interest per period =

A

= Total outstanding amount of loan * APR / # of periods per year

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13
Q

Truth in Lending Act did what

A

Banks must tell you total P&I you will owe over the lifetime of the loan up front, and not hide the information

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14
Q

If you have a $45k loan, maturity of 5 years, 6% interest, what is the monthly P&I

A

PVIFA = 4.212
Annual P&I = $45000/4.212 = $10683.76
Monthly P&I = $830.31

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15
Q

Which formula shows this breakdown:
ROA = Net Income / Assets =
Sales / Assets * Net Income / Sales = Assets Turnover * Profit Margin

A

DuPont Formula

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16
Q

If Profit Margin is 3%, and you want an ROA of 18%, what do you need Assets Turnover to be?

A

ROA = Profit Margin * Asset Turnover

18% / 3% = 6 times = Asset Turnover

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17
Q

Formula for Simple FV

A

FV = PV * (1+r)^n

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18
Q

If you have a $100k in a CD, maturity of 5 years, APR = 4%, compounded quarterly, what is the FV at maturity?

A

FV = $100k * (Simple FV (1%, 20 periods) = 1.220 * $100k - $122,000

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19
Q

When frequency of payment goes up, FV …

A

goes up

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20
Q

Discount rate is…

A

the annual reduction rate on a future value, the inverse of the growth rate

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21
Q

How long will it take you to double your money if you have a simple investment with a 9% interest rate?

A

Approximately 8 years

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22
Q

What interest rate would you need to quadruple the amount of money in an account over 18 years?

A

approximately 8% (FVIF = 3.996 at 8 years)

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23
Q

How much do you need to save for retirement if you want to withdraw $70k each year for 30 years. You have 40 years to save. Your account will accrue 4% interest after retirement, and can earn at 3%

A
  1. PVIFA (4%, 30 years) = 17.292&raquo_space; 17.292 * $70k = $1,210,440 = amount you need at start of retirement
  2. FVIFA (3%, 40 years) = 75.401
    FV = Payment * FVIFA&raquo_space; Payment = $1,210,440 / FVIFA = $16,053.36 annually
24
Q

Which crypto lost value and how much

A

BTC lost 10% of value from a Sunday to Monday, and has now fallen 54% of it’s record high

25
Q

The US national Debt is now ___, in 1980 is was __

A

$30 trillion

$1 trillion

26
Q

Lisa Cook was voted…

A

into the Federal Reserve Board by the Senate, she will be the first black woman on the board of the Fed

27
Q

Jet Blue is trying to buy ___ for $ per share

A

Spirit, $30

28
Q

_____ is selling 850 restaurants in Russia

A

Mcdonalds

29
Q

McDonalds was losing ____ monthly since March when it closed it’s stores in ____

A

$55 million; Russia

30
Q

Amazon’s stock price dropped from ___ in April to ____ in May

A

$3367 to $2142 > 36% drop

31
Q

Elon musk put his purchase deal of Twitter on hold until he got more info on ____. This ___ Twitter’s stock price

A

spam bots

decreased (4%)

32
Q

The Dow Jones IA closed down to ___, the lowest closing level since ___

A

31490 points

March 2021

33
Q

Apple Revenue is getting a hit in Q2 with an _____ loss, due to ____

A

$8 billion; Covid

34
Q

Government employees and contractor wage set to increase to

A

$15/hr

35
Q

Government wants to add _____ charging stations to federal highways

A

550,000

36
Q

Debentures have a ___ interest rate

A

very high, because high risk to the creditor

37
Q

Because of what scandal, the CEO needs to review and sign the annual report released by companies

A

ENRON

38
Q

Exxon reported a $21 billion loss in 2020, but reported ____ in 2021

A

$24.3 billion profit

39
Q

With it’s profit, Exxon is planning to

A

buy back it’s own shares

40
Q

When a company announces they plan to buy back shares, it can

A

cause stock prices to increase

shows confidence in own company

41
Q

Buying back shares can….

A

save on dividend payments

42
Q

Paypal share price ___

A 
dropped dramatically 
(down from 300 in Aug 2021 to less than 100 / share)
43
Q

Spirit and ____ are considering merging with ____ as the controlling interest. This would present an advantage of:

A

Frontier; Frontier; economies of scale

44
Q

Alphabet announced a ______ in order to ___

A

Stock Split

Make the stock more affordable

45
Q

Stock split is generally viewed ____ by the market and this happens

A

very positively

effective value goes up

46
Q

a stock split ____ impact shareholder’s value

A

does not change [but there is a side effect of positive market view]

47
Q

The FED made an announcement to ____ which caused stock prices to go down. This is an example of ____

A

raise interest rates

macro environment effects

48
Q

A major tire company is buying Cooper’s Tires at ____ and adding 75000 workers. This is an example of

A

2.8 Billion;

economies of scale

49
Q

How can a country defend it’s currency in the international currency market

A
  1. buy back it’s own currency using “hard currencies”

2. increase domestic interest rate

50
Q

Why is it hard to protect your currency by buying it back in “common stock currencies” ?

A

most countries do not have enough foreign currencies to support their maternal currency. It’s a bandaid

51
Q

SWIFT is

A

Society for Worldwide interbank financial Telecommunication

52
Q

SWIFT was established in

A

1973, Brussels

53
Q

Goal of SWIFT was to:

A

Transfer of money between banks to be done accurately, efficiently, securely, cheaply, reliable

54
Q

About how many SWIFT transactions are there per day?

A

40 million

55
Q

The rate a country would increase to try and defend it’s currency is the

A

Discount rate, rate that its central bank charges its member banks

56
Q

Examples of common stock currencies

A

Dollar, euro, pound, swiss franc, yen, yuan

Finance (9 decks)

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