Unit 6 (Videos) Flashcards by Janelle Reyes

The stockholder’s equity can be made up of:

share capital
legal reserves
voluntary reserves
prior periods' profit and loss
net income

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net income can comprise

profit/lose of a period

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The total stake holder’s equity can be found by …

adding share capital, reserves, profits and losses in the previous period

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It is important to understand that the nominal value of the entire share is …

share capital/the number of shares

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the nominal value of a share is calculated by …

dividing the number of shares into the share capital

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the nominal value is the emission value

true

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If we know the nominal value, it’s important to also know the book value of shares because …

if we only have nominal value, and it is the same as the emission value, and both are less than the old value of the shares, the old value of the shares will be reduced.

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The book value of an old share can be calculated by …

(total stock holder’s equity)/(the number of old shares)

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The difference between the book value of an old share and the nominal value of the old share is the …

issue premium

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The emission value of new shares must be equal to the …

book value of the old share

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The nominal value is also called the …

face value

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The nominal value of the old shares is the same as the nominal value of …

the new shares

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The book value of the old shares is the emission value of the new shares, and the book value of the old shares is the same as ___________.

the book value of the new shares.

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The book value of the old shares is the emission value of the new shares, and the book value of the old shares is the same as the book value of the new shares.

True

We calculate the book value of the new shares as the (total stock holder’s equity before the issue + the new issue (the value of the new shares*emission value))/the total number of shares

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the new issue of a share is calculated as

the value of the new shares*emission value

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The book value of a new share is calculated as …

(total stock holder’s equity before the issue + the new issue (the value of the new shares*emission value))/the total number of shares (old shares + new shares)

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The total number of shares is calculated as …

old shares + new shares

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We issue a share with an emission value equal to the nominal value plus a premium because …

The new book value of the share will be the same as the old book value when we calculate it.

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If dealing with EURIBOR, the interest is …

EURIBOR rate + Differential rate

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EURIBOR + differential gives a …

nominal interest rate

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equal installments are calculated with the function PMT.

True

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To calculate a new installment, we must know …

the outstanding loan in that moment.

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The outstanding loan in a particular moment can be calculated with the function PV

True

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The higher the interest the higher the installment.

True

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The function PV discounts values to the present moment.

True

NPER calculates ...

the duration of a loan

When the prepayment commision is a percentage, we have to ...

isolate the prepaid loan by considering the amount we have for the prepayment and divide it by (1+cancelation fee) prepayment/(1+cancelation commission %) = prepaid amount

If the commision fee of prepayment is an amount, we just have to ______________.

subtract (discount) the amount from the prepayment

prepaid amount = loan amount actually prepaid + commission

True

"Obtained Funds" are considered __________ flows.

in flows

Opening payment and installments are considered _______ flows.

out flow

Global Cash Flow for each moment is obtained by ___________.

Adding the inflows and out flows in each moment

Postpaid annuities start payment in moment ______.

Prepaid annuities start payments in moment ______.

We can calculate the internal interest rate with the formula IRR then use the IRR obtained to calculate the APR with the formula EFFECT.

True

If we need to calculate the internal rate of annual cash flows, we use the formula IRR. That IRR that we obtain will also be the ____ of the project because _______.

APR because the cash flows are annual, so we get an annual internal rate of return.

Leasing is a financial operation in which we ...

rent an asset from a financial institution by paying installments, and at the end, we have the option of purchasing the asset.

We can have purchase options that are not equal to the previous installments.

True

In leasing, there are two different formulas depending on when the payments are due.

FALSE leasing formulas depend on whether or not the purchase option is the same as the installments

If the purchase option of a lease is different from the installments paid, we use the formula:

leasing installment = [cash value of asset (V) - purchase option (PO)]/present value (PV)

If the purchase option of a lease is the same as the installments paid, we use the formula:

leasing installment = [cash value of asset (V) - installment]/present value (PV) = cash value of asset (V)/(1+present value (PV))

If there's no opening or extra fees, the calculated APR of the cash flow of a project can be the same as the nominal interest rate.

True

When making a principal prepayment, the first thing that the bank will do is ...

calculate the outstanding loan at that moment using PV in excel

I want to make a prepayment of $25,000, that $25,000 will cover ...

the cancelation commission + the real amount being paid off. $25,000 = cancelation commision + real prepayment

If the cancelation commission is a percentage, the principal prepayment is equal to the cancelation commission*real amount I pay.

FALSE principal prepayment (amount I want to prepay) = (cancelation % + 1)*amount I really pay

The commision is the difference between the amount I want to pay and the amount I really pay.

True

When the moment for the cash flows is in years, the effective interest rate and APR are the same.

True

When the issue premium is a percentage, the emission value is calculated by ...

discounting the nominal value using the formula emission value = nominal value*(1-issue premium%)

When we have an emission premium, this means that ...

we have a bond, and the emission value will be less than the face value

When there is no emission premium, this means that the emission value ...

will be exactly the same as the face value

The premium is a profit for investors but a ________ for the company getting the financing.

cost

If we have 100,000 bonds and we have to payback 20,000 each year, we will finish in ...

100,000 bonds/20,000 each year = 5 years (when we pay back everything)

When there is no refund premium, this means that ...

we are talking about a bond, and the refund value is the same as the face value

When there is a refund premium, the refund value ...

is larger than than the face value

The face value is the real value of the bond.

True

We pay ______ than the real value of the bond when there is an emission premium and _____ than the real value of the bond when there is a refund premium.

less | more

The premium is always ...

a benefit for the investor and a cost for the company

The alive bonds and the amortized bonds are the basis of the calculations of cash flows, when dealing with bonds.

True

Amortized bonds are cash outflows.

True

Alive bonds are ...

the number of bonds that are part of our financial structure.

Alive bonds =

Alive bonds = alive bond in moment n +amortized bond of previous moment

Alive bonds =

Alive bonds = alive bond in moment n - amortized bond of previous moment

Alive bonds help calculate the annual coupons

True

Collection emission = bonds issued * emission value

True

Award payment is also called the price of the bond

True?

Refund value = amortized bonds * refund value

True

The refund value must be a negative value because they are cash outflow

True

When we amortize bonds, a fraction of the amortized bonds equal to the refund value receives an award equal to the award of each redeemed bond ($) * the number of bonds being redeemed.

FALSE a fraction of the amortized bonds receives an award equal to some amount stipulated by the terms of the bond

When we pay amortizations, we also ______________-.

pay an award (price)

The refund value and award payment depend on ...

the amortized bonds

refund payment = amortized bonds * refund value

True

award payment = # amortized bonds * $ each bond will receive

True

The interests in the annual coupons are as follows:

the alive bonds in the financial structure of the company receives a coupon when the alive bonds get amortized, they no longer receive interest (coupon)

annual coupons depend on ...

the alive bonds and the face value

if the alive bonds decrease, the annual coupons ...

ALSO DECREASE

The only difference between a coupon paid annually and a coupon paid semi-annually is ...

in a semi-annual coupon payment, the coupon is paid twice a year, but the refund payment and award payment are paid annually

Only alive bonds receive coupons.

True

When there is 0 coupons in a bond, we call the annual coupons ...

interest

The difference between a bond with coupons and a bond with interest (0 coupons) is that ...

during the life of the bond with interest, we don't receive any of the interest, but we accumulate them and when we amortize the bond, we give all the interest to the investor the interest in 0 coupon bonds generate more interests on its own when we have coupons, the alive bonds will receive coupons while they are part of the financial structure of the company

In a 0 coupon bond, we accumulate the interest and ... In 0 coupon bonds, the alive bonds ...

give all of it to the investor don't receive interest, but the amortized bonds receive interest when the refund value is repaid to the investors

In 0 coupon bonds, the interest is calculated on the ..., and we are talking about _______ interest

amortized bonds compound

In 0 coupon bonds, interest =

interest = AM.B * FV*((1+i)^n-1) where AM.B = amortized bonds FV = face value n = period in which we are

AM.B * FV * i% is wrong for calculating interest in 0 coupon bonds because ...

AM.B * FV * i% is for simple interest, but we are talking about compound interest when we are talking about 0 coupon bonds

A difference b/w 0 coupon bonds and bonds with coupon, is that if there is no amortized bond in a moment, there is no _________, but there is for ___________.

interest in the 0 coupon bond bonds with coupon

when we amortize, we pay interest in 0 coupon bonds.

True

bonds with coupons are cheaper than bonds without coupon.

FALSE bonds with coupons are more expensive than bonds without coupons