Finance Exam 2 UPDATED ACTUAL Questions And Correct Answers
Terms in this set (57)
Future Value Formula FV = PV(1 + r)^t
Present Value The current valuye of future cash flows Discounted at the appropriate discount
rate
Future Value the amount of money an investment will grow to over some period of time at
some given interest rate
Present Value Formula PV=FV/(1+r)^n
Discounted Cash Flow Valuation calculating the present value of a future cash flow to determine its value today
Discount rate excel Rate=(nper, pmt, pv, fv)
Number of Periods excel =NPER(rate,pmt,pv,fv)
Annuity A constant or level stream of cash flows for a fixed period of time
Discount Rate The rate used to calculate the present value of futures cash flows
Ordinary Annuity Annuity occurs at the END of each period 0
Annuity Due Annuity occurs at the BEGINNING of each period 1
# of periods compounded Increase over time Present Value with multiple cash flows
Unequal payments use NPV
Equal Payments use PV
Finding Payment use PMT
Finding number of payments use NPER
Finding the Rate use RATE
Annuity Due value = Ordinary annuity value x (1 + r)
perpetuity = equal payments forever
PV for a perpetuity = C/r ( c=cash)
Terms in this set (57)
Future Value Formula FV = PV(1 + r)^t
Present Value The current valuye of future cash flows Discounted at the appropriate discount
rate
Future Value the amount of money an investment will grow to over some period of time at
some given interest rate
Present Value Formula PV=FV/(1+r)^n
Discounted Cash Flow Valuation calculating the present value of a future cash flow to determine its value today
Discount rate excel Rate=(nper, pmt, pv, fv)
Number of Periods excel =NPER(rate,pmt,pv,fv)
Annuity A constant or level stream of cash flows for a fixed period of time
Discount Rate The rate used to calculate the present value of futures cash flows
Ordinary Annuity Annuity occurs at the END of each period 0
Annuity Due Annuity occurs at the BEGINNING of each period 1
# of periods compounded Increase over time Present Value with multiple cash flows
Unequal payments use NPV
Equal Payments use PV
Finding Payment use PMT
Finding number of payments use NPER
Finding the Rate use RATE
Annuity Due value = Ordinary annuity value x (1 + r)
perpetuity = equal payments forever
PV for a perpetuity = C/r ( c=cash)
