CMSA- MATH FOR FINANCE PROFESSIONALS EXAM QUESTIONS AND ANSWERS WITH COMPLETE SOLUTIONS VERIFIED GRADED A++

CMSA- MATH FOR FINANCE PROFESSIONALS EXAM

QUESTIONS AND ANSWERS WITH COMPLETE

SOLUTIONS VERIFIED GRADED A++

Simple Interest


Interest Payment = Principal x Interest


Time Value of Money Concept


The value of a dollar today is not the same as the value of a dollar in the future.


Opportunity Cost


Defer from consuming or investing money now.


Inflation


You can purchase less in the future with money.


Default Risk


Someone may default on money they owe you.


Future Value Using Simple Interest


FV= PV x (PV x i x n)


Present Value Using Simple Interest

, PV= FV / (1 + i x n)


Compound interest


Interest earnt in one period is added to the principal, and the interest in the next period is based on this

new amount.


Future Value Using Compound Interest


FV= PV x (1+i)^n


Present Value Using Compound Interest


PV= FV / (1 + i)^n


Simple Interest/Nominal Rate/Annual Percentage Rate


The interest rate has not taken into account any compounding.


Effective Rate/Effective Annual Rate/Annual Percentage Yield


The interest rate has taken compounding into consideration


Discounting A Single Cash Flow


Reducing the future cash flows to find their present values


Discounted Cash Flow Formula


PV = FV x DF


Annuities Traits