TVM
Interest upon interest, name the process we go from PV to FV
Compounding
$1000 printed on the face of the bond is called...
Face value
Depreciation vs. Amortization... what are these two applied to?
Physical assets (e.g., buildings, machines, computers) vs. financial assets (e.g., debt, loans, mortgages)
A low P/E ratio typically means...
The stock is underpriced (sold at a bargain or discount), with respect to its earnings
FV / (1 + i) ^ n is used to compute the...
PV
$100 in 50 years at 10% interest rate is probably worth how much today? More than $100, less than $100, significant less than $100, or significantly more than $100?
$0.85, significantly less than $100
When the prevailing market interest rate DECREASES, the value of an existing bond...
Increases
What is COGS?
Cost of goods sold (direct cost of raw materials, direct labor, supplies for manufacturing, freight, overhead related to the direct manufacturing of the product)
A very high market capitalization most probably applies to which company? Apple or Penny Stock?
What is the FVIF and PVIF?
(1+i)^n and 1/(1+i)^n
An identical periodic payment is called...
Annuity
What is the theoretical price of a $10,000 face value bond yielding a 10% annual coupon rate when the prevailing market interest rate is also 10%?
$10,000 selling at par
What is Opex?
Operating Expenses needed for day-to-day function (rent, utilities, salary, maintenance, repairs, office supplies, insurance, marketing)
If the Federal Reserve CUTS interest rates (either the federal funds rate and discount rate), stock prices will go _______ (up/down)
Up. A rate cut indicates expansionary monetary policy
What is the 7% & 10 Year rule?
Your FV approximately doubles in 10 years at 7%. It is exactly 1.97X the original (e.g., $1,000 becomes $1,967).
The higher the interest rate, the _______ the future value and the _______ the present value
higher, lower
Do bonds have a higher or lower volatility compared to a stock?
Lower
What is Capex
Capital expenditures used to acquire, maintain, and upgrade physical properties (property, equipment, technology, infrastructure)
Which stock will typically have a higher volatility? Penny stocks or large-cap stocks?
Penny stocks
What is the Double Rule of 72? (that is, 72/Interest Rate Number...)
Your money approximately doubles. Example: $1000 becomes $2000 if your interest rate is 6% in 72/6 = 12 years.
A bond that pays annual coupons FOREVER is called a...
Perpetuity
What do you think a Convertible Bond does?
It is convertible to a stock at a later prespecified time and price
Higher depreciation means _______ taxes and _______ net income but if added back as a noncash expense, it generates a _______ free cash flow
Lower, lower, higher
What day's closing prices do you use for the stock portfolio project in this class?
Monday = Tuesday night class
Wednesday = Thursday noon class
What is 25/5?
5, NOT 14, okay?!