Time Value of Money 1&2
A dollar today is worth more than.......
What is: a dollar tomorrow or in a year's time?
The following risk: refers to the potential loss of purchasing power over time as the general price level of goods and services increases.
What is inflation risk?
The most common type of lending arrangement in loans, where each payment includes both interest and principal components
What is: an amortized loan?
The expected cash flows from owning a bond security
What is a maturity payment and coupon payments?
The acronym for Australia's primary securities exchange
What is: the ASX
The Rule of 72 states:
What is: the average time to double an investment?
What is an opportunity cost?
The period in a loan agreement where the interest paid is the highest
What is: the beginning of the loan?
The rate by which a dividend increases per year
What is: a dividend growth rate?
Australia's central bank and banknote issuing authority, involved in setting overnight cash rates
The following formula is: FV = PV (1+i)^n
What is Future Value Compound Interest?
In a personal income statement, the remains after mandatory deductions and taxes are subtracted from gross income is
What is: disposable income?
A security used in a loan that may be seized and sold when the borrower defaults, often when this is used the interest of rate the loan is lower than when it is not used
What is: collateral?
A type of bond where the coupon rate is greater than the YTM and the Price is greater than the Face Value.
What is: a premium bond?
A company issues shares to this type of market when they conduct an IPO or initial public offering, this type of market raises capital for the company that the shares are issued under
What is: a primary market?
Samantha wants to retire by her 45th birthday in 25 years.
She will receive an interest rate of 15% p.a. and will require $1,000,000 to achieve her goal. What amount should Samantha deposit today? (To 2 d.p)
What is: $30377.64?
Given that Emergency fund has $4300 and Total Expenses is $50030, Emergency fund coverage in months is (2 d.p)
What is: 1.03 months?
John got a car loan of $24000 from Cena Bank that will be repaid in equal installments at the end of each year for 8 years. The effective annual interest rate is 5.5 p.a%.
John's yearly instalment is (to 2 d.p):
What is: $4896.63?
A bond trading at par with a face value of $25000, a yield to maturity of 7.5% p.a, was issued 3 years ago and has 7 years to maturity. The coupon rate is:
What is: 7.5% p.a
A relatively recent financial crisis typified by a housing bubble fueled by poor lending practices, lack of regulatory oversight and complex financial instruments like mortgage-backed securities.
What is: the 2008 Financial Crisis?
What is the present value of a $1300 per year perpetuity today at a discount rate of 8% p.a, if the first payment is received seven years from now? (To 2 d.p)
What is: $10240.26?
The total estimated cost of financial abuse to victims and the broader Australian economy in 2020
What is: $10.9 billion AUD?
You require $736,000 to buy a house. The bank will lend you money over 30 years and allow you to make repayments monthly. The interest is 7% p.a compounded monthly.
The total repayments over the term of the loan.... (2 d.p)
What is: $1,762,785.49?
Alpha Limited shares just paid a dividend of $10. Dividends are expected to increase by 10% in one year, 6% in two years and 2% in three years and every year indefinitely
The intrinsic value of the share today, if the required return is 14% p.a is..... (to 2 d.p)
What is: $94.88?
A type of analysis where the intrinsic value of an asset is calculated and analysis of the factors that could influence price in the future. Warren Buffett, chairperson and CEO of Berkshire Hathaway is a large proponent of this type of investment analysis.
What is: Fundamental Analysis or Value Investing?