Financial Mathematics UPDATED Actual Exam Questions and CORRECT Answers
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Course
Financial Mathematics
Institution
Financial Mathematics
Financial Mathematics UPDATED Actual
Exam Questions and CORRECT Answers
simple interest - CORRECT ANSWER- if the interest charged is base merely on the
principal but is paid at the end of the term
focal date - CORRECT ANSWER- the point on the timeline when several pieces of
money are valued...
Financial Mathematics UPDATED Actual
Exam Questions and CORRECT Answers
simple interest - CORRECT ANSWER✔✔- if the interest charged is base merely on the
principal but is paid at the end of the term
focal date - CORRECT ANSWER✔✔- the point on the timeline when several pieces of
money are valued in order to compare or add them (t=0)
time value of money - CORRECT ANSWER✔✔- the principle that, because of interest, the
value of a given piece of money changes as its location in the timeline changes, increasing
when moved to the future and decreasing when moved to the past
interest - CORRECT ANSWER✔✔- cost or charge for the use of borrowed money
principal - CORRECT ANSWER✔✔- amount of money invested or borrowed
interest rate - CORRECT ANSWER✔✔- percent of the principal that is the basis for the
interest
term - CORRECT ANSWER✔✔- length of the loan in time units corresponding to the rate
promissory note - CORRECT ANSWER✔✔- document on which one party (the payer)
writes his of her promise to pay another party (the payee)the principal and interest for a loan
due at some date in the future
maturity date - CORRECT ANSWER✔✔- the date that a promissory note or other maturing
security must be repaid
maturity value - CORRECT ANSWER✔✔- the amount of money the borrower will pay
back (principal + interest)
, I = - CORRECT ANSWER✔✔- Pit
S = - CORRECT ANSWER✔✔- P(1 + it)
P = - CORRECT ANSWER✔✔- S/ (1 + it)
exact time - CORRECT ANSWER✔✔- everyday of the term except the first day
(subtracting serial numbers)
approximate time - CORRECT ANSWER✔✔- each month is assumed to be 30 days
ordinary interest - CORRECT ANSWER✔✔- the length of a year is assumed to be 360 days
exact interest - CORRECT ANSWER✔✔- the length of a year is taken as 365 days
Banker's Rule - CORRECT ANSWER✔✔- exact time and ordinary interest; find serial
numbers and subtract to find total number of days then divide by 360 to find time
golden rule of finance - CORRECT ANSWER✔✔- monies cannot be added of compared
unless they are valued at the same point in time
average due date - CORRECT ANSWER✔✔- the date at which a single payment equal to
the sum of several obligations will discharge those obligations; not a function of the interest
rate unless it is zero
buying out loans - CORRECT ANSWER✔✔- find maturity value of loan; find the current/
present value of this amount using maturity value at the future value
net present value - CORRECT ANSWER✔✔- 1. Establish the investment
2. Convert expected returns to present value
3. Add PV of expected returns to the negative investment
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