Deck 11: Loan Amortization, investment Analysis, and Asset Depreciation

Question 1

The PMT function and the IPMT functions use the same arguments EXCEPT ________.

A)fv
B)pv
C)type
D)per

Answer 1

D

Question 2

The ________ function can be used to identify the principal portion for a mortgage payment.

A)PMT
B)IPMT
C)PPMT
D)FV

Answer 2

C

Question 3

The ________ function calculates the amount of interest paid over a specific number of periods.

A)CUMIPMT
B)PPMT
C)IPMT
D)CUMPRINC

Answer 3

A

Question 4

The ________ function calculates the number of payment periods for an investment or loan if you know the loan amount,interest rate,and payment amount.

A)NPV
B)IPMT
C)RATE
D)NPER

Question 5

Identify the correct formula to calculate the cumulative principal paid on a mortgage loan for the second year of the loan (periods 1-12,where rate =5%,nper =120,present value = $147,000.

A)=CUMIPMT(.05/12, 120*12, 147000,12,1,0)
B)=CUMIPMT(.05/12, 120*12,-147000,1,12,0)
C)=ABS(CUMIPMT(.05/12, 120,-147000,12,1,0))
D)=(ABS(CUMIPMT(.05/12, 120, 147000,1,12,0))

Question 6

If you don't know the number of periods for a loan but you know the present value,payment,and number of interest rate,you can use the ________ function to determine the number of periods.

A)GUESS
B)PMT
C)RATE
D)NPER

Question 7

The ________ argument is used when you want to speculate about what the interest rate would be when using the RATE function.

A)guess
B)pv
C)fv
D)type

Question 8

The ________ function calculates the interest rate per period for an investment or loan,given that you know the present value of the loan,payment amount,and number of payment periods.

A)NPV
B)IPMT
C)RATE
D)NPER

Question 9

Often used to determine a company's value,________ is the movement of cash in and out of a business.

A)cash flow
B)economic risk
C)NPV
D)capital budgeting

Question 10

A(n)________ occurs when there is a concern that a chosen act or activity will not generate sufficient revenues to cover operating costs and repay debt obligations.

A)cash flow
B)economic risk
C)NPV
D)capital budgeting

Question 11

The pv argument in the PMT function represents the ________ of the loan.

A)payment amount
B)loan amount
C)percentage rate
D)percentage value

Question 12

To display a positive result for the CUMIPMT function you would need to nest the ________ function.

A)NPV
B)PV
C)PPMT
D)ABS

Question 13

Identify the correct formula to calculate the payment for a loan,where rate =6%,loan amount = $2,000,and payments will be made monthly for six years.

A)=PMT(.06, 6*12, 2000)
B)=PMT(.06/12, 6*12, -2000)
C)=PMT(.06, 6*12, -2000)
D)=PMT(6, 6*12, 2000)

Question 14

An amortization table shows all of the following EXCEPT ________.

A)interest payments over the life of the loan
B)interest rate for each payment
C)principal payments over the life of the loan
D)remaining balance of the loan

Question 15

The ________ argument in the PMT function represents number of periods.

A)nper
B)fv
C)type
D)rate

Question 16

All of the following functions can be used to analyze an annuity investment EXCEPT ________.

A)FV
B)PV
C)ABS
D)PMT

Question 17

If you don't know the interest rate for a loan but you know the present value,payment,and number of payment periods,you can use the ________ function to determine the interest rate.

A)GUESS
B)PMT
C)RATE
D)NPER

Question 18

You would use the ________ function to find out how much money you would pay on a mortgage loan of $100,000 with a monthly rate of 5%.

A)PV
B)FV
C)PMT
D)IF

Question 19

Identify the correct formula to calculate the cumulative interest paid on a mortgage loan for the second year of the loan (periods 13-24,where rate =9%,nper= 5,present value = $250,000.

A)=CUMIPMT(.09/12, 5*12, 250000,13,24,0)
B)=CUMIPMT(.09/12, 5*12, 250000,24,13,0)
C)=CUMIPMT(.09*12, 30/12,-250000,13,24,0)
D)=CUMIPMT(.09/12, 30/12,-250000,24,13,0)

Question 20

The ________ argument in the PMT function represents the balance you want to attain after the last payment is made.

A)fv
B)pv
C)rate
D)nper

Question 21

The ________ function can be used to identify the interest portion for a mortgage payment.

A)PMT
B)IPMT
C)PPMT
D)FV

Question 22

The ________ method of depreciation calculates depreciation evenly over the life of the asset.

A)accumulated depreciation
B)double-depreciation
C)fixed-declining balance
D)straight-line

Question 23

The ________ method of depreciation that the value of the asset loses the same amount of value each year of its life.

A)accumulated
B)double distributing-balance
C)declining-balance
D)straight-line

Question 24

The FV function has two optional arguments.These two arguments are ________ and ________.

A)rate; payment
B)payment; type
C)pv; rate
D)pv; type

Question 25

All of the following statements are TRUE about amortization schedules EXCEPT:

A)All interest and principal paid should equal the sum of all the payments made.
B)The final remaining balance value in your table should be zero.
C)A given periodic payment will equal the sum of the interest payment (IPMT)and the principal payment (PPMT).
D)The sum of the principal payments (PPMT)will always equal the loan amount. If you add interest it will be the total amount paid over the course of the loan term, both in interest and principal.

Question 26

The ________ function is used to determine the value of an investment by analyzing a series of future incoming and outgoing cash flows expected to occur over the life of the investment.

A)NPV
B)XNPV
C)IRR
D)XIRR

Question 27

The ________ function can help businesses determine the future return on an investment.

A)FV
B)NPV
C)PV
D)PMT

Question 28

The ________ method of depreciation calculates depreciation at the highest accelerated rate.

A)accumulated
B)double declining-balance
C)declining-balance
D)straight-line

Question 29

The ________ function calculates what an investment would be worth in today's dollars.

A)FV
B)NPV
C)PV
D)PMT

Question 30

The SLN function has ________ arguments.

A)three
B)four
C)five
D)six

Question 31

A(n)________ is the ratio of the amount of money gained or lost from an investment relative to the initial amount invested.

A)return on security
B)equity distribution
C)return on investment
D)maturity ratio

Question 32

Companies that are planning to make a long-term investment,like the purchase of machinery,typically use ________ to evaluate whether the endeavor is worth pursuing.

A)capital budgeting
B)amortization table
C)cash flows
D)present value analysis

Question 33

All of the following statements are TRUE about investments EXCEPT:

A)A security is a legal document that can be bought and sold and holds some financial value.
B)In terms of economic risk for stocks and bonds, stocks are typically considered less risky.
C)Stocks are categorized as equity securities because the company gives partial ownership of its equity, defined as total assets minus total liabilities, by selling stock in the company.
D)Bonds are categorized as debt securities because the company is indebted to the people who loan the company money through the purchase of bonds.

Question 34

The ________ function indicates the profitability of an investment and is commonly used in business when choosing between investments.

A)NPV
B)XNPV
C)IRR
D)XIRR

Question 35

A depreciation schedule records all of the following EXCEPT ________.

A)accumulated depreciation
B)calculation for each year's depreciation
C)the date an asset was placed into service
D)net book value

Question 36

The ________ method of depreciation assumes that the value of an asset depreciates more in the first year than in the second year.

A)accumulated
B)double distributing-balance
C)declining-balance
D)straight-line

Question 37

A(n)________ is a an investment with recurring payments.

A)interest rate
B)amortization schedule
C)principal
D)annuity

Question 38

The ________ function determines the value of an investment or business by analyzing an irregular time series of incoming and outgoing cash flows.

A)NPV
B)XNPV
C)IRR
D)XIRR

Question 39

The ________ of an asset is the value of an asset at the end of its useful life.

A)depreciation
B)principal
C)salvage value
D)death

Question 40

The ________ function analyzes a series of cash flows that are not periodic.

A)NPV
B)XNPV
C)IRR
D)XIRR

Question 41

An amortization schedule is a table that calculates the interest and principal payments along with the remaining balance of the loan for each period.

Question 42

The CUMIPMT and CUMPRINC return a positive value by default.

Question 43

An amortization table shows the interest rate for each payment.

Question 44

The NPER function can be useful if you do not have all the information you need to calculate loan payments with the PMT function or you would like to verify the actual interest rate of the loan.

Question 45

The type argument is used in the PMT function and is an optional argument.

Question 46

Each loan payment in an amortized loan is made up of a principal amount and an interest amount.

Question 47

An alternative method to using the negative sign to make the result positive is to use the ABS function.

Question 48

Interest and principal make up EVERY payment in an amortization table.

Question 49

The PMT function equals the sum of the IPMT and PPMT results.

Question 50

The statement of cash flows can be used by banks to determine whether a company is eligible for a business loan.

Question 51

The PPMT and IPMT functions use the same syntax.

Question 52

When using the PMT function,you should type a negative sign in front of the present value of the loan so that the payment will result in a positive value.

Question 53

To calculate a loan payment for a mortgage loan with a monthly rate of 4%,you would enter .04 for the rate argument.

Question 54

The CUMIPMT requires six arguments.

Question 55

The CUMIPMT can be used to help calculate interest for a federal tax return.

Question 56

Incoming cash flows are "negative," whereas outgoing flows are "positive."

Question 57

By default,the PMT function returns a positive payment amount.

Question 58

The fv and type arguments for the PMT are considered optional arguments.

Question 59

The statement of cash flows can aid in determining whether a company is able to collect payments from customers and pay its bills.

Question 60

As the total loan balance decreases,a larger proportion is applied to interest and a smaller proportion is applied to principal.

Question 61

The ________ is the unpaid balance amount of the loan.

Question 62

A loan schedule that calculates the interest and principal payments is known as a(n)________ table.

Question 63

The series of values for the XIRR function must contain at least one positive and one negative value.

Question 64

The par value is how much the bondholder will receive at maturity.

Question 65

Yield is the amount of annual interest,expressed as a percentage of the par value and determines how much investors will receive on their investment.

Question 66

Maturity is the interest rate the bond pays.

Question 67

You could use ________ analysis to determine whether or not you could afford the payment for a specific mortgage amount,interest rate,and terms.

Question 68

The XIRR function is generally used in capital budgeting to measure and compare how profitable a potential investment is.

Question 69

To calculate a monthly loan payment for a 30-year mortgage loan with a monthly rate of 4%,where A5 = 4%,you would enter ________ for the rate argument.

Question 70

A security is a legal document that can be bought and sold and holds some financial value.

Question 71

You would need to enter a value for the fv argument of the PMT function when you have a(n)________ payment at the end of the loan.

Question 72

Banks measure ________,or potential losses,when assessing a corporate loan.

Question 73

You would use the ________ function to determine the amount of interest paid over a specific number of periods

Question 74

There are two methods for calculating depreciation.

Question 75

The NPV function can evaluate the value of an investment over time through incoming and outgoing cash flows.

Question 76

A(n)________ can be used to assess a company's short-term viability and solvency.

Question 77

As the total loan balance decreases,a(n)________ proportion is applied to interest and a greater proportion to principal.

Question 78

________ is when you use several different values in one or more formulas to explore all the various results.

Question 79

When analyzing a loan a(n)________ can provide detailed information about payments,interest,and balances.

Question 80

The series of values for the XNPV function must contain at least one positive and one negative value.