Pete 353 Exam 1 Questions & Answers 2024/2025
Economics - ANSWERSDrives the decision making in oil and gas companies
Net Cash Flow In - ANSWERSProduction x Price=Revenue
Net Cash Flow Out - ANSWERS% Goes to the Royalty Owner
Operating Expenses
Production Taxes
Capital Expenditures
Fe...
Economics - ANSWERSDrives the decision making in oil and gas companies
Net Cash Flow In - ANSWERSProduction x Price=Revenue
Net Cash Flow Out - ANSWERS% Goes to the Royalty Owner
Operating Expenses
Production Taxes
Capital Expenditures
Federal Taxes
I - ANSWERSInterest
P - ANSWERSPrincipal
n - ANSWERSyears
t - ANSWERSloan period or investment period, years
m - ANSWERSnumber of compounding or interest periods per year
m=1 for yearly
m=4 for quarterly
m=12 for monthly
in - ANSWERSnominal interest rate, fraction per year
,ie - ANSWERSeffective interest rate, fraction per year
r - ANSWERSinterest rate
Principal - ANSWERSamount of borrowed or loaned money
Interest - ANSWERSrent paid for the use of money loaned
Rate of Return - ANSWERSis the incremental gain on the investment to the loaner
What does the simple 'n' refer to? - ANSWERSIt is years
What is the m? - ANSWERSit is the number of times the interest is applied or compounded
Simple Interest - ANSWERSonly initial principal, over a fixed loan period, at a set rate
I=principalXperiodsXrate
Payback Sum at End of Year - ANSWERSSum= Initial Principal + Interest
Simple Interest, Payback before End of Period - ANSWERSI=Pni
Payback=Initial principal X (1+PeriodXrate)
Simple Interest - ANSWERSIs calculated using principal only, earning interest over a fixed loan period. At
the end of the period, both the principal and the accrued interest are returned.
Compound Interest - ANSWERSIs the interest accrued on BOTH the principal and the unpaid interest
earned in the previous periods. Interest accrues on both principal and unpaid interest from previous
periods.
Nominal Rate (in) - ANSWERSis expressed per year and then applied to a compound period as fraction of
the year
-Compounded periodically or continuously
Effective rate (in) - ANSWERSexpresses equivalent rate for the year resulting from compounding at
nominal rate for each period during the year
ie=
Periodic - ANSWERS(1+(in/m)^m)-1
for periodic compounding
ie=
Continuous - ANSWERS(e^r)-1
Consumer Price Index (CPI) - ANSWERSIs often used to adjust data for inflation
(x/Salary in 2011)=(CPI 2015/CPI 2011)
Future Value of Present Sum - ANSWERSF=P(1+ie)^n
(1+ie)^n - ANSWERSF/P
Annuity - ANSWERSa series of equal periodic payments (disbursements) over time
Ordinary Annuity - ANSWERSPv determined one period before first payment
Annuity Due - ANSWERSPv determined as of date of first payment
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