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Financial Modeling Exam 1 Questions And Answers Graded A+ 2024/2025
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Financial Modeling Exam 1 Questions And Answers Graded A+ 2024/2025
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Financial Modeling Exam 1The 3 equal ways of calculating the prevailing cost of a single cash waft are: - ANS1. PV
formulation
2. PV characteristic
3. PV timeline
The effect of destiny fee of a single cash drift whilst you increase the PV - ANSan growth
inside the FV
The impact of future value while you boom the cut price rate - ANSan boom in FV
The impact of future price while you increase the quantity of intervals - ANSan growth inside
the FV
Fully give an explanation for the formulation used for calculating the FV of each cash go with
the flow - ANSEach coins waft is compounded at the Discount Rate for the final intervals
What is the call of the time period that the Present Value is split through to get the Payment.
Why does this components provide the Payment amount? - ANSPresent Value Interest
Factor of Annuity. APV = PMT X PVIFA. So, dividing by means of the Present Value Interest
Factor undo's the product, and gives you the PMT.
Show the formula for calculating the Annuity Present Value the use of the Annuity Future
Value, Discount Rate, and # of Periods in Excel Notation - ANSAPV = AFV/(1+r)^t
State the impact of increasing the charge amount on the APV and AFV - ANSAPV =
increase in FV
AFV = growth in FV
Can the steady cut price rate approach be used to calculate NPV in the preferred case
where the bargain price changes over the years? Why/Why no longer? - ANSNo, because
the NPV function & regular cut price components best permit for one regular discount
charge.
Fully explain the NPV function used to calculate the NPV in mobile b21 - ANSThe NPV
feature in Excel assumes that Year zero cash float happens on the give up of the 12 months
instead of the start, so that you upload it to the NPV of the remaining years the use of the
NPV characteristic. The NPV function takes the cash flows from each 12 months, discounts
it with the aid of the nominal bargain rate (that is observed with the aid of compounding the
inflation fee & the actual cut price price) and summing them up (which includes the
preliminary investment)
Is the NPV of the project shown proper for funding? Why/Why no longer - ANSA undertaking
is appropriate if the NPV is effective
, If we add the inflation rate and the real discount rate to get the nominal cut price rate, how
will it's distinct from the system in b9? - ANSIt might not deliver us the impact/dimension of
the growth in the actual discount fee because of inflation
Why is the coupon bond yield to maturity close to, but now not precisely same to, the yield to
adulthood of the 4-12 months treasury strip? - ANSBecause the yield of the coupon bond is
a weighted common of the yields for each of the eight periods. The biggest coins flow is at
the adulthood date, and the biggest weight inside the weighted average is on that date. So,
it's closest to the yield on the adulthood date. But now the equal.
State whether or not the EAR conference consequences in a better or decrease bond fee
than the APR conference in and supply the purpose for this. - ANShigher bond fee because
it is a lower bargain rate, which from the legal guidelines of discounting coins flows effects in
a higher bond price.
State and give an explanation for the variations among the curvatures of the yield to maturity
curve and the forward fee curve. - ANSForward rates curve is not clean, whereas the Yield
Curve is a compounded average of the Forward quotes so it has a smoother curve.
Fully provide an explanation for the components for calculating the ahead charge of the Ten
Year Treasury Strip. - ANSTake the ten yr yield to maturity and divide it by the 5 12 months
fee compounded for five years to offer the 5 year compounded price between years five and
10. Then take the 5th root to transform it to annual fee, and subtract 1 for the important.
Explain why the yield curve regularly has decrease yields at the short give up and the long
end because of market segmentation. - ANSThere is extra call for for quick-time period
bonds for coins control, which will increase charges of short term bonds, ensuing in low
yields at the quick cease.
List the static features concerning the form, stage, and curvature of the U.S. Yield curve. -
ANSA. Four unique shapes: upward sloping, downward sloping, flat, and humped.
B. The universal degree of the yield curve tiers from low to high
C. The quantity of curvature at the short give up tiers from a touch to loads.
List the dynamic properties regarding the volatility of the U.S. Yield curve. - ANSA. Short
Rates (0-5 yrs) are more volatile than long charges (15-30 yr)
B. The usual volatility of the yield curve is better whilst the level is higher (early 80s)
C. Sometimes there are sharp reactions to authorities interventions
Can the overall cut price price approach be used to calculate NPV if the discount charge is
steady through the years? If yes, how? - ANSYes, it may in case you modify the cut price
rate and inflation rate and make them each constant so that the nominal rate is constant.
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