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Foundations In Finan
Midterm/Final
Question | Answer |
---|---|
How is Islamic Finance Different from Western Finance? | Western Finance charges interest (Riba); Islamic finance does not. Islamic finance earns yield through profit participation. |
What is the difference between a zero coupon bond and standard bond (draw for full credit)? | Zero coupon bond has no coupon payments; Standard has coupon payments |
What are the standard deviations from mean for +/-1, +/-2, and +/-3? | +/-1=68%, +/-2=95%, and +/-3=99.7% |
You are paying $6.5M and will receive $3.5M at the end of the first year and $4.5M at the end of the second year. What is the IRR for this transaction? | R=14.38% or 0.1438 |
Solve) John is considering purchasing an investment property. Current rent in the area for similar units is $4000. The HOA dues on the property is $500/Month and taxes are $500/Month. Assume interest only rates is 5% and leverage of 80%. | Answer (Maximum $900,000) +Rent -HOA -Taxes =NOI NOI*12 (NOI*12/Interest)*10=Debt Equity*Debt= Purchase Price (rounded) |
What is the formula for the present value of annuity? | PVA=R*ā_(i=1)^nā1/(1+i/12)T |