1. Finance Midterm Study
Quiz yourself by thinking what should be in
each of the black spaces below before clicking
on it to display the answer.
Help!
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| Explain IRR | The interest rate that sets the net present value of the cash flows equal to zero.
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| Retention Rate | The fraction of a firm's current earning that the firm retains. 1-dividend rate. % of earnings that a firm chooses to grow and not give to its shareholders via dividends. Div rate=1-retention.
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| Treasury Yield Curve | Risk-free rate of return for treasury bonds. Diminishing returns as time goes on.
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| Bond Price/Yield Relationship | The discounting of future cash flows. A higher yield means that the future cash flows discount at a higher rate and it yields a lower present value (price) to get the same face value.
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| NPV>0 | Go ahead with purchase bc it's adding value. The NPV>0 means the project is earning more than the rate of 17%. 17% is the measure of the opportunity cost of investing in other projects of similar risk.
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| Dividend Yield | Dividend payment/share price
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| Identifying Discount/Premium | We know bond will sell at a discount bc it has a coupon rate of 7% when the market requires 8%.
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Review the information in the table. When you are ready to quiz yourself you can hide individual columns or the entire table. Then you can click on the empty cells to reveal the answer. Try to recall what will be displayed before clicking the empty cell.
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To hide a column, click on the column name.
To hide the entire table, click on the "Hide All" button.
You may also shuffle the rows of the table by clicking on the "Shuffle" button.
Or sort by any of the columns using the down arrow next to any column heading.
If you know all the data on any row, you can temporarily remove it by tapping the trash can to the right of the row.
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Created by:
Elisahbeth
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