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Exam FM (Financial Mathematics)
#Question
A cash inflow of $10,000 is expected in 4 years. If the discount rate is 6%, what is its present value?
A.
$6,500.00
B.
$8,500.00
C.
$8,000.00
D.
$7,486.78
Correct Answer:
D
PV = Cash Flow / (1 + r)^t; 10000 / (1 + 0.06)^4.
#Question
If inflation is 3% and nominal interest rates are 5%, what is the effective real interest rate?
A.
2.00%
B.
3.00%
C.
1.94%
D.
3.50%
Correct Answer:
C
Real Interest Rate = Nominal Interest Rate - Inflation Rate; 5% - 3%.
#Question
A corporate bond has a face value of $1,000, pays a coupon of $60 annually, and sells for $950. What is the bond's current yield?
A.
6.32%
B.
5.50%
C.
7.50%
D.
6.00%
Correct Answer:
A
Current Yield = Coupon Payment / Current Price; 60 / 950.
#Question
A stock has an expected return of 15% with a standard deviation of 10%. If you invest $1,000, what is the expected dollar return in one year?
A.
$150
B.
$100
C.
$300
D.
$200
Correct Answer:
A
Expected Dollar Return = Investment Expected Return; 1000 0.15.
#Question
You want to retire with $1,000,000 in 30 years. How much must you save annually if your savings account earns 5% interest?
A.
$12,000
B.
$11,866.60
C.
$15,000
D.
$10,000
Correct Answer:
B
Using the future value of an annuity formula to solve for annual contributions.
#Question
If your investment of $5,000 grows to $8,000 over 6 years, what is the compound annual growth rate (CAGR)?
A.
7.50%
B.
10.00%
C.
8.00%
D.
9.59%
Correct Answer:
D
CAGR = (Ending Value / Beginning Value)^(1/n) - 1; (8000/5000)^(1/6) - 1.
#Question
An investment costs $15,000 today and is expected to produce cash inflows of $4,000 for each year for 5 years. What is the NPV at a discount rate of 8%?
A.
$1,500.00
B.
$2,000.00
C.
$1,775.40
D.
$2,200.00
Correct Answer:
C
NPV = _ (Cash Flows / (1 + r)^t) - Initial Investment.
Exam FM (Financial Mathematics)
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