0.10 Chapter Zero Review Questions
Review Questions: Chapter Zero
In all the following chapters’ study questions and problem sets, see if you can supplement the given questions with your own. Answer the given questions expansively.
- Define Free Cash Flow.
- What is Free Cash Flow used for?
- You are given the following data. Calculate the simple Present Value:
- Future Value = $110
- Number of Years = 10
- Compounding Periods = Quarterly
- Compound Rate = 12%
- Solve for the following:
- Present Value = $750
- Number of Years = 10
- Discount Periods = Quarterly
- Discount Rate = 12%
- Future Value = ?
- What is the Future Value of a Perpetuity?
- What is the Present Value of a $125 Perpetuity, compounded quarterly, at an 8% annual rate?
- What if that Perpetuity grew at an annual rate of 4%?
- What are both the present- and future-values of a $663 ordinary annuity, given the following:
- Rate = 8%
- Years = 10
- Frequency = Yearly
- You just took out a $240,000 mortgage for ten years, with annual payments, and an annual rate of 5%. What is your annual payment obligation? Assume the payments are due at the end of the year.
- How much interest will you have paid over the life of the mortgage as compared with the principal?
- In general, mortgage interest payments go up/down, while principal payments go up/down. Which are the right (italicized) choices?
- Why take out a longer-term mortgage when you can afford a shorter-term one with a higher payment?