D367 Innovation in Finance - Set 3 - Part 1

Test your knowledge of technical writing concepts with these practice questions. Each question includes detailed explanations to help you understand the correct answers.

Question 1: What is the time value of money (TVM)?

The concept that money received today is worth more than the same amount received in the future

The idea that future money is worth more than present money

The theory that inflation does not affect the value of money

The belief that money remains constant in value over time

Question 2: What is an annuity?

A lump-sum payment made at the start of a project

A series of equal payments made at regular intervals

A payment received after the investment matures

A single one-time payment

Question 3: What is the internal rate of return (IRR)?

The cost of capital for a firm

The rate at which the NPV of a project equals zero

The expected return on an investment

Question 4:

A bond that pays interest indefinitely

A stream of identical cash flows that continues forever

Question 5:

Net Payment Value

Question 6:

Question 7:

Earning interest on the initial principal and on the interest previously earned

of a lump sum?

Question 8:

FV = PV × (1 - r)^n

FV = PV × (1 + r)^n

formula calculates the value of a lump sum after interest is applied over a specified period.

Question 9:

PV = (FV + r)^n

PV = FV × (1 - r)^n

PV = FV / (1 + r)^n

formula is used to discount future cash flows back to their value in today’s terms.

Question 10: The date on which the bond is issued

The date on which the bond expires and the principal is repaid

The date when interest payments begin

The date on which the bond price reaches its peak

The date on which the bond expires and the principal is repaid

Question 11:

A company's first sale of bonds

The first time a privately-owned company offers shares to the public

The issuance of preferred stock

A loan made by a company to the public

Question 12: What is the cost of capital?

The cost associated with producing goods

The cost a company must pay for using investors' funds

The cost of acquiring inventory

Question 13:

Investing all funds into a single asset

Spreading investments across different asset classes to reduce risk

Question 14:

The risk associated with a specific company

Question 15:

Question 16:

A way to determine the value of a stock based on future dividend payments

Question 17:

The period in which a loan must be repaid

The time required to earn back the initial investment from a project’s cash flows

Question 18:

To determine the rate of return on an investment

To assess the growth rate of the overall economy

To estimate the value of a stock based on its future dividends

Question 19:

The amount of debt a company uses to finance its operations compared to equity

The percentage of a company’s revenue spent on debt repayment

The ratio of short-term debt to long-term debt

The amount of debt a company uses to finance its operations compared to equity

Question 20:

The ability to turn assets into cash quickly without losing significant value

The availability of a loan from a bank

The amount of cash a company has on hand

The capacity to repay long-term debt

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