BUS 1350 – Exam 2, 2026 – Study guide and practice material
Explain the difference between positive and negative cash flow. If you borrow $20,000 from a
bank, is that a positive or negative cash flow? Explain your answer. - correct answer ✔✔ Positive
cash flow is money flowing to you or your company. Negative cash flow is money flowing away
from you or your company. Borrowing $20,000 from a bank is a positive cash flow because the
money is flowing to you.
What is the formula to calculate how much a savings account would be worth if the initial
balance is $1,000 with monthly deposits of $75 for 10 years at 4.3% annual interest
compounded monthly? What is the formula result? - correct answer ✔✔ Enter the formula
=FV(4.3%/12, 10*12, -75, 1000), which returns the value $9,684.13
You want a savings account to grow from $1,000 to $5,000 within two years. Assume the bank
provides a 3.2% annual interest rate compounded monthly. What is the formula to calculate
how much you must deposit each month to meet your savings goal? What is the formula result?
- correct answer ✔✔ Enter the formula =PMT(3.2%/12, 2*12, 1000, 5000), which returns the
negative cash flow value ($245.09). Based on the formula result, you will need to deposit about
$245 per month in the savings account to reach the savings goal.
A business takes out a loan for $250,000 at 4.8% interest compounded monthly. If the business
can afford to make monthly payments of only $1,500 on the loan, what is the formula to
calculate the number of months required to repay the loan completely? What is the formula
result? - correct answer ✔✔ Enter the formula =NPER(4.8%/12, -1500, 250000), which returns
the value 275.2020128. Based on the formula result, it will take 276 months (23 years) to pay
off the loan.
Rerun your calculations from Question 4 assuming that the business can afford only a $1,000
monthly payment. What is the revised formula and resulting value? How do you explain the
result? - correct answer ✔✔ Enter the formula =NPER(4.8%/12, -1000, 250000), which returns
the value #NUM!, indicating that the monthly payments are insufficient to pay back the loan.
, A business takes out a 10-year loan for $250,000 at 5.3% interest compounded monthly. What is
the formula to calculate the monthly payment and what is the resulting value? - correct answer
✔✔ To calculate the monthly payment, enter the formula =PMT(5.3%/12, 10*12, 250000),
which returns the negative cash flow value ($2,688.45).
For the loan conditions specified in Question 6, provide formulas to calculate the amount of the
first payment used for interest and the amount of the first payment used to repay the principal.
What are the resulting values? - correct answer ✔✔ The amount of interest paid in the first
month is calculated with the formula =IPMT(5.3%/12, 1, 10*12, 250000), which returns the
value ($1,104.17). The principal payment in the first month is calculated with the formula
=PPMT(5.3%/12, 1, 10*12, 250000), which returns the value ($1,584.28).
For the loan conditions specified in Question 6, what are the formulas to calculate how much
interest the business will pay in the first year and how much the business will repay toward the
principal? What are the resulting values? - correct answer ✔✔ Enter the formula
=CUMIPMT(5.3%/12, 10*12, 250000, 1, 12, 0) to calculate the total interest payments during
the first 12 months of the loan. The formula returns the value ($12,781.31), indicating that
almost $12,800 would be paid toward interest in the first year. To calculate the total paid
towards the principal in the first year, enter the formula =CUMPRINC(5.3%/12, 10*12, 250000,
1, 12, 0). The formula returns the value ($19,480.07), indicating that about $19,500 of the
principal will be paid off in the first year.
For the loan conditions in Question 6, calculate the total cost of the loan in terms of the total
interest paid through the 10 years of the loan? - correct answer ✔✔ Enter the formula
=CUMIPMT(5.3%/12, 10*12, 250000, 1, 120, 0) to calculate the total interest payments through
all 120 months of the loan. The formula returns the value ($72,613.84), indicating that the loan
will cost more than $72,600.
The first value in a linear trend is 50 and the fifth value is 475. What are the values of the
second, third, and fourth items? - correct answer ✔✔ 156.25, 262.50, 368.75
The first value in a growth trend is 50 and the fifth value is 475. What are the values of the
second, third, and fourth items? - correct answer ✔✔ 88.78, 154.11, 270.56
Explain the difference between positive and negative cash flow. If you borrow $20,000 from a
bank, is that a positive or negative cash flow? Explain your answer. - correct answer ✔✔ Positive
cash flow is money flowing to you or your company. Negative cash flow is money flowing away
from you or your company. Borrowing $20,000 from a bank is a positive cash flow because the
money is flowing to you.
What is the formula to calculate how much a savings account would be worth if the initial
balance is $1,000 with monthly deposits of $75 for 10 years at 4.3% annual interest
compounded monthly? What is the formula result? - correct answer ✔✔ Enter the formula
=FV(4.3%/12, 10*12, -75, 1000), which returns the value $9,684.13
You want a savings account to grow from $1,000 to $5,000 within two years. Assume the bank
provides a 3.2% annual interest rate compounded monthly. What is the formula to calculate
how much you must deposit each month to meet your savings goal? What is the formula result?
- correct answer ✔✔ Enter the formula =PMT(3.2%/12, 2*12, 1000, 5000), which returns the
negative cash flow value ($245.09). Based on the formula result, you will need to deposit about
$245 per month in the savings account to reach the savings goal.
A business takes out a loan for $250,000 at 4.8% interest compounded monthly. If the business
can afford to make monthly payments of only $1,500 on the loan, what is the formula to
calculate the number of months required to repay the loan completely? What is the formula
result? - correct answer ✔✔ Enter the formula =NPER(4.8%/12, -1500, 250000), which returns
the value 275.2020128. Based on the formula result, it will take 276 months (23 years) to pay
off the loan.
Rerun your calculations from Question 4 assuming that the business can afford only a $1,000
monthly payment. What is the revised formula and resulting value? How do you explain the
result? - correct answer ✔✔ Enter the formula =NPER(4.8%/12, -1000, 250000), which returns
the value #NUM!, indicating that the monthly payments are insufficient to pay back the loan.
, A business takes out a 10-year loan for $250,000 at 5.3% interest compounded monthly. What is
the formula to calculate the monthly payment and what is the resulting value? - correct answer
✔✔ To calculate the monthly payment, enter the formula =PMT(5.3%/12, 10*12, 250000),
which returns the negative cash flow value ($2,688.45).
For the loan conditions specified in Question 6, provide formulas to calculate the amount of the
first payment used for interest and the amount of the first payment used to repay the principal.
What are the resulting values? - correct answer ✔✔ The amount of interest paid in the first
month is calculated with the formula =IPMT(5.3%/12, 1, 10*12, 250000), which returns the
value ($1,104.17). The principal payment in the first month is calculated with the formula
=PPMT(5.3%/12, 1, 10*12, 250000), which returns the value ($1,584.28).
For the loan conditions specified in Question 6, what are the formulas to calculate how much
interest the business will pay in the first year and how much the business will repay toward the
principal? What are the resulting values? - correct answer ✔✔ Enter the formula
=CUMIPMT(5.3%/12, 10*12, 250000, 1, 12, 0) to calculate the total interest payments during
the first 12 months of the loan. The formula returns the value ($12,781.31), indicating that
almost $12,800 would be paid toward interest in the first year. To calculate the total paid
towards the principal in the first year, enter the formula =CUMPRINC(5.3%/12, 10*12, 250000,
1, 12, 0). The formula returns the value ($19,480.07), indicating that about $19,500 of the
principal will be paid off in the first year.
For the loan conditions in Question 6, calculate the total cost of the loan in terms of the total
interest paid through the 10 years of the loan? - correct answer ✔✔ Enter the formula
=CUMIPMT(5.3%/12, 10*12, 250000, 1, 120, 0) to calculate the total interest payments through
all 120 months of the loan. The formula returns the value ($72,613.84), indicating that the loan
will cost more than $72,600.
The first value in a linear trend is 50 and the fifth value is 475. What are the values of the
second, third, and fourth items? - correct answer ✔✔ 156.25, 262.50, 368.75
The first value in a growth trend is 50 and the fifth value is 475. What are the values of the
second, third, and fourth items? - correct answer ✔✔ 88.78, 154.11, 270.56
