CORPORATE FINANCE EXAM
QUESTIONS AND ANSWERS 2026
(QUICK REVISION)
There are two financial products. A will offer $120,000 in five years. B will offer
$5000 every quarter from now for five years. Assuming quarterly compounding
and your required return is 10%. Which product should you invest today?
What is the present value of product A?
What is the present value of product B?
Which product is more valuable today, A or B? - CORRECT ANSWER (S) -A) FV:
120,000 N: 5 x 4 (Quarterly) = 20
I/Y: 10%/4 = 2.5 PMT: 0
PV: 73232
B) N: 5 x 4 = 20 PMT: 5000
I/Y: 10%/4 = 2.5 FV: N/A
,PV: 77,945.81
Accelerate 77945.81 x 1.025 = 79894
There are two financial products. A will offer $100,000 in five years. B will offer
$1,500 every month from now for five years.
Product A is (single or multiple) cash flow(s)? $100,000 is (present or future)
value?
Product B is (single or multiple) cash flow(s)? How many cash flow(s) in total? -
CORRECT ANSWER (S) -Product A is single
$100,000 is (present or future) value? future
Product B is multiple
How many cash flow(s) in total? 60
Assume APR = 10%, fill the following table where m is compounding frequency
and compute EAR (4 digits after decimal NOT %, e.g., 0.12367 -> 0.1234)
,Annual compounding
m=1
EAR = APR = 0.1000 - CORRECT ANSWER (S) -Effective annual rate = (1 + r/m)^m −
1
Semi-annual compounding
m=2
EAR = (1+ .1÷ 2)^2 - 1 = .1025
Quarterly compounding
m=4
EAR = (1+ .1÷4)^4 - 1 = .1038
Monthly compounding
m = 12
EAR = (1+ .1÷12)^12 - 1 = .1047
Daily compounding
m = 365
EAR = (1+ .1÷365)^365 - 1 = .1052
, Continuous compounding
m=∞
EAR = =e^. 1 -1 = .1052
1. You buy a CD (certificate of deposit) with $10,000 today. Interest rate is 8%,
compounding monthly. How much you can get in two years? (keep the integer,
135.67 => 135);
2. You buy a CD with $10,000 today. Interest rate is 8%, compounding annually.
How much you can get in two years? (keep the integer, 135.67 => 135)
3. You are saving money to buy a CD with $10,000 in 6 months. Interest rate is 8%,
compounding monthly. You already have $7,000. How much more you still need
for now? (keep the integer, 135.67 => 135) - CORRECT ANSWER (S) -1) Compound
= Monthly = 12
Present Value = pv = $10,000
Interest Rate = r = = .666667%
Time = t = 2 (2 years) * 12 (monthly) = 24
FV = pv x (1xr)^2
QUESTIONS AND ANSWERS 2026
(QUICK REVISION)
There are two financial products. A will offer $120,000 in five years. B will offer
$5000 every quarter from now for five years. Assuming quarterly compounding
and your required return is 10%. Which product should you invest today?
What is the present value of product A?
What is the present value of product B?
Which product is more valuable today, A or B? - CORRECT ANSWER (S) -A) FV:
120,000 N: 5 x 4 (Quarterly) = 20
I/Y: 10%/4 = 2.5 PMT: 0
PV: 73232
B) N: 5 x 4 = 20 PMT: 5000
I/Y: 10%/4 = 2.5 FV: N/A
,PV: 77,945.81
Accelerate 77945.81 x 1.025 = 79894
There are two financial products. A will offer $100,000 in five years. B will offer
$1,500 every month from now for five years.
Product A is (single or multiple) cash flow(s)? $100,000 is (present or future)
value?
Product B is (single or multiple) cash flow(s)? How many cash flow(s) in total? -
CORRECT ANSWER (S) -Product A is single
$100,000 is (present or future) value? future
Product B is multiple
How many cash flow(s) in total? 60
Assume APR = 10%, fill the following table where m is compounding frequency
and compute EAR (4 digits after decimal NOT %, e.g., 0.12367 -> 0.1234)
,Annual compounding
m=1
EAR = APR = 0.1000 - CORRECT ANSWER (S) -Effective annual rate = (1 + r/m)^m −
1
Semi-annual compounding
m=2
EAR = (1+ .1÷ 2)^2 - 1 = .1025
Quarterly compounding
m=4
EAR = (1+ .1÷4)^4 - 1 = .1038
Monthly compounding
m = 12
EAR = (1+ .1÷12)^12 - 1 = .1047
Daily compounding
m = 365
EAR = (1+ .1÷365)^365 - 1 = .1052
, Continuous compounding
m=∞
EAR = =e^. 1 -1 = .1052
1. You buy a CD (certificate of deposit) with $10,000 today. Interest rate is 8%,
compounding monthly. How much you can get in two years? (keep the integer,
135.67 => 135);
2. You buy a CD with $10,000 today. Interest rate is 8%, compounding annually.
How much you can get in two years? (keep the integer, 135.67 => 135)
3. You are saving money to buy a CD with $10,000 in 6 months. Interest rate is 8%,
compounding monthly. You already have $7,000. How much more you still need
for now? (keep the integer, 135.67 => 135) - CORRECT ANSWER (S) -1) Compound
= Monthly = 12
Present Value = pv = $10,000
Interest Rate = r = = .666667%
Time = t = 2 (2 years) * 12 (monthly) = 24
FV = pv x (1xr)^2
