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FINANCIAL STATEMENT MODELING RETAKE ACTUAL
EXAM FROM WALL STREET PREP ALL QUESTIONS AND
CORRECT ANSWERS GRADED A+ 2026/ WSP FINANCIAL
STATEMENT MODELING RETAKE EXAM LATEST VERSION
2026 (NEW!!)
The 3 equivalent ways of calculating the present value of a single cash
flow are: ......ANSWER......1. PV formula
2. PV function
3. PV timeline
The effect of future value of a single cash flow when you increase the
PV ......ANSWER......an increase in the FV
The effect of future value when you increase the discount rate
......ANSWER......an increase in FV
The effect of future value when you increase the number of periods
......ANSWER......an increase in the FV
Fully explain the formula used for calculating the FV of each cash flow
......ANSWER......Each cash flow is compounded at the Discount Rate
for the remaining periods
pg. 1
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What is the name of the term that the Present Value is divided by to
get the Payment. Why does this formula give the Payment amount?
......ANSWER......Present Value Interest Factor of Annuity. APV = PMT X
PVIFA. So, dividing by the Present Value Interest Factor undo's the
product, and gives you the PMT.
Show the formula for calculating the Annuity Present Value using the
Annuity Future Value, Discount Rate, and # of Periods in Excel
Notation ......ANSWER......APV = AFV/(1+r)^t
State the effect of increasing the payment amount on the APV and
AFV ......ANSWER......APV = increase in FV
AFV = increase in FV
Can the constant discount rate method be used to calculate NPV in the
general case where the discount rate changes over time? Why/Why
not? ......ANSWER......No, because the NPV function & constant
discount formula only allow for one constant discount rate.
Fully explain the NPV function used to calculate the NPV in cell b21
......ANSWER......The NPV function in Excel assumes that Year 0 cash
flow occurs at the end of the year instead of the beginning, so you add
it to the NPV of the remaining years using the NPV function. The NPV
function takes the cash flows from each year, discounts it by the
nominal discount rate (which is found by compounding the inflation
rate & the real discount rate) and summing them up (including the
initial investment)
pg. 2
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Is the NPV of the project shown acceptable for investment? Why/Why
not ......ANSWER......A project is acceptable if the NPV is positive
If we add the inflation rate and the real discount rate to get the
nominal discount rate, how will it be different from the formula in b9?
......ANSWER......It won't give us the effect/measurement of the
increase in the real discount rate due to inflation
Why is the coupon bond yield to maturity close to, but not exactly
equal to, the yield to maturity of the four-year treasury strip?
......ANSWER......Because the yield of the coupon bond is a weighted
average of the yields for each of the 8 periods. The biggest cash flow is
on the maturity date, and the biggest weight in the weighted average
is on that date. So, it's closest to the yield at the maturity date. But
now the same.
State whether the EAR convention results in a higher or lower bond
price than the APR convention in and give the reason for this.
......ANSWER......higher bond price because it is a lower discount rate,
which from the laws of discounting cash flows results in a higher bond
price.
State and explain the differences between the curvatures of the yield
to maturity curve and the forward rate curve.
......ANSWER......Forward rates curve is not smooth, whereas the Yield
pg. 3
FINANCIAL STATEMENT MODELING RETAKE ACTUAL
EXAM FROM WALL STREET PREP ALL QUESTIONS AND
CORRECT ANSWERS GRADED A+ 2026/ WSP FINANCIAL
STATEMENT MODELING RETAKE EXAM LATEST VERSION
2026 (NEW!!)
The 3 equivalent ways of calculating the present value of a single cash
flow are: ......ANSWER......1. PV formula
2. PV function
3. PV timeline
The effect of future value of a single cash flow when you increase the
PV ......ANSWER......an increase in the FV
The effect of future value when you increase the discount rate
......ANSWER......an increase in FV
The effect of future value when you increase the number of periods
......ANSWER......an increase in the FV
Fully explain the formula used for calculating the FV of each cash flow
......ANSWER......Each cash flow is compounded at the Discount Rate
for the remaining periods
pg. 1
,2|Page
What is the name of the term that the Present Value is divided by to
get the Payment. Why does this formula give the Payment amount?
......ANSWER......Present Value Interest Factor of Annuity. APV = PMT X
PVIFA. So, dividing by the Present Value Interest Factor undo's the
product, and gives you the PMT.
Show the formula for calculating the Annuity Present Value using the
Annuity Future Value, Discount Rate, and # of Periods in Excel
Notation ......ANSWER......APV = AFV/(1+r)^t
State the effect of increasing the payment amount on the APV and
AFV ......ANSWER......APV = increase in FV
AFV = increase in FV
Can the constant discount rate method be used to calculate NPV in the
general case where the discount rate changes over time? Why/Why
not? ......ANSWER......No, because the NPV function & constant
discount formula only allow for one constant discount rate.
Fully explain the NPV function used to calculate the NPV in cell b21
......ANSWER......The NPV function in Excel assumes that Year 0 cash
flow occurs at the end of the year instead of the beginning, so you add
it to the NPV of the remaining years using the NPV function. The NPV
function takes the cash flows from each year, discounts it by the
nominal discount rate (which is found by compounding the inflation
rate & the real discount rate) and summing them up (including the
initial investment)
pg. 2
, 3|Page
Is the NPV of the project shown acceptable for investment? Why/Why
not ......ANSWER......A project is acceptable if the NPV is positive
If we add the inflation rate and the real discount rate to get the
nominal discount rate, how will it be different from the formula in b9?
......ANSWER......It won't give us the effect/measurement of the
increase in the real discount rate due to inflation
Why is the coupon bond yield to maturity close to, but not exactly
equal to, the yield to maturity of the four-year treasury strip?
......ANSWER......Because the yield of the coupon bond is a weighted
average of the yields for each of the 8 periods. The biggest cash flow is
on the maturity date, and the biggest weight in the weighted average
is on that date. So, it's closest to the yield at the maturity date. But
now the same.
State whether the EAR convention results in a higher or lower bond
price than the APR convention in and give the reason for this.
......ANSWER......higher bond price because it is a lower discount rate,
which from the laws of discounting cash flows results in a higher bond
price.
State and explain the differences between the curvatures of the yield
to maturity curve and the forward rate curve.
......ANSWER......Forward rates curve is not smooth, whereas the Yield
pg. 3
