Financial Analyst introduction and prep Exam Questions with Correct Answers

Future Value Correct Answer The value of an invesment made today measured at a specific future date using compound interest. FVn = PV x (1+r)n Present Value: Correct Answer The value today of a cash flow to be received at a specific date in the future, assuming an opportunity to earn interest at a specified rate. TVM (Time value of money) Correct Answer Idea that money available at the present time is worth more than the identical sum in the future due to its potential earning capacity Rdebt Correct Answer Average debt rate (dividend discount model) Correct Answer DDM is a method of valuing a company's stock price based on the theory that its stock is worth the sum of all of its future dividend payments, discounted back to their present value. The equation most widely used is called the Gordon Growth Model ( GGM) e (r) : Expected return Correct Answer Calculated as the weighted average of the likely profits of the assets in the portfolio, weighted by the likely profits of each asset class. *Expected return is b no means a guaranteed rate of return. However, it can be used to forecast the future value of a portfolio, and it also provides a guide from which to measure actual returns