CLFP Chapter 4 - Pricing Latest Update 2025 Questions Fully Solved
Compounding interest - Answers $100 invested today so that it pays 8% interest per annum,
compounding annually, becomes $108 in one year. IF the $108 holds the 8% per annum for another year
it becomes $116.64. This is the process of _________ _________
Time Value of Money - Answers A dollar today is worth more than a dollar tomorrow, and money gained
in the future is worth less than money earned in the present
Discounting - Answers The inverse of compounding
PV of Money - Answers value of future dollars today
Yield - Answers cash flows
- rent
- residual
- tax benefits
= annual %
Implicit rate - Answers RENT + RESIDUAL = %
Running Rate or Stream Rate - Answers ANNUAL RENT %
Lease Rate or Lease Rate Factor - Answers MONTHLY PMT as % of EC
Discount rate - Answers INTEREST RATE discounting PMTS to the PV
Internal rate of return - Answers the interest rate PV cash flow = EC or LOAN
Points - Answers % of PROFIT that is "priced in"
basis point - Answers One-hundredth of 1, is usually used when discussion differences in interest rates
For example: if the cost of funds is 6 percent and the yield is 7.5 percent, then there is a 150-basis point
spread between the cost of funds and the yield
Term - Answers "N" The number of payments (number of months)
Rate - Answers "I" implicit rate
Present Value - Answers "PV" COST
Payments - Answers "PMT" Payments
Future Value - Answers "FV" Payments made at one time during the lease, usually the residual
Compounding interest - Answers $100 invested today so that it pays 8% interest per annum,
compounding annually, becomes $108 in one year. IF the $108 holds the 8% per annum for another year
it becomes $116.64. This is the process of _________ _________
Time Value of Money - Answers A dollar today is worth more than a dollar tomorrow, and money gained
in the future is worth less than money earned in the present
Discounting - Answers The inverse of compounding
PV of Money - Answers value of future dollars today
Yield - Answers cash flows
- rent
- residual
- tax benefits
= annual %
Implicit rate - Answers RENT + RESIDUAL = %
Running Rate or Stream Rate - Answers ANNUAL RENT %
Lease Rate or Lease Rate Factor - Answers MONTHLY PMT as % of EC
Discount rate - Answers INTEREST RATE discounting PMTS to the PV
Internal rate of return - Answers the interest rate PV cash flow = EC or LOAN
Points - Answers % of PROFIT that is "priced in"
basis point - Answers One-hundredth of 1, is usually used when discussion differences in interest rates
For example: if the cost of funds is 6 percent and the yield is 7.5 percent, then there is a 150-basis point
spread between the cost of funds and the yield
Term - Answers "N" The number of payments (number of months)
Rate - Answers "I" implicit rate
Present Value - Answers "PV" COST
Payments - Answers "PMT" Payments
Future Value - Answers "FV" Payments made at one time during the lease, usually the residual
