WorksheetsBusiness Finance Q2 Reviewer
Total questions: 50
Worksheet time: 37mins
What characterizes an amortized loan?
Payments are only applied to the loan's principal amount.
Payments are applied only to the interest accrued.
Scheduled, periodic payments are applied to both the loan's principal amount and the interest accrued.
Amortized loans do not include auto loans, home loans, or personal loans.
How is the interest calculated on an amortized loan?
The interest is fixed, without any important change and does not move over time.
The interest is calculated based on the most recent ending balance of the loan.
The interest is calculated based on the original loan amount.
The interest is calculated independently of the principal amount.
What type of amortization involves a fixed principal payment, and the interest expense is adjusted based on the declining principal balance?
Interest-only repayment
Equal principal repayment
Equal Installment Payments
Present Value of Annuity
It is a series of equal payments made at regular intervals.
Interest-only repayment
Equal principal repayment
Equal Installment Payments
Present Value of Annuity
It is the process of evaluating and selecting long-term investments that are consistent with the firm’s goal of maximizing owner’s wealth.
Which of the following is an examples of capital expenditure or long-term investments?
These are projects which serve the same function and therefore compete with one another.
Complementary Projects
Mutually Exclusive Projects
Independent Investment Projects
Synergistic Projects
Instead of investing in all projects with potential profitability, a company might have to prioritize and distribute its capital to focus on projects that yield the highest return on investment.
Unlimited Funds
Ranking Approach
Capital Rationing
What is the significance of the "Implementation" step in the capital budgeting process?
to generate a list of potential investments
to evaluate and analyze project proposal
to allocate resources and initiate the selected projects
to monitor, assess and review the performance of implemented projects
It is a capital budgeting technique that measures the amount of time, usually in years, to recover the initial investment.
Internal Rate of Return
Sakura Haruno Ltd. is evaluating a project with the following cash flow data. What is the payback period for the project?
Which statement about Net Present Value (NPV) is NOT true?
NPV represents the difference between cash inflows and outflows over a specific period.
A positive NPV indicates a favorable project, generating more cash than the initial investment.
If NPV is negative, the investment is generally considered attractive.
NPV is calculated using the discount rate, representing the opportunity cost of capital.
Kakashi Hatake is considering a project with the following cash flows and cost of capital (r) data. If r = 7.50%, what is the project’s NPV?
Php110,112
Php180,933
Php227,681
Php320,847
What is the present value of cash inflow on year 2 if the discount rate is 7% per year?
₱7,736
₱10,680
₱10,481
₱20,000
As a financial manager, what decision would you make regarding this project proposal, considering its Net Present Value (NPV) at a discount rate of 9% and utilizing a Present Value Annuity (PVA) factor of 1.75911?
NPV is equals to Php1,854.24; accepted
NPV is equals to Php1,854.24; rejected
NPV is equals to negative Php1,854.24; rejected
NPV is equals to negative Php1,854.24; accepted
It represents the rate at which the present value of expected cash inflows equals the initial investment cost, resulting in a Net Present Value (NPV) of zero.
Which of the following statements is not true about Internal Rate of Return (IRR)?
A higher IRR indicates a more attractive investment opportunity.
IRR assumes that cash inflows can be precisely predicted.
Present value of cash inflow is equals to present value of cash outflow
Refers to a broad category of assets or tools that are not explicitly related to financial markets or monetary transactions.
It is a financial instrument representing a debt security, wherein an investor lends money to a borrower, usually a government or a corporation.
It is a contract that provides financial assets to one party and at the same time, entails financial liabilities or equity to another.
Shareholder's agreement
Futures contract
Lease agreement
Financial instrument
Which of the following is not an example of financial instrument?
Common stock in a publicly traded company
Government-issued identification card
Corporate bond
Certificate of deposit (CD)
Which of the following statements is not true about investment?
Stocks represent ownership in a company and may provide dividends.
Real estate is a financial instrument and can directly be traded in the financial market.
Bonds are considered a form of debt where investors lend money to the issuer.
Mutual funds pool money from multiple investors to invest in a diversified portfolio of stocks and bonds.
When the real rate of return is combined with the inflation premium, the result is?
Risk-Free Rate
Risk Premium
Nominal Rate
Effective Interest Rate
What is the effective interest rate if the average real rate of return is determined at 2.80%. The inflation premium or expectation is determined at 3.40%, and the risk premium covering both business risk and financial risk is set at 4%.
4.60%
6.20%
7.40%
10.20%
What is the risk-free rate if the average real rate of return is determined at 2.80%. The inflation premium or expectation is determined at 3.40%, and the risk premium covering both business risk and financial risk is set at 4%.
4.60%
6.20%
7.40%
10.20%
Project Lingon requires an initial outlay of ₱79,000.00 and is expected to receive ₱21,000.00 annually for the next 5 years.
3.76 years
2.66 years
1.33 years
2.79 years
What is type of bond is issued in this example: ₱1 million bond issue with a maturity date 10 years from now. All ₱1 million in principal is due on that date.
Serial bond
Term Bond
What type of bond is issued in this scenario: A ₱1.5 million bond issue with a maturity date set 10 years from now. However, the issuer retains the option to “redeem” the bonds before maturity if needed.
Term Bond
Serial Bond
Callable Bond
Convertible Bond
A type of bond that gives the bondholder the option to convert their bonds into a predetermined number of common shares at any time before maturity.
Term Bond
Serial Bond
Callable Bond
Convertible Bond
What classification of bond is being issued in this case? It entails a ₱3 million bond issuance with a definite maturity date of 15 years, requiring repayment of the entire ₱3 million principal on that specified date.
Term Bond
Serial Bond
Callable Bond
Convertible Bond
Bonds that have series of maturity dates.
Serial bonds
It refers to the value that appears on the face of the bonds.
It is known as yield to maturity or market rate of interest, is the true or actual rate of interest that investors earn from the investment in bonds.
effective interest rate
Nominal rate
Bingo Mariano purchased ₱400,000 worth of bonds on January 5, 2019, with a 10% interest rate paid quarterly. The bonds have a lifespan of five years. What is the amount of cash inflow every interest payment date.
Php10,000
Php50,000
Php100,000
Php500,000
Bingo Marino purchased ₱1,000,000 worth of bonds on January 5, 2019, with an interest of 12% per year. Interest payment is monthly. The bonds have a lifespan of five years. What is the amount of cash inflow every interest payment date.
Php10,000
Php50,000
Php100,000
Php500,000
It is the stated or declared rate of interest printed on a bond.
Nominal rate
Bond Market Price is equals to present value of the Principal amount and the ______?
present value of the amount in the face of the bond
present value of all future cash flows from interest
present value of annuity of ₱1
present value of annual repayment
It appears when the nominal rate is lower than its effective interest rate.
Bond Premium
Discount on Bond
Par Value
Yield to maturity
It appears when the market price is lower than its face value.
Bond Premium
Discount on Bond
Par Value
Yield to maturity
It appears when the face value of the bond is lower than the market price.
Bond Premium
Discount on Bond
Par Value
Yield to maturity
It appears when the effective interest rate is lower than the nominal rate.
Bond Premium
Discount on Bond
Par Value
Yield to maturity
Face value of a bond is ₱1,000,000; bond premium is ₱185,000; How much is the market price?
₱815,000
₱935,000
₱1,085,000
₱1,185,000
Face value of a bond is ₱1,000,000; discount on bond is ₱185,000; How much is the market price?
₱815,000
₱935,000
₱1,085,000
₱1,185,000
How much is the amount of annuity in this bond?
₱105,000
₱120,000
₱210,000
₱350,000
How much is the amount of annuity in this bond?
₱105,000
₱120,000
₱210,000
₱350,000
It is a share of stock that provides the holder some rights or privileges over the ordinary shareholders.
Common stocks
Preferred stocks
Blue-chip stocks
Growth stocks
What is the IRR in this presentation?
2.68%
3.48%
10.75%
11.32%
We may consider buying undervalued stocks when:
The market is in a state of uncertainty, and there is high degree of changes.
Economic indicators point to a potential recession.
the company of undervalued stocks has strong financial statements including earnings.
people generally feeling negative about the market.
When stocks are initially issued to incorporators, their valuation is determined by:
The prevailing market demand and supply conditions.
The face value determined by regulatory authorities.
The par value designated by the company.
The future expected earnings of the company.
The stock has a face value of P2,000,000, and its market value is P2,320,000. What is the premium or discount amount on the bond?
P320,000 - Premium
P320,000 - Discount
Negative P320,000 - Premium
Negative P320,000 - Discount
