FIN 300 Exam 1 Homestretch Review Checklist(3).pdf - FIN...

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FIN 300 – Exam 1 – “Homestretch” Checklist Here is a list of problem types and issues that you might see – by the way, this is nothing new relative to what we have talked about in class (or the topics and types of calculations presented in my lecture slides) – it’s just a recap Time Value of Money – Ch.’s 5&6 o Lump Sum Formula Problems – formula on formula sheet or use financial calculator Solve for FV (compound interest) Solve for PV (discounted) Solve for i (solve for rate of return or change) For example, for change in home price or change in some number such as sales for a company Solve for N (how long it takes in periods for a given change or growth to take place) Be sure and read test problem – if it asks for years, for example, don’t forget to convert to number of years – don’t forget that the “i” and the “n” have to match – correspond to the same period Know how to do lump-sum problems, if the compounding is not annual – for example, semi-annual, quarterly, monthly, etc. o Know how to calculate the APR vs EAR – formula on sheet or use financial calculator If you are comparing 2 or more investment opportunities, you always want the higher effective rate (use EAR as a comparison - not APR) If you are comparing loan rates (when you are borrowing money), you obviously want the lower effective rate o Perpetuity – the “C/i” formula is not given explicitly on the formula sheet – you will have to know it, but it’s simple – also, the “C/i” shows up in the annuity formulas on formula sheet – may jog your memory You will not see any “delayed” perpetuities on exam o Multiple lump-sums

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