If a loan is being repaid by n installments of R per time period
the principal contained in successive installments increases. The interest contained in successive installments decreases. The total of the interest content and the principal content for any installment is constant. The total of the entries in the interest column is nR-L
A loan is being repaid by equal monthly instalments of n/r years at r% p.a. flat
The monthly installment will be greater than that for a loan with interest at j12= r%. The effective annual rate of interest is approximately 2r%. The total of the interest payments in the first year of the loan repayment.
A negative NPV indicates that a project should not proceed. When calculating NPV's to compare two alternative projects.
the internal rate of return that produces a zero NPV. Multiple solutions are sometimes possible.
Capitalized cost equals the sum of
original cost: the present value of a perpetuity to replace: the present value of a perpetuity to maintain.
Relationships between bonds and yields
If redemption is at par then bond interest rate equals required yield and the price of the bond immediately after an interest payment will always equal the bond's face value. if no allowance is made for taxation, growth interest payments are valued. Must use simple interest rather than compound interest for a fraction of the interest period that has elapsed since the last interest payment. Will result in a slightly higher price.
in formula 11 the focal date is one time unit before the first payment. in formula 10 the focal date is at the time of the last payment.
The priority of payment from long-term corporate financial instruments from highest to lowest
Corporate bonds, preference shares, and ordinary shares.
managing sources of funds to meet loan demand
Capital Adequacy Requirements require banks to hold a minimum level of
For superannuation investment options, the level of investment risk ranked from lowest to highest is
capital stable fund, balanced growth fund, managed growth fund.
In Australia, most unit trusts are . . and most property trusts are . . .
unit trusts are unlisted and property trusts are listed.
An offer of additional shares to selected institutional investors.
The acceptor of a bill of exchange does what
undertakes to repay the holder of the bill at maturity.
A pricing deferential for a financial instrument between the physical market and the futures market.
The break-even on a call option
the exercise price plus the cost of the initial premium
When a company enters into a futures contract, the company is required to pay the clearing house.
As the quote increases . .
The yield decreases and the price increases.
Sydney Futures Exchange is an example of
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