Interest And Loan

Question 1

borrowing money from lenders and not giving up ownership.

Answer 1

Debt Financing

Question 2

the method of raising capital by selling company stock to investors (stockholders) in exchange of ownership interests in the company.

Answer 2

Equity Financing

Question 3

usually offered to firms that don’t qualify for a line of credit, generally runs less than a year, though it can also refer to a loan of up to 18 months or so

Answer 3

Short term Loan

Question 4

runs for three to 25 years, uses company assets as collateral, and requires monthly or quarterly payments from profits or cash flow.

Answer 4

Long Term Loan

Question 5

may also provide financial services such as wealth management, currency exchange, and safe deposit

Answer 5

Bank

Question 6

financial institution licensed to receive deposits and make loans.

Answer 6

Bank

Question 7

financial institution that does not have a full banking license and cannot accept deposits from the public.

Answer 7

Nonbank Financial Institution

Question 8

the willingness of the borrower to repay the loan

Answer 8

Character

Question 9

security pledged for payment of the loan

Answer 9

Collateral

Question 10

a customer’s ability to generate cash flows

Answer 10

Capacity

Question 11

current economic or business conditions

Answer 11

Condition

Question 12

a customer’s financial resources

Answer 12

Capital

Question 13

5 C’s Credit

Answer 13

Character
Capacity
Collateral
Capital
Condition

Question 14

It is the value of a current asset at a future date based on an assumed rate of growth.

Answer 14

Future Value

Question 15

the amount to which an investment will grow after earning interest.

Answer 15

Future Value

Question 16

a single cash outflow is made and the total receipts will be at a single future date.

Answer 16

Single Amount (Lump Sum)

Question 17

unequal periodic cash flows that reflect no particular pattern.

Answer 17

Mixed Stream

Question 18

periodic stream of equal cash flow at equal time intervals (monthly. Quarterly, semi-annually and annually).

Answer 18

Annuity

Question 19

is a stream of equal periodic cash flows over a specified period.

Answer 19

Annuity

Question 20

is the amount you have to invest today if you want to have a certain amount of cash flow in the future.

Answer 20

Present Value

Question 21

Future Value (Lump Sum) Formula

Answer 21

FV = PV × (1 + R)^t

Question 22

Present Value (Lump Sum)

Answer 22

PV= FV / (1+r)^t

Question 23

Future Value Annuity

Answer 23

FVA = A × { (1+r)^t - 1 / r}

Question 24

refers to the reduction of a debt over time by paying the same amount each period, usually monthly.

Answer 24

Amortization