Financial Analysis Flashcards
7 cards from real CAC practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Financial Analysis flashcards as text
What is the present value of $1,100 received one year from now at a 10% discount rate?
Answer: $1,000
PV = $1,100 / 1.10 = $1,000.
Why might a lender that buys installment contracts discount the expected future collections to present value?
Answer: To estimate what the contracts are worth today and price the advance correctly
Discounting expected cash flows shows today's economic value of uncertain future collections, which supports pricing.
Which disclosure does the Truth in Lending Act (Regulation Z) require on a retail installment contract?
Answer: The annual percentage rate (APR) and finance charge
TILA requires a clear disclosure of the APR, finance charge, amount financed, and total of payments.
A borrower's financed amount is $18,000 and the total of payments is $24,600. What is the finance charge?
Answer: $6,600
Finance charge = total of payments minus amount financed = $24,600 - $18,000 = $6,600.
Which factor most directly increases loss severity on a repossessed vehicle?
Answer: A high LTV at origination with fast depreciation
High LTV combined with depreciation leaves a large gap between the balance and the auction proceeds.
A portfolio has a 20% probability of default and a 50% loss given default. What is the expected loss rate?
Answer: 10%
Expected loss = PD x LGD = 0.20 x 0.50 = 10% (with exposure at default treated as 100%).
What does the 30+ day delinquency rate of an auto receivables portfolio measure?
Answer: The share of receivables with payments 30 or more days past due
It is the balance of accounts 30+ days past due divided by total receivables, and it is an early warning of losses.