FIN 550 Milestone 4

QUESTION 7 First National Bank has assets that are more rate-sensitive than its liabilities.  As interest rates rise, then we should expect the bank profits to:   A. Remain unchanged   B. Fall   C. Rise

QUESTION 1 The following is true for banks managing interest rate risk:     In refinancing risk, banks gain if interest rates decrease       In refinancing risk, banks gain if interest rates increase       In reinvestment risk, banks lose if interest rate increase       In reinvestment risk, banks gain if interest rate decrease

3. Future value The principal of the time value of money is probably the single most important concept in financial management. One of the most frequently encountered applications involves the calculation of a future value. The process for converting present values into future values is called four time-value-of-money variables. Which of the following is not one of these variables? The trend between the present and future values of an investment The duration of the deposit (N) The interest rate (t) that could be earned by deposited funds The present value (PV) of the amount deposited This process requires knowledge of the values of three of 4

5

Question 1

QUESTION 14 Relative to cash flows affecting net working capital, all of the following are true EXCEPT ... cash outlays for current liabilities are relatively predictable. cash inflows are generally more predictable than cash outlays. the more predictable the cash inflows, the less net-working capital a firm needs. since most firms cannot match cash inflows and outflows with certainty, current assets that more than cover outflows of current liabilities are necessary.

Question 18 The pecking order states that firms should: issue debt first. issue new equity first. always issue debt then the market won't know when management thinks the security is overvalued. use internal financing first.

GE MINDTAP Q Search this course jian 1 naining: 1:57:34 Save Is Which of the following statements is CORRECT, other things held constant? O a. If expected inflation increases, interest rates are likely to increase. O b. Interest rates on all debt securities tend to rise during recessions because recessions increase the possibility of bankruptcy, hence the riskiness of all debt securities. O c. If companies have fewer good investment opportunities, interest rates are likely to increase. O d. Interest rates on long-term bonds are more volatile than rates on short-term debt securities like T-bills. O e. If individuals increase their savings rate, interest rates are likely to increase. e here to search IN

2. Future value The principal of the time value of money is probably the single most important concept in financial management. One of the most frequently encountered applications involves the calculation of a future value. The process for converting present values into future values is called    . This process requires knowledge of the values of three of four time-value-of-money variables. Which of the following is not one of these variables? The interest rate (I) that could be earned by deposited funds   The trend between the present and future values of an investment   The duration of the deposit (N)   The present value (PV) of the amount deposited     All other things being equal, the numerical difference between a present and a future value corresponds to the amount of interest earned during the deposit or investment period. Each line on the following graph corresponds to an interest rate: 0%, 9%, or 17%. Identify the interest rate that corresponds…

LO 1 8.3 Payback Period Concerning payback: Describe how the payback period is calculated and describe the information this measure provides about a sequence of cash flows. What is the payback criterion decision rule? a. b. What are the problems associated with using the payback period as a means of evaluating cash flows? What are the advantages of using the payback period to evaluate cash flows? Are there any circumstances under which using payback might be appropriate? Explain. с.

Question 22 of 30: facility is considered mainly for businesses and trading to fill the in working capital requirements. O Overdraft Bill finance Cash credit Demand loan