13. In cash flow estimation and risk analysis, real rate will be equal to nominal rate if there is A. no inflation B. high inflation C. no transactions D. no acceleration
Q: If there is inflation how does this affect LIFO reserves? Does it increase or decrease it?
A: LIFO Last-in-first out is a method used to issue material. It is a method of pricing the issues of…
Q: Nominal Risk-Free Rate (NRFR) , considers the conditions in the capital market and Expected rate of…
A: The Nominal Risk-Free Rate (NRFR) is the theoretical rate of return on an investment that carries no…
Q: ternal rate of return (IRR) and net presetn value (NPV): -Generally arrive at the same…
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A: Options given in the question:A.) A flat yield curve occurs when the yield-to-maturity is virtually…
Q: Assuming that we are not able to accurately predict cash flows , generally decreased risk is thought…
A: Cash flow at risk at risk tells us how changes in market factors can change the future cash flows.…
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A: The Money supply and demand of money is affected by reserve requirement of bank which are placed by…
Q: If you disounted a set of positive real cash flows with a nominal discount rate and inflation were…
A: Justification:Suppose the positive cash flows are discounted with the inflation rate, which is…
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A: The questions are related to Capital Budgeting. The Accounting rate of return is traditional…
Q: Why is the predictability of cash flow so important?
A: Cashflow is defined as the movement of cash into and outside the business in order to facilitate the…
Q: Which of the following statements is correct? The NPV method assumes that cash flows will be…
A: Solution:- Net Present Value (NPV) means the net of the present value of cash inflows and initial…
Q: If the inflation rate is positive, the expected NPV of an investment will be: A.understated if real…
A: The nominal discount rate will be reflection of the combination of real interest rate and the rate…
Q: Which of the following is NOT true? In risk-neutral valuation the risk-free rate is used to discount…
A: Risk-neutral valuation produces a valuation that is correct in all situations not just those where…
Q: Which of the following is not true with Money Market? Select one: a. Deals in short term funds b.…
A: Money market is a market wherein short term instruments are traded and only those investors who are…
Q: cash flow frequ ot the same, one W oved: the period
A: Period interest rate approach : In simple words, the period interest rate approach refers to the…
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A: Financial ratios are an important concept in the world of finance. We use financial ratios like…
Q: Reinvest risk is lowest during a period of low-interest rates. Is this true or false? Explain.
A: Reinvestment Risk is the risk that an investor will not be able to reinvest the income received on…
Q: 26. Real interest rate and real cash flows do not include A. equity effects B. debt effects C.…
A: Interest rate refers to the rate at which one party agrees to lend and the other party agrees to…
Q: Instruction: For each statement, begin by answering whether the statement is true or false. If you…
A: Since you have posted the question with multiple sub-parts, we will solve the three first three…
Q: Payback method is Select one: a. None of the options b. Yield on investment c. PV of cash inflow- PV…
A: Payback method is one of the capital budgeting technique which helps in evaluating profitability of…
Q: 13. Securities with less predictable prices and have longer maturity time is considered as _____. A.…
A: Securities refer to the capital market instruments that facilitate the flow of money in the market…
Q: Relying solely on using a traditional spot cash market is a relatively high risk means to pricing a…
A: Traditional spot cash means future traded in the same exchange and same date. Pricing a commodity…
Q: Duration is a measure of interest rates risk. Select one: True False
A: The factors that can impact the bond duration are the time to maturity and the coupon rates. Longer…
Q: echnical problems associated with the internal rate of return include:
A: IRR (Internal Rate of Return): It is the rate of return that makes the net present value of the…
Q: Question 2 Which one of the following methods of analysis could completely ignore some cash flows?…
A: Capital Budgeting involves various techniques which are used to evaluate different proposals to make…
Q: When adjusting for inflation, there are two methods. The real- rate method where the discount rate…
A: The real rate method involves adjusting the discount rate or interest rate to account for inflation.…
Q: FINANCIAL RISK MANAGEMENT 1. Duration is a measure of interest rates risk. (True/ False) 2. Bond…
A: The answers and explanations are provided below:
Q: An increase in the riskiness of financial securities results in a_______ in the supply of loanable…
A: The riskiness of financial securities or financial risk is defined as the threat of losing the money…
Q: The only time you change the original cash flow diagram in problems involving uniform series cash…
A: Cash flow diagrams are defined as business tools that are used to represent the cash flows that is…
Q: Explain your answer assuming that all variables are constant except for the one mentioned:
A: Capital budgeting is a method used for finding the profitability of investment proposals. This…
Q: All else equal, as market interest rates fall, the present value of a future cash flow. the…
A: Present value is the equivalent today based on time value of money of the future cash flow that is…
Q: Cash flows cannot be added together unless
A: The concept of time value of money states that value of money and hence value of cash flows changes…
Q: 31. An inverted yield curve: a. exists when short-term interest rates are higher than long-term…
A: The yield curve is a graphical representation of yields vs its maturities.
Q: Typically, short-term interest rates: А. are more volatile than long-term interest rates В. are less…
A: Short-term interest rates are usually averages of daily rates, calculated as a percentage. The…
Q: When borrowers tend to pay back the loans to bankers earlier, the bank is facing a. Repricing risk O…
A: Since, more than one different questions are posted, answer for the first question is only provided…
Q: As long as the inflation rate is positive, the nominal rate of return on a security will be the real…
A: Let the inflation rate = i Nominal rate = n Real rate = r
Q: Which of the following best explains an upward sloping Treasury yield curve? A. Maturity risk is…
A: Treasury yield curves represents the interest rate and maturity of treasury securities relationship…
Q: Which of the following statements are true assuming that all assets satisfy CAPM? a) Low-beta…
A: CAPM (Capital Asset Pricing Model) is a financial model used to determine expected return on an…
Q: 13. Consider the following two statements: Statement 1: If nominal cash flows are used in…
A: Concept. according to fischer effect , (1+Nominal rate) = (1+ real rate) ( 1+ inflation rate). Thus…
Q: Which of the following are problems in using net present value to appraise an investment? 1. The…
A: In evaluating the various investment proposals, one of the methods used is NPV method. In this…
Q: ding to the time value of money concept, also referred to as the present discounted value, is based…
A: Time value of concepts as the time period goes on due to the inflation goes on increasing and hence…
Q: Which of the statements about the Arbitrage Pricing Theory MUST BE TRUE. I. There is only one…
A: There are two models of security pricing where different risk factors are considered along with the…
Q: 59. Modified True or False T means Correct and F means Wrong Scenario: If you have a series of…
A: Cash flow is the inflow and outflow of cash in the business. It is real or virtual movement of money…
Q: An investment with a positive total cash flow will always outperform an investment that shows…
A: Positive Cash flows are the annual cash inflow that has been received to the organization on yearly…
Q: 1. Explain how liquidity risk can be a problem when there is a maturity mismatch between the long…
A: Liquidity risk is an important factor in investing as it can cause large losses if an investor is…
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- Present and Future Values of Single Cash Flows for Different Interest Rates Use both the TVM equations and a financial calculator to find the following values. (Hint: If you are using a financial calculator, you can enter the known values and then press the appropriate key to find the unknown variable. Then, without clearing the TVM register, you can "override" the variable that changes by simply entering a new value for it and then pressing the key for the unknown variable to obtain the second answer. This procedure can be used in parts b and d, and in many other situations, to see how changes in input variables affect the output variable.) Do not round intermediate calculations. Round your answers to the nearest cent. An initial $700 compounded for 10 years at 6%. $ An initial $700 compounded for 10 years at 12%. $ The present value of $700 due in 10 years at a 6% discount rate. $ The present value of $700 due in 10 years at a 12% discount rate. $NonePresent and Future Values of Single Cash Flows for Different Interest Rates Use both the TVM equations and a financial calculator to find the following values. (Hint: If you are using a financial calculator, you can enter the known values and then press the appropriate key to find the unknown variable. Then, without clearing the TVM register, you can "override" the variable that changes by simply entering a new value for it and then pressing the key for the unknown variable to obtain the second answer. This procedure can be used in parts b and d, and in many other situations, to see how changes in input variables affect the output variable.) Do not round intermediate calculations. Round your answers to the nearest cent. An initial $700 compounded for 10 years at 3%. $ An initial $700 compounded for 10 years at 6%. $ The present value of $700 due in 10 years at a 3% discount rate. $ The present value of $700 due in 10 years at a 6% discount rate. $
- Certainty Equivalent Cash flow (CEQ) is obtained through converting the expected cash flows by a ______ shift of risk. If we discount the CEQ by the time value of money, we will have the present value _______ discounting future cash flow by time and risk discounting factor. Therefore, CEQ is always ______ than the expected cash flow. Find the correct choice to fill the blanks. A. time varying, same as, lowerB. constant, same as, lower C. time varying, higher than, lowerD. constant, same as, higherThe Profitability Index (PI) is a financial metric that depends only on the Present Value (PV) of expected future cash inflows. This statement is: a False. b Only partly true. c True d Only partly false.Give typing answer with explanation and conclusion TRUE or FALSE?) The reinvestment risk of a bond happens when the market rates change, we will be reinvesting the cash flows at a different rate than what we expected.
- 9. Which one of the following is the advantage of payback period method? a. Does not consider time value of money b. Simple and easy to understand c. Ignores cash beyond payback period d. None of the optionsWhich of the following is true about Interest Rate? i. The Fisher Effect illustrates the positive relationship between inflation and nominal interest rates. ii. APR will always be greater than the EAR. iii. We can find the nominal interest rate by adding the default and maturity premiums to the sum of the real rate and inflation. O A. ii and i only O B. i and ii only OC. i only O D. i, ii, and iiiThe gradient amount in linear or geometric cash flow can be positive or negative value. Select one: True False
- How do you justify using a “constant dollar” cash flow analysis when inflation over the period covered in your “constant dollar” cash flow analysis is as good as guaranteed48) Find out the monetary asset from the following. a. Fixed Liabilities b. Current Liabilities c. Capital d. None of the Options19 Which of these is NOT a monetary policy tool?* A. Discount rate B. Open market operations C. Balance accounts D. Reserve requirements
