Daayata Department Store wishes to discount two notes receivable arising from the sale of merchandise in order to meet some maturing obligations. Both notes have a face amount of P50,000 each and are due in one year. Note A is a non-interest bearing note while Note B is to be paid with an interest of 12%. The bank rate in discounting the notes is 12%. Assuming that the notes were discounted ten months prior to maturity, the total proceeds from both notes discounted is:
Risk and return
Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary.
Capital Asset Pricing Model
Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.
Problem 28
Daayata Department Store wishes to discount two notes receivable arising from the sale of merchandise in order to meet some maturing obligations. Both notes have a face amount of P50,000 each and are due in one year. Note A is a non-interest bearing note while Note B is to be paid with an interest of 12%. The bank rate in discounting the notes is 12%.
- Assuming that the notes were discounted ten months prior to maturity, the total proceeds from both notes discounted is:
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
