What is the difference between simple and compound interest? Give examples.

Q: Define the term internal rate of return?

A: The internal rate of return (IRR) is a capital budgeting metric used to gauge the benefit of…

Q: fferent ty

A: Define interest. In finance, or economics interest can be defined as the payment of a proportion…

Q: Compare simple interest to compound interest.

A: Answer: Simple interest: This is the fundamental type of interest in which interest is paid on the…

Q: Explain The Need for an External Interest Rate?

A: There is a strong need for the external interest rate because it helps in making financial…

Q: What is the basis for the discount rate in a DCF analysis? Describe how this rate mightbe estimated.

A: Basis of discount rate in DCF analysis is to compute the PVF of future Cash Flows expected as it is…

Q: Write the methods of Calculating Interest?

A: Methods of calculating interest: The basic and fundamental methods for calculating interests are…

Q: What is interest rate?

A: Answer: At a particular situation, an interest rate determines how much money a borrower promises to…

Q: Define Interest Capitalization.

A: Interest Expense: The cost of debt which is incurred during a particular accounting period is called…

Q: What is the concept of present value? What is discounting?

A: Present value means value of future cash flows in todays terms.

Q: Please explain the difference between the terms interest rate and required return by defining each.

A: The amount which is charged by the lender to the borrower in order the use assets is known as the…

Q: What is realized real interest rates? Give example.

A: realized real interest rate  = nominal interest rate - actual inflation rate realized real interest…

Q: What are the advantages of using duration as opposed to interest-sensitive gap analysis?

A: Asset liability management is a technique used to address the risks that financial institutions face…

Q: What is risks and interest rate

A: Risks and interest rate are tied together in case of fixed income instruments like bonds.

Q: Briefly explain the following a. Relation between present value and interest rate

A: Present value = Applying time value to the future cash flows using interest rates Present Value =…

Q: What is collateral? Give an a example.

A: Consumer Loans: This type of loan are user by common people to finance their personal expenditure or…

Q: Explain how the concept of comparable risk is incorporated into the discount rate.

A: The concept of comparable risk is fundamental to determining the appropriate discount rate to use…

Q: Define Interest cost.

A: Cost: The amount paid to purchase the asset, install it, and put it into operations, is referred to…

Q: Explain the term Collateral.

A: Assets refer to those resources which have some economic value held by a corporation, individual or…

Q: clearly distinguish between norminal interest rate and effective interest rate

A: The term interest rate can be defined as the fixed income received on the investment. . There are…

Q: hat are the factors being considered in computing for the simple Interest?  State the simple…

A: The simple interest is an interest that is paid on the principal amount over the period. The simple…

Q: Give some examples of an insurable interest and explain why they are insurable.

A: Introduction: Insurable interest is nothing but an interest in the subject of an insurance policy…

Q: What is net interest margin(NİM)?

A: There are various profitability ratios

Q: explain the term force of interest as used in interest theory.

A: interest : it is the compensation that the borrower of the capital pays to the lender for use of it.

Q: What are the implications of interest rate parity theorem.

A: Interest rate Parity:- The interest rate parity (IRP) theory states that the difference between the…

Q: Explain how compound interest differs from simple interest.

A: Interest is the amount of money that a financial institution or money lender receives for lending…

Q: What do we mean by covered interest arbitrage parity? Explain in detail by a diagram.

A: Covered interest arbitrage: It is relationship between forward premium and interest rates. If…

Q: Distinguish between the initial rate of interest and the expected yield on an ARM. What is the…

A: Introduction: The adjustable rate mortgage is one of the method used to calculate the interest rate…

Q: What is present value interest factor?

A: The present value interest factor is a mathematical equation used to estimate today's value of money…

Q: What is a functional currency? What is the Intercst Coverage (Times Intcrest Earned) Ratio?

A:

Q: What is the internal rate of return? How is it used? How does it relate to the concept of compound…

A: The internal rate of return (IRR) is a capital budgeting metric used to gauge the benefit of…

Q: Explain Property Type Swap?

A: Answer: Swap alludes to exchange with another between the parties involved in one monetary…

Q: Define the term Rate of Return?

A: Rate of Return:It means the benefit that is derived from the investment, benefit may be in terms of…

Q: Why there is a difference between the interest rate and the APR

A: Interest rates and APR are two phrases that are sometimes used interchangeably to refer to…

Q: What is the clearing price for the following Treasury Auction, in which the US Treasury wants to…

A: Treasury bills, or T-bills, are short-term debt instruments issued by governments, with the U.S.…

Q: How is the PW analysis dependent on the rate of interest used for the PW computation?

A: Net present value (or) PW analysis is one of the capital budgeting techniques. When a company is…

Q: Illustrate the methods of calculating Interest?

A: Traditionally, there are two methods of calculating interest : 1. Simple interest rate method 2.…

Cost of Credit

The cost of credit is an extra amount that the borrower has to pay besides the loan amount. These credit charges may vary from loan to loan. The cost of credit includes interest charges, maintenance charges, and arrangement charges. Some of the costs are mandatorily collected by the lender based on the loan amount and tenure of the loan. The cost of credit is also called finance charges of the credit.