Which combination of investment policy and financing policy related to working capital provides the lowest risk but entails the lowest potential profits? O relaxed, conservative O restricted, conservative relaxed, aggressive O restricted, aggressive O O

Q: The ______________on capital is called Cost of capital Select one: a. Average expected return b.…

A: Return on capital is called as cost of capital. Return for investors on capital invested by them is…

Q: Which of the following are present value methods of analyzing capital investment proposals? a.…

A: The objective of the question is to identify the correct pair of present value methods used for…

Q: Why do come companies prefer to use discounting in their capital investment decisions?  What is a…

A: Capital Investment:-It is an investment that a company made to purchase its fixed assets or…

Q: Which two types of investment criteria are most frequently used by managers today? Multiple Choice O…

A: Net Present Value (NPV) is the difference between present value of cash inflows and present value of…

Q: Asset allocation is performed to A) reduce the load that intermediaries charge maximize the earning…

A: Asset Allocation means the process of allocating money across different financial assets (such as…

Q: 1. The payback criterion for capital investment decisions a. is conceptually superior to the IRR…

A: The payback criteria is that capital budgeting tool in which we consider the length of time that it…

Q: The desired rate of return on an investment should reflect the degree of risk involved. A.   True…

A: Riskier investments may give higher returns to the investors as they provide favorable ratio of risk…

Q: Ignoring differences in the useful lives of investments when evaluating ca

A: Capital expenditures are distinct from operating expenditures, which are day-to-day spending…

Q: This is a generalized framework for analyzing the relationship between risk and return: a. capital…

A: Risk refers to the uncertainty related to the investment within the future. Risk arises within the…

Q: Which of the following decision criteria is the easiest to use and very popular among investors?…

A: The capital budgeting process uses different methods to analyze the projects. Each method has…

Q: Discuss the advantages and disadvantages of using (a) payback, (b) net present value and (c )…

A: Payback Period: It refers to the period in which the project's or investment's initial cost is…

Q: Capital investment decisions often involve all of the following: qualitative factors or…

A: Solution Introduction Capital investment means investment in capital assets The capital assets are…

Q: Which one of the following could be considered as an advantage of using the payback method of…

A: Solution: Payback period represents that period where the initial cost of the investment gets…

Q: Defining capital investment terms Fill in each statement with the appropriate capital investment…

A:

Q: Methods that ignore the time value of money in capital investment appraisal include which of the…

A: Net present value – Net present value is the difference between present value of cash inflows of…

Q: Which of the following is not a method for incorporating risk analysis into capital budgeting?   a.…

A: Capital budgeting is a process of evaluating various investment proposals. The various capital…

Q: Which important function of management needs huge capital and have a long-term effect Select one: a.…

A: Management is an act or process of performing planning, organizing, staffing, directing, and…

Q: For a capital investment project to be acceptable, it must generate a rate of return: O Less than…

A: Company raises money from the market through debt and equity and each one has cost related to that…

Q: Profitable projects are difficult to find.    a. Efficient capital markets b. The curse of…

A: Profitable project are difficult to find just because of severe competition world wise, because in…

Q: According to Capital Asset Pricing theory (CAPM), in a competitive marketplace: Group of answer…

A: Capital Asset Pricing Model(CAPM) is an investment tool used to determine the fair valuation of…

Q: How do you call a strategy that separately examines capital market conditions and the investor's…

A: The strategy is called as “Integrated Asset Allocation Strategy”.

Q: Which of the following statements is TRUE about risk-free investment? a. Return in risk-free…

A: Risk free investment is an investment which gives low consistent returns and is a safe, secure…

Q: What are the likely effects of a policy in which a company fails to adjust for difference in risk…

A: The cost of capital is a critical financial concept for companies. It represents the return expected…

Q: The computations involved in the net present value method of analyzing capital investment proposals…

A: (I) NPV method of analyzing the capital investment is complex and involves more computations than…

Q: Why should the financial manager include opportunity cost but ignore sunk costs when evaluating a…

A: Capital investment is defined as an amount, which used to get invested in the corporation for…

Q: Payback period is one of the nondiscounting models used in capital investment decisions.  What are…

A: Payback period refers to the period in which the initial investment is recovered.

Q: Which of the following is TRUE about liquidity? a. All assets should be put in liquid asset so that…

A: The simplicity with which an asset, or security, might  be changed into immediate cash without…

Q: If the internal rate of return (IRR) is less than the cost of capital, then the investment is…

A: False If the internal rate of return (IRR) is less than the cost of capital, then the investment is…

Q: The Cost of capital is the Select one: a. Average expected return on capital b. Highest expected…

A: Businesses and corporations operate on a large scale and require funds every now and then to fuel…

Q: The capital asset pricing model expresses the cost of equity as a function of a return on riskless…

A: The term capital structure refers to the structure of debt and equity financing in the company. A…

Q: 6. In a perfectly efficient market the best investment strategy is probably a/an

A: In an efficient market, the strategy which generates additional profit to the investors is…

Q: Briefly define capital risk and explain how a positive leverage-adjusted duration gap can contribute…

A: Capital risk is the potential of loss of part or all of an investment. It applies to the whole gamut…

Q: Whenever you make an investment decision, you need to consider its impacts on the diversification of…

A: Investment decision and diversification go hand in hand. One should be careful while making an…

Q: Which of the following statements is true about perfect capital markets?   Group of answer choices…

A: A perfect capital market is a market that has some idyllic properties. In a perfect capital market…

Q: Speculation tends to have a high risk and high rate of return compared to investment Select one: O…

A: The main target in both the cases are making profit, however there are major differences between the…

Q: The internal rate of return method of evaluating capital investments can be used with uneven cash…

A: Uneven cash flows is a series where the cash flows are not the same throughout the project's life.…

Q: Which of the following investment strategies involves generating a higher expected rate of return…

A: The risk and return of investment are usually positively related. An investor cannot earn an extra…

Q: What capital budgeting rule is a simple but imperfect attempt to solve the capital rationing…

A: Answer: Option c.  Payback rule   Explanation: Payback rule is a very simple method which is used to…

Q: Which of the following statements relating to working capital financing is not correct? A.…

A: 1. A conservative policy uses long-term debt to finance non-current assets.   A conservative policy…

Q: According to the capital asset pricing model, assets with Lower; lower; unsystematic Higher; higher,…

A: Solution:- Capital Asset Pricing Model (CAPM) is the equity model to determine the required rate of…

Interest Rate

When you deposit your money with the bank, the deposit earns you some extra money at the end of the specific period – something more than what you deposited. That amount of money that the bank pays you for keeping the money with the bank is the “interest” and the percentage at which the bank pays you for your amount is called the “interest rate”.