You are developing a new product and you use a 12% discount rate to compute its NPV. Your banker, from whom you hope to obtain a loan, expresses concern that your discount rate is too low. How do you respond?
Q: A balloon payment is a loan where you pay small amounts of the loan first and then, at the end of…
A: Balloon payment refers to the single payment that should be paid at the end of the loan period in…
Q: Suppose your bank’s loan officer tells you that if you take out a mortgage (i.e., you borrow…
A: A short sale in terms of real estate is one in which a house is sold for a price that is less than…
Q: Pay day loans are short term loans that you take out against future paychecks: The company advances…
A: Payday loans are short-term loans that can be used to cover emergency expenses or make ends meet in…
Q: When you borrow money from someone it is because you do not have enough to pay for something…
A: Time value of money refers to the concept that states that the money we have today is having more…
Q: re developing a new product and you use a 12% discount rate to compute its NPV. Your bank, from whom…
A: Discount rate of the project depends on the many factors that are going to be have impact on the…
Q: Which statement is true when considering a loan? F. You should always take the least interest rate…
A: While considering a loan, both interest rate and term of the loan are important. Both of these…
Q: A lending officer at C Bank has insisted that your firm improve the current ratio of 0.8 before the…
A: To improve the current ratio, either current assets should increase or current liabilities decrease.
Q: If you are hoping to get a loan to expand your business, will you welcome the news that the Fed is…
A: fed impact the flow of money through various method such as OMO, change in interest rate.
Q: Your friend is trying to establish good credit. Your friend is thinking about taking out a $15,000…
A: These days, it is important for individuals to maintain a good credit score or rating. It helps in…
Q: Imagine that you are in the position of buying loans in the secondary market (that is, buying the…
A: Banks generally prefer secondary markets for lending purposes so that they can always have the funds…
Q: Christy would like to improve the current ratio of her firm, which is now 0.5, so that she will have…
A: The current ratio is defined as ration of current assets and current liabilities.
Q: Explain how a firm that expects to need funds in the upcoming year might make sure the needed funds…
A: Note: According to the policy, we are supposed to provide the solution of one question at a time,…
Q: You will discuss credit from the lenders point of view. What factors do lenders consider when making…
A: A credit score is a numerical representation of a person's creditworthiness and indicates how well…
Q: hat is a mathematical model? Give two examples of mathematical models (e.g. present value of money,…
A: A mathematical model is one in which we describe a situation using a mathematical equation.…
Q: Scenario 1: you want to purchase a new vehicle and you have your heart set on a brand-new SUV. you…
A: Introduction : A credit score can be understood as the numerical expression that represents an…
Q: Due to this pandemic, your mother is having a hard time paying your bills, so she decided to apPply…
A: The conceptual formula used:
Q: Provide an analysis of how the following investment patterns can be explained using theories of…
A: Introduction: The theory behind behavioral finance refers to a branch of behavioral economics in…
Q: Do you think that IFRS 9 may make loans more expensive for borrowers? Implementation of IFRS 9 will…
A: IFRS 9 follows the expected credit loss model, which regulated the provisioning to be done by the…
Q: our mother received an offer from a bank. The flier is offering your mother to open a credit card…
A: The 15% mentioned in the flier is the stated rate or the nominal rate. It is not the effective…
Q: I am currently working on a study guide and came across the following question. Which of the…
A: a)It is known that total revenues are equal to the total number of quantities sold. Therefore, if…
Q: Suppose you are shopping for a mortage and the lender presents you with long menu on loan options.…
A: Discount point: It is an amount paid directly to the lender of the loan in exchange for a reduced…
Q: Explain why a loàn pays off faster if you make extra payments.
A: When you take a loan then you pay a fixed amount each period towards the loan. The fixed amount…
Q: Imagine that Commodore has taken out a multimilliondollar loan that must be repaid next year. How…
A: Corporation- A corporation is a legal entity that is distinct from its owners and is formed by the…
Q: Which credit card offers the best interest rate? 2. Which credit card has the highest annual…
A: Annual percentage rate (APR) of a credit card shows the rate at which the user of card pay the…
Q: What'd be the best strategy for your purchase? Explain using economic theory, not as a personal…
A: If fed is going to purchase securities in open market operation it will increase the reserve of…
Q: You purchase 700 shares of MAYA BHD stock on margin at a price of RM47.Your broker requires you to…
A: Initial margin A purchase price percent should be paid with the cash when utilizing the margin…
Q: What are the major flaws with NPV? What are the major flaws with IRR? If you are going to a bank and…
A: Major flaws with NPV:Requires an assumption of discount rate which is not directly observable in the…
Q: Assuming the interest rates are roughly the same, would you prefer to financeyour new company by…
A: Investment is the amount which is spent by the producer for the purchase of those goods which…
You are developing a new product and you use a 12% discount rate to compute its
Step by step
Solved in 2 steps
- Pay day loans are short term loans that you take out against future paychecks: The company advances you money against a future paycheck. Either visit a pay day loan company, or look one up online. Be forewarned that many companies do not make their fees obvious, so you might need to do some digging or look at several companies. Explain the general method by which the loan works.Which of these statements is true? A)There is no reason to pay off a loan early B) when shopping for a loan, you need to compare only APRs C) the more you owe, the higher your interest payment will be D) you can save money by making the smallest down payment the lender will allowIf you are hoping to get a loan to expand your business, will you welcome the news that the Fed is raising the discount rate? Why or why not?
- You are going to make a substantial purchase. You have enough money to pay cash, but don’t know if that’s the way to make best use of your assets. Maybe you should take out an installment loan to make the purchase and invest the cash you would otherwise have used to pay for it. Use the information provided to complete the following worksheet and analyze how the numbers work out most favorably for you. For simplicity, compounding is ignored in calculating both the cost of interest and interest earnings. [Note: Enter your dollar answers rounded to the nearest two cents and precede numbers that are less than zero (0) with a minus sign (–).] Buy On Time or Pay Cash Cost of Borrowing 1. Terms of the loan a. Amount of the loan $20,000 b. Length of the loan (in years) 4 c. Monthly payment $497.60 2. Total loan payments made ($ per month months) $ 3. Less: Principal amount of the loan $ 4. Total interest paid over life of…What are the major flaws with NPV? What are the major flaws with IRR? If you are going to a bank and trying to get a loan, which is the best method to use (NPV, IRR, Payback period)?Suppose your bank’s loan officer tells you that if you take out a mortgage (i.e., you borrow money to buy a house), you will be permitted to borrow no more than 80% of the value of the house. Describe this transaction using the terminology of short-sales.
- Please try to answer in 30 minuteYou will discuss credit from the lenders point of view. What factors do lenders consider when making new real estate loans? When banks make loans they are taking a risk based on several factors including creditworthiness. You will discuss how banks determine the creditworthiness of borrowers. Topic: Creditworthiness Respond to the following questions: . How does the bank determine if a borrower is credit worthy? . Does this analysis guarantee that the borrower will be able to pay off the loan as agreed? • What happens if their credit scores are below 500? What alternatives would someone with no credit history have? .Your company provides credit to customers. Someof these customers default on their loans, with verynegative implications for you. Describe how you coulduse discriminant analysis to learn what distinguishesthe customers who default on their loans from thosewho pay back their loans. How might you use such amodel?
- 2.-When deciding to accept a cash discount from a supplier, on what day is it advisable to take the financing? A) On the last day of the discount period, to see if they are able to meet the discount. B) On the first day of the discount period, so why wait? C) On any day of the discount period D) In the middle of the discount period, so there is no risk.Which statement is true when considering a loan? F. You should always take the least interest rate possible. The term of the loan doesn’t matter G. You should always take the plan with the least number of payments. The interest doesn’t matter. H. You should consider both the interest rate and the term of the loan. You have to determine which loan will fit into your budget. J. The least number of payments will always have you a smaller payback amount.Imagine that you are in the position of buying loans in the secondary market (that is, buying the right to collect the payments on loans ) for a bank or othe r financia l services company.Explain why you would be willing to pay more or less for a given loan if: a. The borrower has been late on a number of loan payments b. Interest rates in the economy as a whole have risen since the bank made the loan c. The borrower is a firm that has just declared a high level of profits d. Interest rates in the economy as a whole have fallen since the bank made the loan