Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
12th Edition
ISBN: 9781259144387
Author: Richard A Brealey, Stewart C Myers, Franklin Allen
Publisher: McGraw-Hill Education
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Chapter 17, Problem 14PS
Summary Introduction

To discuss: The validity of the objection that “MM entirely ignores the fact that if borrow more, the payment of a rate of interest will be high”.

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1. Modes of extinguishing obligations when creditor abandons his right to collect. (PLEASE EXPLAIN YOUR ANSWER) A. Condonation B. Forfeiture C. Debt D. Damages 2. Fall after the increase reaches a certain variable amount, this is called: (PLEASE EXPLAIN YOUR ANSWER) A. Process factor B. Law of return C. Inflation D. Supply & demand 3. It is always true that the effective rate is greater than the nominal rate when m ≥ 2. ​​​​​​​(PLEASE EXPLAIN YOUR ANSWER) A. True B. False 4. (A/F, i%, N) = (A/P, i%, N) + i ​​​​​​​(PLEASE EXPLAIN YOUR ANSWER) A. True B. False
20 Which of the following is the positive impact of inflation?   Inflation makes debtors pay less in real return.     Fixed-income people have the same income but a high cost of living.     A lender will not have the option to earn interest.     Inflation causes the real value of saving for a saving person to eroded.
Consider two loans that are otherwise identical, except that Loan A has a higher chance of borrower default and Loan B has a lower chance of borrower default. Which loan would you expect to charge more interest-all else equal-and why? O Loan A would charge more interest because it is less risky than Loan B. O Loan A would charge more interest because it is riskier than Loan B. O Loan B would charge more interest because it is less risky than Loan A. O Loan B would charge more interest because it is riskier than Loan A.
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