PFIN 7:STUDENT EDITION-MINDTAP (1 TERM)
7th Edition
ISBN: 9780357033647
Author: Billingsley
Publisher: CENGAGE L
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Question
Chapter 4, Problem 9FPE
Summary Introduction
To discuss: Some short-term investments that are used to manage cash resources.
A liquid investment is any investment that can be effectively changed over into money without significantly affecting its worth.
Summary Introduction
To discuss: The factors that are focused when inflation is concerned.
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Briefly explain the following;
a. present value of money.
b. future value of money.
Assume you’re an investor and you expect interest rate to rise in the near future, how would this affect your investment decision in the short and in the long term. Assume you’re a potential borrower and you anticipate that interest rate will decline in the near future. How will affect your borrowing decision in the short term as well as in the long term.
How to do Cash Flow Projection when investing? give a example.
Chapter 4 Solutions
PFIN 7:STUDENT EDITION-MINDTAP (1 TERM)
Ch. 4 - Prob. 1LOCh. 4 - Describe todays financial services marketplace,...Ch. 4 - Prob. 3LOCh. 4 - Prob. 4LOCh. 4 - Prob. 5LOCh. 4 - Develop a cash management strategy that...Ch. 4 - Adapting to a low-interest-rate environment. A...Ch. 4 - Prob. 2FPECh. 4 - Choosing a new bank. Youre getting married and...Ch. 4 - Prob. 4FPE
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- What determines the anticipated interest rate payout for an investment?arrow_forwardHow does one determine the value of any asset whose value is based on expected future cash flows?arrow_forwardSuppose you know that an investment will earna positive return in the future. Why is it important to know the present value of the investment?arrow_forward
- The payback method measures: The profitability of an investment. The net cash inflow from an investment. The economic life of an investment. How rapidly the investment is recovered. The investment’s true rate of return.arrow_forwardA financial analyst is treating a cash flow stream as a perpetuity. The present value of the perpetuity will __________ (increase, decrease, or not change) if the interest rate increases, and will ___________ (increase, decrease, or not change) if the growth rate increases.arrow_forwardWhat can you calculate with the Excel argument FV? Number of periods of time for a loan or investment. Interest rate. Future value of an investment based on a constant interest rate. The constant periodic payment required to pay off a loan or investment.arrow_forward
- Why do we discount the future in valuing investments today that are expected to provide returns in the future? Explain with examples. Define & explain Annual Percentage Rate (APR) & the Effective Annual Rate (EAR). What is the relationship between APR & EAR? The discounting of the future is assumed to be exponential. What does behavioral finance have to say about this assumption? What is hyperbolic discounting?arrow_forwardWhat does the Excel argument Nper refer to? Number of periods of time for a loan or investment. The constant periodic payment required to pay off a loan or investment. Periodic interest rate. Present value of an investment.arrow_forwardExplain what is meant by the internal rate of return of an investment and discuss its relationship to the NPV of an investment. Explain the problems posed for the use of the IRR when it is necessary (i) to choose between two investments and when (ii) investments are characterised by negative net cash flows at the end of their lives. Discuss and evaluate the use of the payback period as an investment criterion.arrow_forward
- How is the market interest rate in the short-term and long-term financial market affected under the Pure Expectations theory when suppliers and users of loanable funds expect that interest rates will decrease the next year?arrow_forwardSuppose investors expect interest rates to increase substantially in the future. Currently, should they prefer to purhcase short-term or long-term investments? Explain your asnwer.arrow_forwardWhich of the following decision criteria is the easiest to use and very popular among investors? O Payback period. O Internal rate of return. O Average accounting return. Net present value. O Discounted return on investment.arrow_forward
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