Answer:
the investment with large cash flow early
Explanation:
This can be illustrated with an example.
There are 2 investments A and B
The cash flows of A =
Cash flow in year 1 = $50,000
Cash flow in year 2 = 0
Cash flow in year 3 = 0
The cash flows of B =
Cash flow in year 1 = 0
Cash flow in year 2 = 0
Cash flow in year 3 = 50,000
Discount rate for both investment is 40%
Present value of A = $35,714.29
Pesent value for B = $18,221.57
It can be seen that the investment with the higher cash flow early has a higher present value
Answer:
1. Transaction will have effects on Balance Sheet in the Assets Section and will be classified as an Investing Activity in the Statement of Cash flows.
2. Transaction will have effects on Balance Sheet in the Liability Section and will be classified as a Financing Activity in the Statement of Cash flows.
3. Transaction will have effects on Income Statement in the Revenue Section and will be classified as an Operating Activity in the Statement of Cash flows.
4. Transaction will have effects on Income Statement in the Revenue Section and will be classified as an Operating Activity of the Statement of Cash flows.
5. Transaction will have effect on Income Statement in the Expense Section and will be classified as a Financing Activity in the Statement of Cash flows.
Explanation:
1. Falcon purchases common stock of Wildcat. This is classified in the investments tab of the assets account. This will be reflected in balance sheet. The transaction is classified in the investing activity.
2. Falcon borrows from Wildcat and signs Notes payable this will have effects in balance sheet liability account. This is financing activity.
3. Falcon receives Dividend revenue from Wildcat. This will be reflected in income statements as revenue. It will operating activity.
4. Falcon provides services to Wildcat , this is reflected in income statement as revenue. This will appear under operating activity.
5. Falcon pays interest on the borrowings to Wildcat. This is income statement items and is an expense. It belongs to financing activity.
Answer:
Stated Rate No. of Times Compounded Effective Rate (EAR) %
11.85% Semiannually 12.2 %
12.37% Monthly 13.1%
110.27% Weekly 10.8%
13.54% Infinite 14.5%
Explanation:
EAR = ( 1 + ( APR / m )^m)-1
Semiannually
m = 12 / 6 = 2
0.1220 = ( ( 1 + ( APR / 2 ) )^2) - 1
0.1220 + 1 = (1 + ( APR / 2 ) )^2
1.1220 = ( 1 + ( APR / 2 ) )^2
= 
1.059 = 1 + ( APR / 2 )
1.059 - 1 = APR / 2
0.059 x 2 = APR
APR = 0.1185 = 11.85%
Monthly
m = 12 / 1 = 12
0.1310 = ( ( 1 + ( APR / 12 ) )^12) - 1
0.1310 + 1 = (1 + ( APR / 12 ) )^12
1.1310 = ( 1 + ( APR / 12 ) )^12
APR = 12.37%
Weekly
m = 52
0.1080 = ( ( 1 + ( APR / 52 ) )^52) - 1
0.1080 + 1 = (1 + ( APR / 52 ) )^52
1.1080 = ( 1 + ( APR / 52 ) )^52
APR = 10.27%
Infinite
m = 20,000
0.1450 = ( ( 1 + ( APR / 12 ) )^12) - 1
0.1450 + 1 = (1 + ( APR / 12 ) )^12
1.1450 = ( 1 + ( APR / 20,000 ) )^20,000
APR = 13.54%
<u>Complete Question:</u>
Why do some lenders require borrowers to secure credit?
A. To prevent defaults
B. To guarantee full repayment
C. To avoid any losses
D. To reduce risk
Answer:
Option D. To reduce risk
Explanation:
The reason is that the lender faces the credit risk which is the risk of the loss of the repayment in whole or in parts and the risk of default of the interest payments by the borrower.
So if we see the options, the option A, B and C are basically the credit risk that the lender is facing so the only option that is more general (not specific as the option A, B and C) and includes these three options is option D.
So the option D is correct.
Hope that helps! If you look it up it's all online!
