Answer:
d) may be shorter or longer than monetary policy lags.
Explanation:
Remember, the term policy lags refers generally to the lag or length of time between the time when an economic problem is discovered, like increased unemployment, and the extent to which policy solves the economic problem.
From a general perspective this policy lags in fiscal policy may be shorter or longer than monetary policy lags depending on the political and economic environment of the country.
Answer:
After tax cost of debt is 5.239%
Explanation:
Given:
Face value = $1,000
Bond price = $895
Coupon payments = 0.035×1,000 = $35 (coupon payment is paid semi-annually so 7% is divided by 2)
Maturity = 20×2 = 40 periods
Using bond price formula:
Bond price = Present value of face value + present value of coupon payments
Use excel function =RATE(nper,pmt,PV,FV) to calculate cost of debt.
substituting the values:
=RATE(40,35,-895,1000)
we get Pre-Tax cost of debt = 4.03% semi- annual
Annual rate is 4.03%×2 = 8.06%
Note: PV is negative as bond price is cash outflow.
After tax cost of debt = 8.06(1 - 0.35)
= 5.239%
option C to persuade, just took the test
Answer: D. 2.2%
Explanation: Equity Dividend Rate is calculated by dividing the Before Tax Cash Flow by the Acquisition price. If you need the answer in percentage form, you then multiply by 100.
Here, before-tax cash flow = $11,440
Acquisition price = $520,000
So Equity Dividend Rate = 
X 100
Equity Dividend Rate = 2.2%
In this question, you do not need the Net Operating Income (NOI). You only need the NOI if the Before Tax Cash Flow is not given and the debt service payment is. If this is the case, you subtract the debt service payment from the NOI to get the Before Tax Cash Flow.
