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lukranit [14]
3 years ago
12

First National Bank loans Mike’s Shoe Store $100,000 for remodeling. On their balance sheets, this loan is an asset for Mike’s S

hoe Store and a liability for the First National Bank.
a.The loan leads to an increase in the money supply. an asset for Mike’s Shoe Store and a liability for the First National Bank.
b.The loan does not lead to an increase in the money supply. a liability for Mike’s Shoe Store and an asset for the First National Bank.
c.The loan leads to an increase in the money supply. a liability for Mike’s Shoe Store and an asset for the First National Bank.
d.The loan does not lead to an increase in the money supply
Business
1 answer:
butalik [34]3 years ago
8 0

Answer:

The answer is: C)The loan leads to an increase in the money supply. a liability for Mike’s Shoe Store and an asset for the First National Bank.

Explanation:

Fractional reserve banking refers to a banking system in which banks keep as reserves only a fraction of the money their clients deposited in them. By doing this, banks are able to use the rest of their clients' money to make loans and other financial operations, therefore creating "new money" and increasing the money supply. For example, a client A deposits $100, the bank keeps in reserve $10, and loans $90 to a different client B. Client A's $100 have created an extra $90 in new money.

When a company gets a bank loan, the loan becomes a liability for the company (they owe money) and an asset for the bank (someone owes them money).

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Complete sentence will be as below:

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3 years ago
Which type of money does the diagram best describe?
loris [4]

Answer: Commodity

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8 0
3 years ago
Indigo Ink Supply paid a dividend of $5 last year on its common stock. It is expected that this dividend will grow at a rate of
pychu [463]

Answer:

a.

1st $5.43

2nd $5.89

3rd $6.39

4th $6.93

5th $7.52

6th $7.81

b.

$75.85

Explanation:

Dividend is the payment to the stockholders out of earning of the company. Companies have a dividend policy which determine the future dividend payments.

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Dividend Payment

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Second year = $5 x ( 1 + 8.5% )^2 = $5.89

Third year = $5 x ( 1 + 8.5% )^3 = $6.39

Fourth year = $5 x ( 1 + 8.5% )^4 = $6.93

Fifth year =$5 x ( 1 + 8.5% )^5 = $7.52

Sixth year = $7.52 x ( 1 + 3.8% )^1 = $7.81

b.

Intrinsic value of the stock is the present value of all the associated dividends

We need to calculate the present value of all the dividend payment.

First year = $5.43 x ( 1 + 11.5% )^-1 =  $4.87

Second year = $5.89 x ( 1 + 11.5% )^-2 = $4.74

Third year = $6.39 x ( 1 + 11.5% )^-3 = $4.61

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Fifth year = $7.52 x ( 1 + 11.5% )^-5 = $4.36

After fifth year the dividend will be discounted as follow

PV of dividend after fifth year = [ $7.81 / (11.5% - 3.8%) ] x [ (1+11.5%)^-6 ] = $52.79

Intrinsic Value of Stock = Sum of PV of all dividends = $4.87 + $4.74 + $4.61 + $4.48 + $4.36 + $52.79 = $75.85

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7 0
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3 0
3 years ago
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