Wk 3 DQ 1

When you borrow money, you typically have to pay an interest rate. What does interest represent? a) The cost of borrowing money b) The profit earned on an investment c) A bank fee d) A penalty for late payment????

In the PMT function, what is not true about the rate argument? Group of answer choices It assumes an annual interest rate. It can contain references to fields. It is optional. It reflects the interest charged on a loan.

A forward rate is a borrowing/lending rate for a loan to be made at some future date.   Select one: True False

If a person charges interest on a loan transaction equivalent to the inflation rate than will it be still called Riba? How would then the issue of time value of money be resolved?

1. Explain how an installment loan differs from revolving credit in terms of risk and the nature of the return to the lender.

Which of the following is true? Short-term notes payable should be discounted at its present value, more so, if it constitutes a financing transaction and the imputed interest can be measured without undue cost or effort. Transaction costs of issuing financial liabilities are expensed outright. The present value of a serial note's principal is computed by using the PV of 1 as the present value factor. Notes payable are obligations supported by creditor's promissory notes.

Default Pay Yourself First Interest is a strategy in which saving is prioritized and made an essential cost in a budget occurs when a borrower is unable to meet the obligation of debt repayment. is the money that a borrower owes to a lender. It can be accrued through any form of borrowing - credit cards, mortgages, per is money received through sources such as employment, investments, or business transactions. is the percentage of a loan principal that lenders charge borrowers. is money set aside for big, unexpected expenses such as job loss or large medical bills. It provides a financial buffer that shiel is a plan for using income to meet financial obligations. It tracks how much income a person receives and details how that mo is the amount of money due to a loan before interest. is a financial arrangement in which money is borrowed for a purchase and paid back at a later date. It allows consumers to mo One of the most basic concepts of personal finance is being able to…

From the standpoint of the borrower, is long-term or short-term credit riskier? Explain. Would it ever make sense to borrow on a short-term basis ifshort-term rates were above long-term rates?

Notes receivable should be stated at amortized cost which is equivalent to its present value which may be its face or discounted value for long term interest bearing and or long term interest bearing with unreasonably low interest rate.   TRUE OR FALSE

Add-on Interest is a method of calculating the interest to be paid on a loan by combining the principal amount borrowed and the total interest due into a single figure, then multiplying that figure by the number of periods for repayment. Is it True or False?

What is a common method used by banks to account for the interest income on loans that considers changes in market interest rates? a) Straight-line interest b) Effective interest rate method c) Simple interest d) Discounted cash flow method

Banks and other lenders are required to disclose a rate called the APR. What is this rate?Why did Congress require that it be disclosed? Is it the same as the effective annual rate? Ifyou were comparing the costs of loans from different lenders, could you use their APRs todetermine the loan with the lowest effective interest rate? Explain.

Simple interest refers to interest on a loan computed as a percentage of the loan amount. Compound interest refers to the process of, investing your money. saving your money. C a loan amortization. a loan computed at a nominal interest rate. E earning interest on interest.

Identify the types of information that can readily be deter-mined from an amortization table for an installment loan. (More than one answer may be correct.)a. Interest expense on this liability for the current year. b. The present value of the future payments under chang-ing market conditions. c. The unpaid balance remaining after each payment.d. The portion of the unpaid balance that is a currentliability.

A bank's net interest margin represents the proportion of its investments that are financed with borrowed funds.   Group of answer choices: True False

Write out an equation for the nominal interest rate on any debtsecurity.

1. True or false. Rate of return is the interest earned on the unpaid balance of an amportized loan

Describe payday loans, tax-refund advances and structured-settlement advances—the differences between these financing products and the concerns that are associated with similar short-term loan products. Specifically, explain the effect these can have on your future cashflow.

Which of the following statements is most correct?   a. When actual inflation exceeds expected inflation, debtors gain at the expense of creditors because they repay their loans with depreciated currency. b. When expected inflation exceeds actual inflation, debtors gain at the expense of creditors because they repay their loans with depreciated currency. c. When actual inflation exceeds expected inflation, creditors gain at the expense of debtors because they repay their loans with devalued currency. d. When actual inflation exceeds expected inflation, debtors and creditors both lose because they repay their loans with depreciated currency.

What factors must be considered when deciding whether to refinance a loan after interest rates have declined?

The concept that supports the discounting of notes to their present value is:   time value of money matching form over substance amortization

In some banks the interest on the deposit depends on the amount on the account. Derive the difference equation describing the growth of your deposit in this situation taking the conversion period a and interest rate p(N).

What is the first step in calculating the lender's effective yield and calculating the borrower's effective cost of funds for loans? 1. Calculate the periodic loan payment based on the appraisal value. 2. Calculate the periodic loan payment based on the tax assessor's value.   3. Calculate the periodic payment based on the contract loan amount, nominal interest rate, and full amortization period. 4. All of the above.

State whether the following statements are true of false. Statement 1: The conversion of the company’s short-termdebt into a long-term note payable would decrease both workingcapital and the current ratio.  Statement 2:A user of financial statements who is a short-termcreditor is interested in the borrower’s ability to pay interestregularly. STATEMENT 1        STATEMENT 2a. True                    Trueb. True                    Falsec. False                    Trued. False                    False