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- What are the advantages of evaluating fund performance based on Internal Rate of Return (IRR)? Why would an investor prefer to evaluate a fund based on a cash-on-cash return?Which of the following statements are true?I. Money markets are used to facilitate the transfer of short-term funds from individuals, corporations, or governments with excess funds to those with deficient funds. Even investors who focus on long-term securities tend to hold some money market securities because this enables them to maintain liquidity.II. Financial institutions manage their liquidity by participating in money markets. They may issue moneymarket securities when they experience cash shortages and need to boost liquidity. They can also sell holdings of money market securities to obtain cash.III. The value of a money market security represents the future value of the present cash flows generated by that security. Since money market securities represent debt, their expected cash flows are typically known.IV. The pricing of money market securities changes in response to a shift in the required rate of return by investors. The required rate of return changes in response to…Why is it so hard for actively managed funds to generate higher rates of return than passively managed index funds having similar levels of risk? Is there a simple way for an actively managed fund to increase its average expected rate of return?
- Keeping your funds in liquid assets is riskier than keeping them in liquid assets and therefore investors require a higher expected rate of return on liquid assets.a) How do financial institutions reduce monitoring costs associated with the flow of funds from fund suppliers to fund investors?Which of the following statements regarding the banks motives for holding reserves is incorrect ? A ) If banks on average expect an increase in policy rates they will be inclined to decrease their reserve holdings. B ) As the opportunity cost of holding reserves increase ,ceteris paribus banks are expected to decreasetheir holdings. C ) Depending on the volatility of fund inflows and outflows banks adjust the amount of their reserve holdings accordingly. D ) Under instable financial conditions banks are inclined to hold higher amounts of reserves compared to normal levels.
- Explain with an example of how we can balance cash investments?If you chose to use only long-term financing, what total amount of borrowing would you need to have on a permanent basis? Forecast your excess cash levels under this scenario (see MyFinanceLab for the data in Excel format).Why do equity investors often use borrowed funds? Explain positive and negative financial leverage and the risks to the borrower of using borrowed funds.What is a real estate investment trust? Explain the difference between public and private REITs. How is performance measured for REITs? Choose three common investment ratios in real estate. Explain what the ratio measures and why an investor might consider the ratio. What is the difference between unlevered and levered cash flows? What discount rate must be applied when using unlevered cash flows versus levered cash flows? What is lease assignment? What is subletting? Explain at least one main difference between these methods.
- When using the NPV method for a particular investment decision, if the present value of all cash Inflows Is greater than the present value of all cash outflows, then _______ . A. the discount rate used was too high B. the investment provides an actual rate of return greater than the discount rate C. the investment provides an actual rate of return equal to the discount rate D. the discount rate is too lowHow should I think about the discount rate in a discounted cash flow model, and what it means (in real life)? And where do I find inputs for the discount rate? How is it calculated?For Discounted Cash Flows to be useful, individual investors and companies must estimate a discount rate and cash flows correctly. Select one: a. True a. False
