Answered: Are there any advantages to the…

Are there any advantages to the equity-holders of banks from them engaging in short-term as opposed to long-term borrowing?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter21: Supply Chains And Working Capital Management

Section: Chapter Questions

Problem 14MC

See similar textbooks

Related questions

Q: What will be the firm's internal growth rate?

A: The growth rate of a company is the pace at which the company expands or increases its scale of…

Q: The principal P is borrowed and the loan's future value A at time t is given. Determine the loan's…

A: Given in question,Principal (P).Amount (A).Time (t) = 6 months year = 0.5Let,the rate per year…

Q: A company currently has EBIT of $25,000 and is all-equity financed. The company expect EBIT to stay…

A: Capital structure refers to the mix of different sources of financing that a company uses to operate…

Q: Compute the annualized discount rate in dollar assuming 365 days in a year.

A: Forward contract- It is an over-the-counter derivative contract between the two parties to buy or…

Q: Nelco Inc. has decided in favour of a capital structuring that involves increasing its existing $80…

A: EPS means earnings per share.If there are no taxes ,EPS = whereEBIT = Earnings before interest and…

Q: listed below is that ACME toy Companty's liablities and owner's equity section from their financial…

A: AP 10000000Current debt 2000000Total current liablity 12000000Long tearm Debt 55000000Stock holder…

Q: David Quincy wants to withdraw $30,800 each year for 10 years from a fund that earns 10% interest.…

A: Given:Annual payment = $30,800Interest rate = 10%Years = 10years.

Q: Both Bond Sam and Bond Dave have 12.4 percent coupons, make semiannual payments, and are priced at…

A: Bonds refer to instruments that a company issues to have access to debt capital from investors and…

Q: Excel Online Structured Activity: Required annuity payments Your father is 50 years old and will…

A: One need to have planning for the retirment and if done on time will have good happy retirement life…

Q: Imagine a firm that plans to distribute a dividend of $5.00 next year. Due to financial issues, the…

A: Dividend in Year 1 = d1 = $5dividend in year 4 = d4 = $5Growth rate after year 4 = g = 0%Cost of…

Q: A 3.750 percent TIPS has an original reference CPI of 186.2. If the current CPI is value and current…

A: TIPS are inflation adjusted bonds and these bonds adjust par value and coupon based on the inflation…

Q: Question You want to buy Wolfuman Inc.'s semi-annual bonds that pay a 4.9% coupon rate. They have 6…

A: A bond is a kind of debt security issued by the government and private companies to the public for…

Q: Antonio borrows $3,358 from the bank for 4 years at an annual interest rate of 7.08% compounded…

A: Variables in the question:PV= $3358N=4 yearsRate=7.08% (compounded quarterly)

Q: ron bought goods from shelley on september 2shelly gave rana time extension on his bill by accepSng…

A: September has 30 days, so there are 28 days in September from the 2nd to the end of the month, and…

Q: ppose in the question above, the tuition obligations have a Macaulay duration of 4.35 in years, and…

A: Duration of the bond shows the weighted period of the bond required to recover the all cash flow…

Q: You are travelling in Thailand and want to purchase a souvenir for ฿2000. The current exchange rate…

A: When one company transactions with another international company this exchange rate is usually used.…

Q: ABC Inc. just paid a dividend of $10 on its stock. The growth rate in dividends is expected to be a…

A: Firstly, we will calculate the Present value of Dividends for the first 6 years at different…

Q: Gifts For All has projected sales for next year of: Q1 Q2 Q3 Q4 Sales S 26,000 S $23,473 $20,640…

A: The accounts payable period is the number of days it takes for a company to pay its supplies. Here,…

Q: Consider two possible investments whose payoffs are completely independent of one another. Both…

A: from the given information in questionwe have to consider two possible investments whose pay offs…

Q: You purchase 30 bonds with a coupon rate of 5.875% and a current market price of 89. The commission…

A: Entities or companies can raise cash by borrowing from investors using bonds. When a company issues…

Q: Review Problem 9 # 16 (LO1) For the five-year period ended October 31, 2022, a North American…

A: Future value of investment refers to the final amount that an investment will be worth after a…

Q: All of the following statements are true concerning the conversion of governmental funds to…

A: Government funds are a category of funds used in governmental accounting to track and manage public…

Q: 5. In one year, Bold Betties Inc. will pay a $2 per share dividend and it is expected to grow by 5…

A: The dividend discount model suggests that the intrinsic price of the share is the present value of…

Q: You can afford a $1400 per month mortgage payment. You've found a 30 year loan at 7.9% interest.…

A: Present value of annuity.PV = A*wherePV = Present value of annuityA = periodic paymentsr = interest…

Q: Given the following information regarding Builtrite's capital structure, calculate its weighted…

A: WACC stands for Weighted Average Cost of Capital. It is a financial metric that represents the…

Q: Suppose that your firm issued a bond with 10 years until maturity, a face value of $1000, and a…

A: Holding period return:Holding period return refers to the profit generated by an investment over a…

Q: A firm has an ROA of 11%, a 6% profit margin, and an ROE of 23%. What is its total assets turnover?

A: A quantitative method that provides information about the company including its liquidity,…

Q: Your firm has total sales of $1,420, Costs are $780 and depreciation is $120. The tax rate is 22…

A: Operating Cash Flow:Operating cash flow refers to the amount of cash generated by a company's core…

Q: McGilla Golf has decided to sell a new line of golf clubs. The company would like to know the…

Q: The Moore Enterprise has gross profit of $1,140,000 with amortization expense of $490,000. The…

A: Cash flow is the money available from core business activities after making payment for expenses…

Q: You are evaluating a project for The Ultimate recreational tennis racket, guaranteed to correct that…

A: 1. Sales Revenue2. Variable Costs3. Fixed Costs4. Depreciation5. Initial Investment6. Working…

Q: Bonds A and B are both priced at par of $1,000. Bond A has $90 annual coupons and 10 years to…

A: To analyze the price sensitivities of Bonds and , we need to calculate the new prices of the bonds…

Q: Emily receives R1 500,00 from the bank now that charge 10,5% simple discount per annum. She has to…

A: To find the number of months after which Emily pays back the loan, we can use the formula for simple…

Q: According to the capital asset pricing model, all investors will hold the market portfolio. If this…

A: According to Capital Asset Pricing model ,k = Rf + [Beta * (Rm- Rf)]wherek = Expected return on…

Q: Honda Motor Company is considering offering a $1,900 rebate on its minivan, lowering the vehicle's…

A: cost and benefit analysis is best used for decision making in the field of finance. This analysis…

Q: Assume that interaffiliate cash flows are uncorrelated with one another. Calculate the standard…

A: Variables in the question:Affiliate Expected Transaction Standard DeviationU.S.…

Q: You purchased 500 shares of The New Century Fund at NAV of $23.56 last year. The fund distributed…

A: Given,Current NAV = $23.56 Dividends Distributed = $4.35adjusted closing price of your purchase =…

Q: You have found three investment choices for a one-year deposit: 11.7% APR compounded monthly, 11.7%…

A: Effective Annual Rate (EAR) means the effective rate for a year after effect of all the…

Q: A 4-year project is expected to generate annual sales of 30,000 units at a price of $50.00 per unit…

A: ParticularsCash flow @VC of $38Cash flow @VC of $39i) Units30,00030,000ii) SP per unit5050iii) VC…

Q: uestion 6 An investment that has an expected return of 32% and a standard deviation of 10%. What is…

A: The coefficient of variation (CV) is a measure of relative risk and is calculated as the ratio of…

Q: Suppose a firm has a EBIT of $450, Depreciation of $65, taxes of $50, change in NWC of $35, and net…

A: The value of the firm is the present value of all the future cash flows expected from the firm…

Q: A firm has net fixed assets of $8 million on December 31, 2001 and $14.5 million on December 31,…

A: Capital Spending / Expenditures are the payments which are made for other than goods and services…

Q: Suppose the interest rate is 3.8%. a. Having $600 today is equivalent to having what amount in one…

A: Money has time value and value of money change according to the time and interest rate and…

Q: Company US Bank PepsiCo JDS Uniphase Duke Energy Shares 400 300 700 300 Beginning of Year Price…

A: Portfolio return:Portfolio return refers to the overall performance of a portfolio of assets, such…

Q: ost recent fiscal year, the Hammock Company's total equity was $450 and net income was equal to $97.…

A: Sustainable growth rate is which can be obtained without any external funding required and can…

Q: A firm has annual sales of $100 million, $20 million of inventory, and $30 million of accounts…

A: Given:Annual Sales = $100 millionInventory = $20 million

Q: BALANCE SHEET Cash A/R Inventories Total CA Gross FA Less: Deprec. Net FA Total Assets 2016E Sales…

A: The analysis using ratios computation will help an investor measure a company's performance in terms…

Q: Suppose that you are thinking about buying a car and have narrowed down your choices to two options.…

A: Loans are paid in equal monthly installments and these installments carry the payment for interest…

Q: under what circumstances would a hedge be profitable for US corporations receiving monies from…

A: A hedge is a financial instrument that is used to reduce the risk of adverse price movements in a…

Q: firm has a cre rating A. You notice that the credit spread for five-year maturity debt is 82 basis…

A: Yield of bond is the required rate of the bond and that depends on the credit rate and risk involved…

Question

Are there any advantages to the equity-holders of banks from them engaging in short-term as opposed to long-term borrowing?

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1: Introduction

VIEW

Step 2: Explanation:

VIEW

Solution

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

Provide an explanation of whether it is advantageous for a bank to classify debt investments as “held to maturity “or “available for sale” if the required return by the market declines? What impact will this have on the bank's balance sheet and net income?
How should a bank structure its liquid assets portfolio to take advantage of falling interest rates ? a. The bank should invest in short-term securities to minimise capital loss b. The bank should invest in long term securities to maximise capital gains. c. The bank should borrow at fixed interest rates d. The bank should issue certificate deposits with fixed interest rates. e. The bank should hold cash to maximise its interest income. Which option is correct
What risks might commercial bank operations face by funding long-term loans such as mortgages to borrowers (often at fixed interest rates) with short-term deposits from savers? What steps could the financial institution take to reduce these risks?
What is the advantage of issuing bonds instead of obtaining financing from the company’s owners?
How much debt should be incurred/settled to satisfy the banks condition?
What are the advantages and disadvantages of direct lending for the bank?
Discuss how banks benefit when interest rates decrease?
2. If a bank wants to avoid volatility in its regulatory capital, which investment classification would be the most desirable, and which investment classification would be the least desirable? Does your answer differ depending on whether the bank is large or small? In other words, do large and small banks differ on how they can categorize unrealized gains/losses on AFS debt?
Why are banks currently holding capital well above the minimum regulatory requirement?
what is ADVANTAGES AND DISADVANTAGES OF THIS MORATORIUM FOR THE BANKS AND BORROWERS? provide EXAMPLES.
What risks might commercial banks face if they use short-term deposits from savers to pay for long-term loans, like mortgages, that often have fixed interest rates? What could the financial institution do to lower these risks?
What are the advantages and disadvantages of direct lending for the bank? How are banks reducing the effect of the disadvantages?