Q: Why should we care what the Term Structure of Interest Rates looks like? The Expectations Theory of…
A: The question is to explain the concept of term structure of interest rate, which varies with change…
Q: he difference between an ordinary annutty and an annulty due is: Multiple Choice an ordinary annuity…
A: Annuity means where regular payment is made at the end of regular period and full amount with…
Q: During a period of inflation, an account balance remains constant. With respect to this account, a…
A: This question is answered as per IAS 29 "Financial Reporting in Hyperinflationary Economies"
Q: How low can nominal interest rates go? Explain why they can become negative.
A: The nominal interest rate is the interest rate that is calculated before inflation is factored in.…
Q: When using the interest tables, the needed interest rate is determined from the intersection between…
A: Interest rate tables show the values of present value/future value factors for $1 investment at a…
Q: Can nominal interest rates be negative?
A: Nominal interest rate is the rate that is paid to lender for the amount or money borrowed.
Q: When a note’s stated rate of interest is unrealistic relative to the market rate, the concept of…
A:
Q: Illustrate the very important relationships between changes in interest rates and varying rates of…
A: It illustrates an inverse relationship amongst the change in the interest rate and the varying…
Q: If interest rates increase, the value of a fixed income contract decreases and vice versa. true?…
A: When interest rate increases, the value of fixed income contract will decrease. This is because…
Q: In hedging, interest rate swap (IRS) can be used to hedge against rising rates, falling rates,…
A: to understand the topic better, the interest rate swap is defined as the contract between any two or…
Q: If a problem is silent as to whether a warranty payable is short-term or long-term, will it be…
A: Warranty payable represents a liability account that reports the estimated amount that a company…
Q: discounted note will produce an effective rate which is different than the stated rate. Why does…
A: a discounted note is a short term financial products which allows the company two raise the cash…
Q: A quoted rate of interest is a “nominal” rate because it includes inflation expectations. a) True…
A: Answer:- True. The nominal interest rate comprises of the real interest rate and a premium for…
Q: ond interest rates may differ from market interest rates because:
A: Bonds are priced by discounting future cash flows. Future cash flows include coupons and par value…
Q: Borrowings, with Luxe paying no long-term liabilities, are
A: Computation of amount of borrowings: Long term liabilities: The amount of long term liabilities in…
Q: If the question doesn’t state when payments are made- is the default ordinary annuity?
A: Annnuity is the series of reccuring payment made at regular interval.
Q: When the effective rate falls due to good credit, the fair value of the bond payable reflects a…
A: The fixed income instrument which represents the loan granted by the investor to a borrower is known…
Q: When the interest is NOT included in the face value of the note, the maturity value is greater than…
A: Face Value is often termed as the nominal value of the asset.The asset can be in the form of shares,…
Q: What is the expected result of a zero-interest-bearing note that is sold today for less than face…
A: Solution: Zero interest bearing note are note that contains no interest and same is issued at a…
Q: Please clarify the difference between the stated interest rate on notes receivable and the market…
A: This question tells about the difference between the stated interest rate on notes receivable and…
Q: Can the actual real rate of interest be negative? When ? Can the expected real rate be negative?
A: Yes, the actual real interest rate can be negative. This can happen when the actual inflation rate…
Q: Can real interest rates be negative
A: The real rate of return is calculated to ascertain the actual return on investment considering the…
Q: Whenever payment and compounding periods differ from each other, it is recommended to compute the…
A: The effective annual interest rate is the real return for a bank account or other interest paid…
Q: Can there be instances when the interest expense recognized for each period increases? No, such…
A: solution : Can there be instances when the interest expense recognized for each period increases?…
Q: Which of the following statements regarding forward rate agreements (FRAS) is false? O An agreement…
A: A forward contract is a customized agreement between parties to acquire or sell an item at a pre -…
Q: It's it true? The factors are useful for all types of interest rates, whether nominal or effective,…
A: The nominal interest rate or coupon rate, is the actual price borrowers pay lenders, without…
Q: Depending on the frequency of compounding, how can the effective interestearned (or paid by the…
A: The basic difference between compounding and simple interest is that simple interest is only offered…
Q: When the effective interest method is used, the amortization of the bond premium decreases interest…
A: Lets understand the basics. For amortization of premium and discount, there are two methods which…
Q: Why there is a difference between the interest rate and the APR
A: Interest rates and APR are two phrases that are sometimes used interchangeably to refer to…
Q: Amortized loans with equal principal repayments will result in less interest being paid over the…
A: If the loan amount amortize with equal amount of principal it means it is repaying more amount of…
Q: Bank charges is an example of a timing difference. True or False Interest on overdraft is an example…
A: A bank reconciliation statement compares an entity's bank account with its financial records by…
Q: How does the interest rate adjust?
A: Interest rate levels are based on two factors- supply and demand of credit: an increase in the…
Q: Explain why we record interest in the period in which we incur it rather than in the period in which…
A: Given: The record of interest in the incurred period rather than the period of payment.
Q: How can we compare interest rates that are compounded differently?
A: Solution Concept interest rates that are compounded differently The number of…
Q: What makes it so difficult to correctly forecast interest rate changes?
A: Interest rates are used to understand price and value of money. Interest rate is the cost incurred…
Q: The interest rate (i) is assumed to be a compound rate, unless specifically stated as simple…
A: There are 2 types of interest rates are used in the financial transactions. one is simple interest…
Q: Define the term break-even interest rate?
A: The question is to define break even interest rate. The concept of Break even interest rate is…
Q: When the cost of a long-term debt security is different from the maturity value, the difference is…
A: Maturity value of a debt security is amount payable at Date of maturity to bond holders.
Q: Physical settlement of a credit default swap avoids the need to determine the termination value of…
A: Credit default swap- is a derivative instrument. Under this the credit risk of a fixed income…
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- 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.Explain the addition to the interest rate, HELOC borrowers consider the issues?When an interest rate statement does not include a time period, e.g., 3%, the time period is assumed to be what?
- If interest rates increase, the value of a fixed income contract decreases and vice versa. true? false?It's it true? The factors are useful for all types of interest rates, whether nominal or effective, as well as simple and compound interest?Which of the following is not a determinant of interest rates? a) The Required Rate of Return b) The Liquidity Risk Premium c) The Re-investment Risk Premium d) The Maturity Risk Premium e) None of the above
- Define the term break-even interest rate?How is duration related to the interest elasticity of a fixed income security? What is the relationship between duration and the price of the fixed-income security? ( LG 22-3 )Which of the following statements is true?a. When the interest rate increases, the present value of asingle amount decreases.b. When the number of interest periods increases, thepresent value of a single amount increases.c. When the interest rate increases, the present value of anannuity increases.d. None of the above are true.
- When the quantity of a financial security supplied or demanded changes at every given interest rate in response to a change in a factor, this causes a shift in the supply or demand curve true or 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?What makes it so difficult to correctly forecast interest rate changes?