What does maturity matching mean, and what is the advantage of this financingpolicy?

Q: Explain the concept of efficient markets.  Are the equity capital markets inefficient?

A: Introduction: The given question is related to the concept of efficient market hypothesis. It is a…

Q: What is the Capital Asset Pricing Model (CAPM)?What are the assumptions that underlie themodel?

A: The CAPM is an equilibrium model which stipulates the association among required rates of return and…

Q: What are some of the risks involved in short-term vs. long-term financing ?

A: Financing refers to providing or borrowing capital so as to run the operations of the business…

Q: In what way does leverage increase the riskiness of a loan?

A: The advantage a financial specialist or investor gets from utilizing debt is called financial…

Q: What role do interest rates play in allocating capital to different potential borrowers?

A: Rate of interest : It is the amount paid by a borrower to use the capital borrowed from the…

Q: Formula for interest rate parity?

A: Interest Rate Parity: It is the technique used to govern the relation between currency exchange rate…

Q: What is meant by Short-term financing?

A: Finance refers to the study of money , currency as well as the capital assets.There are basically…

Q: What is maturity matching approach (for short-term financing)?

A: This approach states that the maturity of company’s assets and liabilities should be coordinated to…

Q: How do maturity risk premiums affect the yield curve?

A: A premium, which a borrower pays to the lender in the form of compensation of interest rate…

Q: Which Interest Rate do we use in comparing different financing options?

A: The question is based on the concept of interest rate , which is used in comparing financing…

Q: What are the key points to consider when describing a firm's payout?

A: Meaning of dividend pay-out:The pay-out ratio shows the share of earnings paid out to shareholders…

Q: What is Long-Term Equity AnticiPation Security (LEAPS)?

A: Long-term equity anticipation securities (LEAPS) It's a contract for trading on open market options…

Q: What is the difference of Cost of Equity and the required rate of return on equities?

A: The amount of money that would be transferred to a company's shareholders if all of the company's…

Q: What does it mean to adopt a maturity matching approach to financing assets, includingcurrent…

A: Maturity matching states that long period funds must be utilized to finance long period assets and…

Q: What does it mean to adopt a maturity matching approach to financing assets, including current…

A: Matching concept while preparing the income statement , revenue  and profits are matched with…

Q: Evaluate the advantages of equity financing.

A: It is the process of selling a portion of business in exchange of  an investment in cash.It does not…

Q: What is the compensation for price risk in finance? How do they arise and what issues arise due to…

A: Price risk: Price risk can be defined as the risk that price of a security may reduce. This risk is…

Q: What is the difference between debt and equity financing?

A:

Q: How do you call a strategy that separately examines capital market conditions and the investor's…

A: The strategy is called as “Integrated Asset Allocation Strategy”.

Q: a) What is the similarity between the internal rate of retum of a project and the yield-to-maturity…

A: An investor make investments in securities and bonds with a purpose of earn long term return. When…

Q: What are the characteristics of equity investment?

A:

Q: How can we determine the borrowing rate of return?

A: The borrowing rate of return is the return that is charged on the borrowings made by the firms or…

Q: What is duration gap model? Explain the concept of duration. How duration measure can be used to…

A: Duration gap measures the mismatch between the duration of assets and liabilities held by a…

Q: How are interest rate risk and reinvestment raterisk related to the maturity risk premium?

A: The maturity risk premium is the premium for the hazard created amid an asset's life by conceivable…

Q: What is off–balance sheet financing?

A: To keep the debt-to-equity and leverage ratios low, companies opt to record certain liabilities and…

Q: how FHA buydown loans are structured?

A: Buydown loan is a type of loan in which lower interest rate is charged to the buyer. In such type…

Q: What are Capital Markets, and how do bonds markets fit into the definition of Capital Markets?

A: Capital markets is a broad term used to describe a venue where funds are exchanged between suppliers…

Q: Is Collateralized debt obligation a good investment? Please explain in details.

A: A collateralized debt obligation also known as a CDO is a complex structured credit product which is…

Q: what are the benefits/risks of financial leverage?

A: Financial leverage is a condition wherein a company raises funds through the issue of additional…

Q: Explain equity participation loans?

A: Equity participation loans refer to the situation where the owner or lender will reduce the interest…

Q: What differentiates a Total Return Swap (TRS) from a Loan Portfolio Swap (LPS)?

A: Swap-  A swap is an agreement between two counterparties to exchange financial instruments or…

Q: What common assumptions do the Capital Asset Pricing Model (CAPM) and Arbitrage Pricing Theory (APT)…

A: Portfolio management is the process of encompassing the activities of investment in assets and…

Q: What is the difference between lending and borrowed portfolio. How leverage can increase the…

A: The capital allocation line, also known as the capital market link, is a line drawn on a graph of…

Q: What are the advantages and disadvantages ofusing short-term debt as a source of financing?

A: Short-term debt: It is a kind of debt that is repaid in a small span of time or within a year. The…

Q: Describe the hedging (maturity matching) approach to financing and the advantages/disadvantages of…

A: Matching or hedging approach:  This approach matches assets and liabilities to maturities.…

Q: Does the signaling theory lead to the same conclusions regarding the optimal capital structure asthe…

A: The concept of signaling theory comes from the asymmetries of knowledge between management and…

Q: Which of the following rebalancing methodologies will ha market impact cost? Buy and Hold Momentum…

A: Rebalancing a portfolio It is a process by which the weights of the assets of a portfolio are…

Q: What are the two ways a sinking fund can be handled? Whichmethod will be chosen by the firm if…

A: A sinking fund is a fund created periodically by setting aside money for the gradual repayment of a…

Q: Discuss the following terms…

A: Terms mentioned in the question relates to overall financial markets and management as well risk…

Q: What is the strength of equity method?

A: Investments:   Companies invest in stocks and bonds of other companies or governmental entity to…

Q: Explain Yields on Investment Annuities?

A: The question is based on the concept of calculation yield, which describes the  returns to the…

Q: What are investor motivations for acquiring dual-currency and currency-option bonds? Which is…

A: Dual currency bond is a type of bond which will be issued in one currency and which will pay coupon…

Q: discuss the advantages and disadvantages of options in the financial market

A: Options are financial instruments which derives its value from an underlying asset. The buyer of the…

Q: What are the key factors on which external financing depends, as indicated in the AFN equation?

A: Introduction: Additional funds needed (AFN) is a financial term that is used when a company’s trying…