Which method should be used if management anticipates a periodof inflation? Why?

Q: If there is inflation how does this affect LIFO reserves? Does it increase or decrease it?

A: LIFO Last-in-first out is a method used to issue material. It is a method of pricing the issues of…

Q: Who uses the original base period for the CPI index?Give an example?

A: CPI is the abbreviation used for the consumer price index. The combined weighted average value of…

Q: How is the revaluation surplus handled under the revaluation model?

A: The question is related to Revaluation model under IAS16 Property, Plant and Equipment. Under this…

Q: The difference between the nominal interest rate and the effectiveinterest rate.

A: The nominal interest rate is the interest rate paid annually without compounding period.  The…

Q: According to the single index model, the inflation risk is an example of the:

A: Single Index Model is the type of an asset pricing model which determines the returns on security…

Q: hOW DO YOU CALCULATE MARR in real terms? (Adjusted for inflation)

A: Minimum Acceptable Rate of Return (MARR) is made to ascertain the economic attractiveness of the…

Q: What are the Effects of Inflation on Projects with Depreciable Assets?

A: Answer: A depreciable asset is nothing a property that gives more economic benefit over a tax period…

Q: In a complete sentence give an example of something that has been affected by inflation.

A: In finance inflation is the rate of increase in prices of goods and services over a time period. An…

Q: Explain Interest Rates and Inflation Expectation?

A: An interest rate is the measure of cash a bank or creditor charges for right of entry to cash. The…

Q: How does the price level adjusted mortgage (PLAM) address the problem of uncertainty in inflationary…

A: Price level adjusted mortgage helps in reducing the interest rate risk and effects of inflation on…

Q: Real rates are defined as nominal rates that have been adjusted for inflation. Select one: True…

A: Nominal interest rate is the amount of rate paid to lendor for the use of money

Q: How much is the estimated payment to liabilities with priority?

A: The determination of estimated payment to Liabilities with priority is shown hereunder : The…

Q: What is the relationship between the time value of money and inflation?

A: Inflation is the rate at which the purchasing capability of money decreases over time. It is…

Q: What is a question that should be asked about accounts payable when forecasting?

A: Accounts payable is a liability for the company which means all payables related to credit purchase…

Q: What security provides a good estimate of the short-term nominalrisk-free rate?

A: T-bills are the treasury bills issued by the government. These bills are risk-free and the rate of…

Q: the natural

A: The Phillips curve displays the inverse relationship between unemployment and inflation: as…

Q: What will be Effects of Changes in “Going-In” Cap Rates in Response toSupply and Demand?

A: Going-in-cap rate: Going-in-cap rate is the cap rate originated on the ratio of the initial year of…

Q: What is the concept of present value? How does it affect inflation

A: Increase in general price levels in an economy is known as inflation. Due to inflation, the cost of…

Q: Describe the process of using the risk-adjusted discount rateto calculate the net present value?

A: Net present value (NPV) is the excess of present value of cash inflows over the present value of…

Q: What is the purpose and workings of the Monetary policy transmission mechanism (MPTM)? What are the…

A: Monetary transmission technique or the mechanism is referred to as the process through which the…

Q: impacts  of inflation on money investment

A: Inflation occurs when prices across a sector or an industry increases, thereby decreasing the…

Q: What effect does inflation typically have on the EOQ?

A: Economic order quantity (EOQ) is the optimal purchasing order number to keep stock costs, such as…

Q: The real rate of return is related to O The risk-free rate The risk-free and the inflation rate The…

A: Real rate of returnAn annual profit percentage that is earned on the investment, being adjusted for…

Q: INTEREST RATE RISK  In the context of the repricing gap model, what is the spread effect? How does…

A: The repricing gap model is based on the consideration that a bank's exposure to interest rate risk…

Q: Define the term Risk-Adjusted Discount Rate Approach?

A: The estimation of the present value of cash for high-risk investment is known as a risk-adjusted…

Q: How can we determine the project cash flows in the absence of inflation?

A: Project Cash Flows are the Net cash flows of the project i.e. Sources of cash less uses of cash. The…

Q: Using the AD-AS model, demonstrate the potential causes of inflation

A: AD/ AS curve is demand and supply curve which shows the aggregate demand v/s aggregates supply in…

Q: Why inflation is considered and have effect in present value?

A: Inflation is the increase in the general price level of the country. It is an important indicator of…

Q: What is inflation premium (IP)?

A: Inflation premium is considered to be a very popular concept as this is considered to be a major…

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: Why is it true, in general, that a failure to adjust expected cash flows forexpected inflation…

A: Expected cash flow is the cash flow which is expected to be generated from the project. Higher are…

Q: Define the term recession?

A: Recession: When an entire economy performs poorly (i.e. having a negative performance or decline in…

Q: In an inflationary period, what is the difference between (a) inflated dollars and “then-current”…

A: Inflation is the rate at which goods and services cost rates increment. On the off chance that…

Q: What should be reported in a hyper-inflationary statement of financial position prepared on December…

A: Carrying amount of the asset is the value of the asset which has been computed and determined by the…

Q: Inflation

A: Inflation means increase in prices of different products.

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: what give rises to the changes in PBO balance?

A: PBO stands for the Projected Benefit Obligation. It shows how much the company would need in its…

Interest Rate

When you deposit your money with the bank, the deposit earns you some extra money at the end of the specific period – something more than what you deposited. That amount of money that the bank pays you for keeping the money with the bank is the “interest” and the percentage at which the bank pays you for your amount is called the “interest rate”.