Homework Answers
Q7) An IPO stands for initial public offer and therefore the company issues the shares to the public for the first time when it issues and IPO and not the second time. When it raises the funds from the public the second time, it is known as a follow on offering, or an FPO. So the given statement is false
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7. An IPO is the sale of shares by a company to the general public for...
Universal Bank pays 6% Interest, compounded annually, on time deposits. Regional Bank pays 5% interest, compounded...
Universal Bank pays 6% Interest, compounded annually, on time deposits. Regional Bank pays 5% interest, compounded quarterly a. Based on effective interest rates, in which bank would you prefer to deposit your money? 1. You would choose Regional Bank because its EAR (or EFF%) is higher. II. You would choose Regional Bank because its nominal interest rate is higher. TIL. You are indifferent between the banks and your decision will be based upon which one offers you a int for...
Effective versus nominal interest rates
Effective versus nominal interest ratesBank A pays 7% interest compounded annually on deposits, while Bank B pays 6% compounded daily.Based on the EAR (or EFF%), which bank should you use?-Select-IIIIIIIVVItem 1You would choose Bank A because its EAR is higher.You would choose Bank B because its EAR is higher.You would choose Bank A because its nominal interest rate is higher.You would choose Bank B because its nominal interest rate is higher.You are indifferent between the banks and your decision will...
Bank A pays 3% interest compounded annually on deposits, while Bank B pays 2.25% compounded daily....
Bank A pays 3% interest compounded annually on deposits, while Bank B pays 2.25% compounded daily. a. Based on the EAR (or EFF%), which bank should you use? You would choose Bank A because its EAR is higher. You would choose Bank B because its EAR is higher. You would choose Bank A because its nominal interest rate is higher. You would choose Bank B because its nominal interest rate is higher. You are indifferent between the banks and your...
Bank A pays 6% interest compounded annually on deposits, while Bank B pays 5.75% compounded daily....
Bank A pays 6% interest compounded annually on deposits, while Bank B pays 5.75% compounded daily. a. Based on the EAR (or EFF%), which bank should you use? You would choose Bank A because its EAR is higher. You would choose Bank B because its EAR is higher. You would choose Bank A because its nominal interest rate is higher. You would choose Bank B because its nominal interest rate is higher. You are indifferent between the banks and your...
11. Problem 5.27 Click here to read the eBook: Semiannual and Other Compounding Periods Click here...
11. Problem 5.27 Click here to read the eBook: Semiannual and Other Compounding Periods Click here to read the eBook: Comparing Interest Rates EFFECTIVE VERSUS NOMINAL INTEREST RATES Bank A pays 8.5% interest compounded annually on deposits, while Bank B pays 7.5% compounded daily. a. Based on the EAR (or EFF%), which bank should you use? I. You would choose Bank A because its EAR is higher. II. You would choose Bank B because its EAR is higher. III. You...
Effective versus nominal interest rates Bank A pays 9.5% interest compounded annually on deposits, while Bank...
Effective versus nominal interest rates Bank A pays 9.5% interest compounded annually on deposits, while Bank B pays 9% compounded daily. a. Based on the EAR (or EFF%), which bank should you use? I. You would choose Bank A because its EAR is higher. 11. You would choose Bank B because its EAR is higher. III. You would choose Bank A because its nominal interest rate is higher IV. You would choose Bank B because its nominal interest rate is...
2. Tom sets up auto-payment for his monthly mortgage payments so that at the end of...
2. Tom sets up auto-payment for his monthly mortgage payments so that at the end of every month $2100 will be automatically withdraw from one of his savings accounts and sent to the mortgage company. This savings account pays a generous 1.75% monthly interest. He expects that he will need to make exactly 300 payments and his mortgage will be paid off. He wishes to move enough money from his other accounts into this one so that he won't need...
Find the present value of $700 due in the future under each of these conditions: a....
Find the present value of $700 due in the future under each of these conditions: a. 15% nominal rate, semiannual compounding, discounted back 8 years. Do not round intermediate calculations. Round your answer to the nearest cent. b. 15% nominal rate, quarterly compounding, discounted back 8 years. Do not round intermediate calculations. Round your answer to the nearest cent. c. 15% nominal rate, monthly compounding, discounted back 1 year. Do not round intermediate calculations. Round your answer to the nearest...
1. A friend asks to borrow $57 from you and in return will pay you $60...
1. A friend asks to borrow $57 from you and in return will pay you $60 in one year. If your bank is offering a 6% interest rate on deposits and loans: (a) How much (in $) would you have in one year if you deposited the $57 instead? (Round your answer to the nearest cent.) (b) How much money (in $) could you borrow today if you pay the bank $60 in one year? (Round your answer to the...
Company X went public at the start of 2017. At the time of the IPO the...
Company X went public at the start of 2017. At the time of the IPO the company: Issued 200M shares of stock at $25 per share (thus raising $500M in equity) Issued $400M of long term debt; as part of this interest only loan, the company agreed to pay creditors 15.0% per year; this implies the current portion of long term debt is $0 in 2017/2018 At the end of 2017, Company X issued financial statements. A complete...
Universal Bank pays 6% Interest, compounded annually, on time deposits. Regional Bank pays 5% interest, compounded quarterly a. Based on effective interest rates, in which bank would you prefer to deposit your money? 1. You would choose Regional Bank because its EAR (or EFF%) is higher. II. You would choose Regional Bank because its nominal interest rate is higher. TIL. You are indifferent between the banks and your decision will be based upon which one offers you a int for...
11. Problem 5.27 Click here to read the eBook: Semiannual and Other Compounding Periods Click here to read the eBook: Comparing Interest Rates EFFECTIVE VERSUS NOMINAL INTEREST RATES Bank A pays 8.5% interest compounded annually on deposits, while Bank B pays 7.5% compounded daily. a. Based on the EAR (or EFF%), which bank should you use? I. You would choose Bank A because its EAR is higher. II. You would choose Bank B because its EAR is higher. III. You...
Effective versus nominal interest rates Bank A pays 9.5% interest compounded annually on deposits, while Bank B pays 9% compounded daily. a. Based on the EAR (or EFF%), which bank should you use? I. You would choose Bank A because its EAR is higher. 11. You would choose Bank B because its EAR is higher. III. You would choose Bank A because its nominal interest rate is higher IV. You would choose Bank B because its nominal interest rate is...
2. Tom sets up auto-payment for his monthly mortgage payments so that at the end of every month $2100 will be automatically withdraw from one of his savings accounts and sent to the mortgage company. This savings account pays a generous 1.75% monthly interest. He expects that he will need to make exactly 300 payments and his mortgage will be paid off. He wishes to move enough money from his other accounts into this one so that he won't need...
Find the present value of $700 due in the future under each of these conditions: a. 15% nominal rate, semiannual compounding, discounted back 8 years. Do not round intermediate calculations. Round your answer to the nearest cent. b. 15% nominal rate, quarterly compounding, discounted back 8 years. Do not round intermediate calculations. Round your answer to the nearest cent. c. 15% nominal rate, monthly compounding, discounted back 1 year. Do not round intermediate calculations. Round your answer to the nearest...
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