milkshakegrande101
08.07.2021 •
Business
The impact of interest rate changes in the PV of $100 due in 20 years compared to the PV of $100 due in one year are:
a. smaller because interest rate changes have a greater impact on the near-term cash flows than distant cash flows.
b. the same because the cash flow is the same.
c. greater because interest rate changes have a greater impact on distant cash flows than near-term cash flows.
d. sometimes less and sometimes more depending on the interest rate.
Solved
Show answers
More tips
- F Family and Home Do Lullabies Help Babies Sleep or Is it Just a Myth?...
- H Health and Medicine Tick Traps: How to Remove Them Safely and Effectively...
- S Society and Politics Why are thugs called gopniks ? A fascinating journey through Russian subculture...
- A Animals and plants Want a Perfect Lawn? Learn How to Plant Grass the Right Way...
- A Animals and plants How to Properly Care for a Pet Decorative Rabbit at Home?...
- C Computers and Internet How to Check the Speed of My Internet?...
- H Health and Medicine 10 Ways to Cleanse Your Colon and Improve Your Health...
- W Work and Career How to Write a Resume That Catches the Employer s Attention?...
- C Computers and Internet Е-head: How it Simplifies Life for Users?...
- F Family and Home How to Choose the Best Diapers for Your Baby?...
Answers on questions: Business
- B Business On March 1, the Garner Corporation borrowed $75,000 from the First Bank of Midlothian on a 1-year, 5% note. Required: If the company keeps its records on a calendar year,...
- B Business According to the wedding report, in 2010, the average wedding cost a little more than twenty-four thousand dollars five thousand dollars eleven thousand dollars thirty...
- B Business If consumer sovereignty is considered greatest in a system of pure competition, why is sovereignty still limited? consumers still rely on producers’ set prices. few products...
- E English Which of the following is not a way in which private theatres differed from public theatres? a. private theatres were within city limits. b. private theatres used artificial...
- B Biology The greenhouse effect is caused by a buildup of carbon dioxide in the atmosphere the trapping of the sun s heat pollution from burning fossil fuels all of the above...
- M Mathematics What is a mathematical sentence whose verb is equal (=)...
- E English Limestone can be metamorphosed into...
- E English When mary the robin she wasn t sure what to think of it. a) peculiar b) encountered c) manipulated d) encouraged...
- M Mathematics Amotorcycle has 30 spokes on it what is the angle between each spoke...
- M Mathematics Which is a unit of measurement for perimeter? a. yd b. yd^3 c. yd^2...
Ответ:
c. greater because interest rate changes have a greater impact on distant cash flows than near-term cash flows.
Explanation:
Interest rate changes have a greater impact on distant cashflows because those cashflows will be exposed to the interest rates for longer. This means that they will be subjected to more discounting than a cashflow that is due in one year which would be subject to only a single year of discounting.
For instance, assume the required rate of return for two investments is 10%. One investment yields $10,000 in 20 years and another yields $10,000 in 2 years .
The present value of both are:
= 10,000 / (1 + 10%)²⁰ = 10,000 / ( 1 + 10%)²
= $1,486.43 = $8,264.46
Notice the difference. The longer term investment was more exposed to interest rate effects.
Ответ: