| 3. Multiple Choice. (1\'*10-10) (1) Which of the following are both a A. Mutua
ID: 426643 • Letter: #
Question
| 3. Multiple Choice. (1'*10-10) (1) Which of the following are both a A. Mutual funds C. Pension funds B. Insurance companies D. Hedge funds (2) A balance sheet portrays the value of a firm's assets and liabilities: A. over an annual period. B. over any stated period of time. C. at any stated point in time. D. only at the end of the calendar year A firm with no leases has a long-term debt ratio of 50%. This means that the book value of equity: A. equals the book value of long-term debt. B. is less than the book value of long-term debt. C. is greater than the book value of long-term debt. D. is unknown in relation to the book value of long-term debt. (3)Explanation / Answer
1. Mutual Funds, Pension Funds and Insurance Companies are Financial Institutions which are also Financial Intermediaries.Many financial institutions play the role of a financial intermediary. That is, they help connect borrowers and lenders of funds.
Mutual fund's Investors buy shares in the fund and the mutual fund uses the proceeds to buy securities such as stocks and bonds.
Most people are familiar with insurance companies through the services they offer consumers: car insurance, life insurance, homeowners’ insurance. What people are less familiar with is that insurance companies hold much of the premiums they get as bonds and other securities, making them an important institutional investor. These investments provide a stream of revenue that is used to pay off on policies and to provide the profits for the firm.
Pension funds are financial intermediaries that handle the financial activity behind retirement plans. The standard company pension fund invests current funds (recorded as contributions by the company, the employee, or some mix) and uses the proceeds from the investments to pay the pension in the future.
2. (C) Balance Sheet of an organisation portrays assets and liabilities of a firm at any stated point of time i.e 31st March or any such date.
3.Long Term Debt to Equity %- The ratio is calculated by taking the company'slong-term debt and dividing it by the book value of common equity. The greater a company's leverage, the higher the ratio. Generally, companies with higher ratios are thought to be more risky.
Thus (A) Book value of equity is equal to Book value of debt when Long Term Debt Ratio is 50%.
4. Simple interest is always based on the present value, whereas compounded interest means that the present value grows exponentially each year. However with a long investment horizon the simple interest exceeds.
(B) When the investment hprizon is very long.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.