Why are there different interest rates on loans and securities?
What will be an ideal response?
Answer: Different interest rates exist to reflect the different risks and times for repayment. For example, it usually costs more to borrow for a car than to borrow for a house. In the case of the house, the lender is safer because house prices (in the old days at least!) usually went up, and so in the event of default the lender could just foreclose on the house, sell it, and get back the value of the loan. A car, however, usually depreciates, so foreclosing on a bad car loan does not get all the bank's money back. Another major reason interest rates differ is the time factor. For example, usually longer-term certificates of deposit pay higher interest rates—you'll earn a higher interest rate on a 24-month CD than on a 12-month CD. People usually want to borrow for long periods and lend for short periods. This leads to the imbalance in the demand and supply for short- and long-term loans, which in turn causes longer-term loans to offer higher rates.
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An investment promises to pay you the following amounts at the end of each of the next 10 years: (1 ) $1,000, (2 )
$2,000, (3 ) $3,000, (4 ) $4,000, (5 ) - (10 ) $5,000 per year. If you want to earn a return of 8% per year, how much will you be willing to pay for the investment today?
After shopping in the same store for nearly two hours, Holly goes to Burger King for a Whopper, while Tess goes to the optical shop to see if her contacts are ready. They engage in these activities without leaving the store in which they have been shopping. They are most likely in a
A. convenience store. B. hypermarket. C. department store. D. superstore. E. discount store.
Following are selected accounts for Green Corporation and Vega Company as of December 31, 2020. Several of Green's accounts have been omitted. Green VegaRevenues$900,000 $500,000 Cost of goods sold 360,000 200,000 Depreciation expense 140,000 40,000 Other expenses 100,000 60,000 Equity in Vega's income ? Retained earnings, 1/1/2020 1,350,000 1,200,000 Dividends 195,000 80,000 Current assets 300,000 1,380,000 Land 450,000 180,000 Building (net) 750,000 280,000 Equipment (net) 300,000 500,000 Liabilities 600,000 620,000 Common stock 450,000 80,000 Additional paid-in capital 75,000 320,000 ??Green acquired 100% of Vega on January 1,2016, by issuing 10,500 shares of its $10 par value common
stock with a fair value of $95 per share. On January 1, 2016, Vega's land was undervalued by $40,000, its buildings were overvalued by $30,000, and equipment was undervalued by $80,000. The buildings have a 20-year life and the equipment has a 10-year life. $50,000 was attributed to an unrecorded trademark with a 16-year remaining life. There was no goodwill associated with this investment.?Compute the December 31, 2020 consolidated retained earnings. A. $1,840,375. B. $1,565,375. C. $1,350,000. D. $1,265,375. E. $1,645,375.
Wight Corporation has provided its contribution format income statement for June. The company produces and sells a single product. Sales (9,600 units)$336,000Variable expenses 144,000Contribution margin 192,000Fixed expenses 137,000Net operating income$55,000If the company sells 9,100 units, its total contribution margin should be closest to:
A. $174,500 B. $52,135 C. $192,000 D. $182,000