Financial Management - Study Mode

[#406] Procedure of finding present values in time value of money is classified as
Correct Answer

(B) discounting

Explanation

Solution: Procedure of finding present values in time value of money is classified as discounting. Discounting is the process of determining the present value of a payment or a stream of payments that is to be received in the future. Given the time value of money, a dollar is worth more today than it would be worth tomorrow. Discounting is the primary factor used in pricing a stream of tomorrow's cash flows.

[#407] The available capital funds are to be carefully allocated among competing projects by careful prioritization. This is called ____________.
Correct Answer

(D) capital budgeting

Explanation

Solution: The available capital funds are to be carefully allocated among competing projects by careful prioritization. This is called capital budgeting. Capital budgeting is the process a business undertakes to evaluate potential major projects or investments.

[#408] Treasury bills are traded in the __________.
Correct Answer

(A) money market

Explanation

Solution: Treasury bills are traded in the money market. The money market is the trade in short-term debt investments. At the wholesale level, it involves large-volume trades between institutions and traders.

[#409] The cost of capital of a long term debt is generally.
Correct Answer

(D) Higher than that of owned funds

Explanation

Solution: The cost of capital of a long term debt is generally Higher than that of owned funds. Cost of capital refers to the opportunity cost of making a specific investment. It is the rate of return that could have been earned by putting the same money into a different investment with equal risk.

[#410] Which of the following would not be considered as capital market security?
Correct Answer

(C) A 6-month Treasury bill

Explanation

Solution: A 6-month Treasury bill would not be considered as capital market security. A Treasury Bill (T-Bill) is a short-term debt obligation backed by the U.S. Treasury Department with a maturity of one year or less.