Question

Suppose a firm wants to take advantage of an upward-sloping yield curve. If the firm believes that interest rates will stay constant and it wants to use the current yield curve to bolster profits, which approach should the firm follow? O Conservative approach O Aggressive approach O Maturity matching approach Suppose a firm occasionally faces demand for short-term credit but usually has an excess of short-term capital to finance current assets. Which approach is the firm following? Conservative approach O Maturity matching approach Aggressive approach Which usually costs less-short-term or long-term debt? Long-term debt O Short-term debt

Answer 1

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WORKING CAPITAL APPROACH - Microsoft Excel (Product Activation Failed) Review View Add-Ins File Home Insert Page Layout Formulas Data - 2x % Cut Calibri Dr -11AA = = = D A B I U - SF Wrap Text General Merge Merge & Center Center $ - % % CD Number 4:0 .00 8.9 Insert Delete Format Conditional Format Formatting as Table Styles Cell Styles Σ AutoSum : A Fill Sort & 2 Clear Filter Editing Find & Select E Copy Paste Format Painter Clipboard AM2 L AA Font Alignment Cells AB AL AM AN AO AP AC AD AE AF AG AH AI AJ AK Suppose a firm wants to take advantage of an upward-sloping yield curve. If the firm believes that interest rates will stay constant and it wants to use the current yield curve to bolster profits, which approach should the firm follow? answer aggressive approach BBBO00 ou wn reason: In upward sloping curve scenario, short term rates are lower than long term rates so he prefers to take short term loans suppose a firm occasionally faces demand for short-term credit but usually has an excess of short-term capital to finance current assets. which approach is the firm following? answer conservative approach 13 14 15 reason: firm finances fixed assets & permanent current assets using long term funds & temporary current assets with short term debt so firm may go for short term debt to finance peak requirement otherwise has sufficient capital to finance current assets 16 17 18 19 20 HI Rea which type of debt usually cost less answer short term reason: long term loans are more riskier than short term loans and hence short term loans cost less Sheet1 Sheet2 Z SCORE insu pv fv cash opti LINE OF CREDIT og_miller CARD BANKER ACCEPTANC FACTOR SI DISC FOCAL ferences WC REQUIRE Sheet3 BOU 130% 0 ... B 9 . * . 40 ENG 27-11-2019