BUSINESS ADMINISTRATION
FINANCIAL MANAGEMENT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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You benefit from earning interest on your deposit, safety for your funds, and having a recognizable means for paying for your financial obligations without having to hold cash.
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You and your professor have an obvious conflict of interest because you have accounts at the same financial institution.
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The bank is criminally liable to you for paying an interest rate lower than the expected rate of inflation.
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Your professor is the only party to be made worse off by this example because she is the only party paying net interest.
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Detailed explanation-1: -The basic function of financial intermediaries is to move advice from lenders to borrowers and back to lenders. In the lending/borrowing process, a financial intermediary function is to bear the risk that the borrower will not repay. All financial transactions have a buyer and a seller.
Detailed explanation-2: -Answer and Explanation: The correct answer is (B) Investing in real assets. Financial intermediaries are charged with accepting depositing and lending money to customers. Investing in real assets is not one of the functions of financial intermediaries.
Detailed explanation-3: -Option d-one-time cash flows, is not an example of an annuity. There must be multiple cash flows involved for a transaction to be characterized as an annuity.
Detailed explanation-4: -The time value of money concept becomes less critical as the prime rate of lending increases. Compounding refers to the growth process that turns $1 today into a greater value several periods in the future. a series of consecutive payments of equal amounts.