If You Earn and Spend $2,000 Per Month and Maintain

question 126

Multiple Choice

If you earn and spend $2,000 per month and maintain an average cash balance of $500 per month, your velocity of money is

• A) $1,250.
• B) 2.
• C) 4.
• D) $1,500.

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Definitions:

Appropriate Discount Rate

The rate used to discount future cash flows to their present value to account for risk and time value of money, reflecting the opportunity cost of capital.

Interest Rate

The share of a loan incurred as interest costs to the borrower, habitually depicted as an annual percentage of the loan's outstanding amount.

Marginal Tax Rate

The rate at which the last dollar of income is taxed, indicating the proportion of any additional dollar of income that must be paid in taxes.

Weighted Average Cost

A calculation that takes into account the varying costs of goods or services by weighting them according to their importance or quantity.