The Pure Interest Yield

question 55

Multiple Choice

The pure interest yield

• A) reflects the expectation that the loan will be repaid with dollars of less purchasing power.
• B) is the real price one must pay for earlier availability.
• C) reflects the probability of default.
• D) is the real rate of return one could expect if the funds were invested in the commodities market.

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Definitions:

Liquidity

The simplicity of transforming an asset or security into immediate cash without impacting its market value.

Internal Rate of Return

The discount rate that makes the net present value (NPV) of all cash flows (both positive and negative) from a particular project or investment equal to zero.

Required Return

The smallest percentage of annual gain required from an investment to attract individuals or corporations to fund a certain project or venture.

Wealth

The abundance of valuable financial assets or physical possessions which can be converted into a form that can be used for transactions.