Target Cash Balances Are Generally Not Affected by Compensating Balance

question 91

True/False

Target cash balances are generally not affected by compensating balance requirements except during periods of high interest rates and tight money.

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Definitions:

Semiannual Interest

Interest that is calculated and paid twice a year on an investment or loan.

Bond Discount

The financial difference that arises when a bond is sold for an amount below its official face value.

Straight-line Method

A technique for determining depreciation or amortization by uniformly distributing the asset’s cost throughout its lifespan.

Unamortized Discount

The portion of a bond discount that has not yet been amortized to interest expense over the bond's life.