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Why Is It Important for Businesses to Understand the Interest

question 15

Essay

Why is it important for businesses to understand the interest rate path? How do companies use debt to leverage their ?nancial returns? Illustrate with an example.


Definitions:

DAX-30 Index Futures

Futures contracts that speculate on the future value of the DAX, a stock index of 30 major German companies trading on the Frankfurt Stock Exchange.

Underpriced

A term describing a security or other asset that is selling for a price considered to be below its intrinsic or true value.

Arbitrage Profit

The profit made from buying and selling identical assets in different markets or formats to take advantage of differing prices for the same asset.

Buying

The action of acquiring ownership in a security or other financial asset in the hope of generating a gain.

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