When the Length of the Financing Is Directly Related to the Life

question 8

Multiple Choice

When the length of the financing is directly related to the life of the asset being financed,the firm is said to follow a:

• A) policy of maturity matching.
• B) restrictive financing strategy.
• C) matched depreciation strategy.
• D) minimum working capital strategy.

---

Definitions:

Future Value

The value of an investment at a specific date in the future, accounting for specified interest rates or returns.

Present Value

The contemporary value of a forthcoming amount of money or cash flow stream, determined by a certain rate of return.

Discount Rate

The rate at which regional Federal Reserve Banks lend to commercial banks and other financial institutions, charged for loans obtained from the Federal Reserve's lending facility.

Present Values

The current worth of a future sum of money or stream of cash flows given a specified rate of return, taking into account the time value of money.