-What Is the Weighted Average Maturity of Assets?
A)5

question 12

Multiple Choice

$$\begin{array} { | l | r | l | l | r | l | } \hline \text { Assets } & \begin{array} { l } \text { Amount } \\\text { (\$ millions) }\end{array} & \begin{array} { l } \text { Annual } \\\text { Rate }\end{array} & \text { Liabilities } & \begin{array} { l } \text { Amount } \\\text { (\$ millions) }\end{array} & \begin{array} { l } \text { Annual } \\\text { Rate }\end{array} \\\hline \text { 1-year bonds } & \$ 60 & 7 \% & \text { 1-year CD } & \$ 50 & 5 \% \\\hline \text { 10-year loan } & \$ 40 & 12 \% & \text { 2-year CD } & \$ 40 & 6 \% \\\hline & & & \text { Equity } & \$ 10 & \\\hline \text { Total } & \$ 100 & & \text { Total } & \$ 100 & \\\hline\end{array}$$
-What is the weighted average maturity of assets?

• A)5.50 years.
• B)6.40 years.
• C)5.00 years.
• D)4.60 years.
• E)10.0 years.

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Definitions:

Sunk Cost

Costs that have already been incurred and cannot be recovered or altered and should not affect future business decisions.

Net Book Value

The value at which an asset is carried on a balance sheet, essentially the cost of the asset minus accumulated depreciation.

Equipment Rental

The process of leasing machinery or equipment for a specific period instead of purchasing it outright.

Markup Per Unit

The sum added to the purchase price of products to account for operational costs and earnings.