In Periods of Unexpected Inflation

question 26

Multiple Choice

In periods of unexpected inflation:

• A)borrowers benefit, since they repay their loans in dollars with lower real value.
• B)lenders benefit, since they are repaid in dollars with a higher real value.
• C)neither borrowers nor lenders are affected by the inflation rate, since their nominal interest rate stays the same.
• D)lenders benefit, since the nominal interest rate does not change.

Comprehend the implications of changes in credit terms on the accounts payable period and cash cycle.

Recognize the various uses of cash in a company.

Understand how to manage cash flow problems in the short term.

Understand the characteristics and differences between various sources of finance such as debt capital, equity capital, commercial paper, and venture capital.

---

Definitions:

Combine

To join two or more items together to form a single entity or to merge separate elements into a cohesive whole.

Simplify

The process of writing an expression in a more compact or simplified form without changing its value, by performing all possible operations and reducing complexity.

Missing Factor

Refers to an unknown quantity in multiplication that, when multiplied with a known quantity, yields a given product.