Ima Safer,who Recently Graduated from College and Got a Full

question 147

Multiple Choice

Ima Safer,who recently graduated from college and got a full time job,has prepared her first personal budget and found a pleasant surprise.After taking into account her expected monthly income and all of her ordinary expenses,including the monthly payment on her credit card,she should have some money left over.If Ima is like most young people who are just starting out,the best thing for her to do with the extra money would be to:

• A)use it to open her own business.
• B)pay off any charges against her credit card account or other high interest debts.
• C)use it to make a down payment on a house.
• D)put it into a savings account that earns a guaranteed rate of return.

Explain how discretionary fiscal policy can shift aggregate demand and supply curves.

Understand the concept of the cost of capital and its importance in finance.

Calculate the cost of equity using different models (DCF, CAPM).

Identify and calculate the component cost of debt for WACC.

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Definitions:

American Options

Options that can be exercised at any time up to the expiration date, unlike European options which can only be exercised on the expiration date.

Put Option

A financial contract giving the holder the right but not the obligation to sell a specified amount of an underlying asset at a set price within a specified time.

Exercise

The action of implementing or executing a right or option, such as the act of buying or selling an asset under the terms of an options contract.

Option Strike Price

The strike price is the set price at which an option contract can be bought or sold when it is exercised.