You place 500 into your checking account at First Bank and earn 1 APR on your deposit. Your professor borrows money at a rate of 8 from the same bank for a tuition loan for her son. Which of the following statements is true?
A) The bank is criminally liable to you for paying an interest rate lower than the expected rate of inflation.
B) You and your professor have an obvious conflict of interest because you have accounts at the same financial institution.
C) You benefit from earning interest on your deposit, safety for your funds, and having a recognizable means for paying for your financial obligations without having to hold cash.
D) Your professor is the only party to be made worse off by this example because she is the only party paying net interest.
Question 2
A corporation is considering expanding operations to meet growing demand. With the capital expansion, the current accounts are expected to change.
Management expects cash to increase by 20,000, accounts receivable by 40,000, and inventories by 60,000. At the same time accounts payable will increase by 50,000, accruals by 10,000, and long-term debt by 100,000. The change in net working capital is ________.
A) an increase of 120,000
B) a decrease of 60,000
C) a decrease of 120,000
D) an increase of 60,000
A typical bank statement.
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