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What is reinvestment rate risk?
Reinvestment rate risk refers to the potential for an investor to earn lower returns on reinvested cash flows, such as interest or dividends, when interest rates decline. This risk is particularly significant for fixed-income investments, where the cash flows may need to be reinvested at prevailing market rates, which could be lower than the original investment’s yield. Consequently, if rates drop, the overall return on the investment may decrease, impacting the investor's expected income.
Where does cash go on the income statement?
Cash does not appear on the income statement. The income statement shows a company's revenues and expenses over a specific period, while cash flow is shown in the statement of cash flows.
Explain why the interest only strip is at risk as market interest rates decline?
if interest rates decline, the underlying mortgages will be prepaid, thereby, reducing the cash flows from interest payments, and the value of these investments will decline. Because of the volatility of these investments
Where does cash go on an income statement?
Cash does not appear on an income statement. The income statement shows a company's revenues and expenses over a specific period of time, while cash flow is shown on the statement of cash flows.
Why is reduction of debt considered income?
Anytime reduction of debt is considered income to the debtor, this means financial stability and good cash flows in business. larryadebesin.com the Ultimate Wealth Enrichment and Debt Elimination Plan will show you how to get your money's worth by systematically reducing your taxes, eliminating interest payments and increasing your cash flow all at the same time without spending any extra money.
What two distict flows may be classified with income?
Income can be classified into two distinct flows: earned income and unearned income. Earned income is generated through active participation in work or business activities, such as salaries, wages, and profits from self-employment. Unearned income, on the other hand, comes from investments and assets, including interest, dividends, rental income, and capital gains. Both flows contribute to an individual's overall financial health and economic status.
When the vendor cashes the expenditure check and money flows from the Treasury to the vendor or supplier?
Outlay
How do you calculate the net income after taxes with cash flows?
Cash flows are adjusted for depreciation transaction and then net income is arrised and from there taxes are deducted as well.
What effect will the declaration and distribution of a stock dividend have on the net income and cash flows?
19. What effect will the declaration and distribution of a stock dividend have on net income and cash flows? (Points : 2)No effect on net income or cash flowsNo effect on net income, decrease cash flowsDecrease net income, decrease cash flowsIncrease net income, no effect on cash flows
The present value of future cash flows has what relationship to interest rate?
The present value of future cash flows is inversely related to the interest rate.
What is net income and net cash flow?
Net Income is equal to the income that a firm has after subtracting costs and expenses from the total revenue. It can refer to the total of all the flows involved or to only a subset of those flows.
What are the two main flows in an economy?
income and consumer
Cash flows from interest received are reported in the statement of cash flows as part of?
Operating activities
the three major flows in the economy?
explain the 3 major flows in the economy
What is reinvestment rate risk?
Reinvestment rate risk refers to the potential for an investor to earn lower returns on reinvested cash flows, such as interest or dividends, when interest rates decline. This risk is particularly significant for fixed-income investments, where the cash flows may need to be reinvested at prevailing market rates, which could be lower than the original investment’s yield. Consequently, if rates drop, the overall return on the investment may decrease, impacting the investor's expected income.
What two distinct flows may be classified with income?
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How does income taxes affect net cash flow?
An individual's net income is used to determine how much income tax is owed. ... cash flows from operating activities ...
