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Questions and Answers
Which of the following is a key reason why discounting is used in financial transactions?
Which of the following is a key reason why discounting is used in financial transactions?
- To obtain the right to delay payments (correct)
- To settle the debt immediately
- To reduce the original amount owed
- To increase the amount owed in the present
Which term is used to describe the difference between the original amount owed in the present and the amount that has to be paid in the future to settle the debt?
Which term is used to describe the difference between the original amount owed in the present and the amount that has to be paid in the future to settle the debt?
- Discount rate
- Charge (correct)
- Interest rate
- Discount yield
What is the discount yield?
What is the discount yield?
- The proportional share of the initial amount owed that must be paid to delay payment for 1 year (correct)
- The interest rate charged for delayed payment
- The charge to settle the debt immediately
- The total amount owed in the present
Why do most people prefer current interest to delayed interest?
Why do most people prefer current interest to delayed interest?
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What is the discount rate also called?
What is the discount rate also called?
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