WEEK 4 - COST OF DEBT

Question 1

is the total interest expense owed on a debt.

Answer 1

cost of debt

Question 2

is any money owed by one entity to another. companies and individuals may use ____ to
make large purchases or investments for further growth.

Answer 2

debt

Question 3

deals with how a firm finances its overall operations and growth
through different sources of funds, which may include debt such as bonds or loans.

Answer 3

Capital structure

Question 4

Several factors can increase the cost of debt, depending on the level of risk to the lender. These
include:

Answer 4

1. longer payback period (greater effects of tima value of money and opportuntiy costs)
2. risky norrower
3. unsecured debts

Question 5

How to reduce Cost of Debt?

Answer 5

1. Negotiating rates
2. Refinancing
3. Increase payments
4. Improving credit scores

Question 6

refers to the fair market value of the assets used to secure a
loan. Is typically determined by looking at the recent sale prices of
similar assets or having the asset appraised by a qualified expert.

Answer 6

Collateral value

Question 7

Types of Collateral

Answer 7

1. Consumer goods
2. Property on paper
3. Farm products
4. Inventory
5. Equipment

Question 8

These are primarily items bought by any consumer. They may include vehicles.

Answer 8

Consumer goods

Question 9

involves stocks, bonds, and funds in a savings account. lender could take over it and use them for their benefit.

Answer 9

Property on paper

Question 10

may involve farm animals and crops.

Answer 10

Farm products

Question 11

includes contents of a building, a list of properties, and goods in
stock.

Answer 11

Inventory

Question 12

are items used in business operations like computers and other machinery.

Answer 12

equipment

Question 13

A formal ________
appraisal can help lenders understand how much an asset is worth today.

Answer 13

collateral valuation