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Homework answers / question archive / Section C
Section C. Statement/Concept Matching Exercise Statement Concept 1. Self-interest a. Bond 2. Allocating funds among projects b. Capital structure decision 3. Has a fixed rate of return and a finite life c. Maximising personal welfare d. Intrinsic value 4. Allocating capital between debt and equity e. Capital budgeting decision 5. The amount people are willing to pay for something USTRALIAN INSTITUTE
| Statement | Concept | Explanation |
|---|---|---|
| 1.Self interest | c) Maximizing personal welfare | Self interest refers to the actions and policy which focuses on increasing the personal wellfare |
| 2.Allocating funds among projects | e)Capital budgeting decisions | Capital budgeting decisions help us in taking decisons regarding how much amount should be jnvested in what projects/assets and for what period of time. |
| 3.Has a fixed rate of return and finite life | a)Bond | This is a debt financial instrument which has fixed rate of return and a fixed period of life.Eg: Government bond. |
| 4.Allocating capital between Debt and equity | b)Capital Structure decisions | Capital structure refers to the composition of debt and equity of the company which finances the company.These decisins refer to what distribution/composition (ratio)of the debt and capital should be obtained for financing the company. |
| 5.The amount people are willing to pay for something | d)Intrinsic value | Intrinsic value refers to the investors perception of the inherent value of an investment.It is the price which the investors are willing to pay. |
