Cost of capital rising faster than its return on assets

Assignment Help Financial Management

Reference no: EM13766256

In the 2010 10-K Frontier’s management wrote, If the interest we pay on deposits and other borrowings increases at a faster rate than the interest we receive on loans and other investments, our net interest income, and therefore earnings, could be adversely affected. Earnings could also be adversely affected if the interest we receive on loans and other investments fall more quickly than the interest we pay on deposits and other borrowings.

This indicates that Frontier is worried about its cost of capital rising faster than its return on assets.

TRUE OR FALSE.

Please explain the answer.

Reference no: EM13766256

Questions Cloud

What is the approximate yield to maturity : A 13-year bond pays 9 interests on a $1000 face value annually. If it currently sells for $1,300, what is its approximate yield to maturity? What is the approximate yield to maturity for a 11-year bond that pays 12 interest on a $1000 face value annu..

What is causing pain and suffering in the ectopic pregnancy : What is causing the pain and suffering in the ectopic pregnancy? Is one person's health and well being taking a higher priority over another person's health and well-being (mother, baby)?

How should investment returns be measured : How should investment returns be measured? Do financial services companies have an incentive to provide nominal rather than true rates of return in their advertising? Should they be required to provide nominal, real, and true rates of return?

What are the potential benefits for policymakers : What are the potential benefits for policymakers in determining IA structures and networks and outlining the ways these will be used

Cost of capital rising faster than its return on assets : In the 2010 10-K Frontier’s management wrote, If the interest we pay on deposits and other borrowings increases at a faster rate than the interest we receive on loans and other investments, our net interest income, and therefore earnings, could be ad..

What would the result of those suits be explain : Jack and Mari decided to open a new bakery and pastry shop in Encino. On 10 January 2000 they entered into a written agreement providing that each of them would contribute $50,000 to the capital of the business. What would the result of those su..

Explore and evaluate the costs and benefits of fdi : Explore and evaluate the costs and benefits of FDI with respect to your selected country in particular and host economies in general.

Expected return-overvalued or undervalued : Stock Y has a beta of 1.6 and an expected return of 16.6 percent. Stock Z has a beta of 0.8 and an expected return of 9.4 percent. If the risk-free rate is 5.1 percent and the market risk premium is 6.6 percent, the reward-to-risk ratios for stocks Y..

Best estimate of the companys cost of equity : Stock in Dragula Industries has a beta of 1.4. The market risk premium is 7 percent, and T-bills are currently yielding 4.40 percent. The company’s most recent dividend was $1.60 per share, and dividends are expected to grow at a 6.0 percent annual r..

User Account

All Pages