Your credit card:
a) Is a form of demand deposit
b) Is a form of time deposit
c) Is an asset
d) Has all the functions of money
So from my understanding, credit cards are not an asset, since they do not store value, can't be sold or given away. Hence they also do not have all the functions of money. But even in terms of deposit, I do not see how credit card fits into that. Please do help, it is much appreciated.
I believe that of your choices, asset is the best answer. Each credit card carries a certain dollar-amount of credit, which can be considered an asset.
The taught capital structure for QM Industries is 45% common stock 7% preferred and 48% debt. If the cost of common equity for the firm is 17%, the cost of preferred stock is 10%, the before-tax cost of debt is 8.4% and the firm tax rate is 35%, what is the weighted average cost of capital. QM's Wacc is ( ) % round to three decimal places.
You're correct that credit cards are not a form of deposit. They are a financial tool that allows you to borrow money from a bank or credit card issuer to make purchases. When you use a credit card, you are essentially taking out a loan, which you must repay later.
Now, let's break down the given options:
a) A demand deposit is a type of account, such as a checking account, where funds can be withdrawn at any time. Credit cards are not considered demand deposits because they do not hold your money.
b) A time deposit, also known as a certificate of deposit (CD), is a savings account with a fixed term and a fixed interest rate. Credit cards are not time deposits because they are not used to save or earn interest.
c) In the context of credit cards, they are not considered assets because they do not represent something of value that you own. Instead, they represent a line of credit extended to you by the issuer.
d) Credit cards do not have all the functions of money. Money serves as a medium of exchange, a store of value, and a unit of account. While credit cards can be used as a medium of exchange to make purchases, they do not function as a store of value because they generally do not accumulate interest and cannot be used to save money.
In summary, credit cards are not a form of deposit and are not considered an asset. They serve as a means to borrow money, but they do not have all the functions of money like physical currency or actual deposits in bank accounts.