To accumulate $14,000,000 in 8 years with Dia-Ichi Kangyo Bank at a 12% annual return compounded semiannually, you should deposit $348,765.76 every six months.
1. First, determine the interest rate per period: 12%/2 = 6% or 0.06.
2. Next, find the total number of periods: 8 years * 2 = 16 periods.
3. Calculate the future value factor: (1 + 0.06)¹⁶ = 2.898266.
4. Divide the desired future value by the future value factor: $14,000,000 / 2.898266 = $4,832,451.21.
5. Calculate the ordinary annuity factor: (1 - (1 / (1 + 0.06)¹⁶)) / 0.06 = 13.853035.
6. Divide the present value by the ordinary annuity factor: $4,832,451.21 / 13.853035 = $348,765.76.
Hence, you should deposit $348,765.76 with Dia-Ichi Kangyo Bank every six months for 8 years to reach your goal.
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consider the information in the table below. what is the marginal rate of return for keeping the property one additional year? if sold today if sold next year sale price $ 2,500,000 $ 2,650,000 mortgage balance 1,000,000 900,000 capital gain tax 112,500 135,000 cash flow $ 1,387,000 $ 1,615,000 noi over next year $ 50,000
The marginal rate of return for keeping the property one additional year is $177,500.
The cash flow for keeping the property one additional year would be calculated as follows:
NOI for next year - mortgage payment - capital gain tax = cash flow
$50,000 - ($1,000,000 - $900,000) / 12 - $135,000 = $1,615,000
The marginal rate of return would be the difference in cash flow between selling today and selling next year, which is:
$1,615,000 - $1,387,000 = $228,000
However, since the question asks for the marginal rate of return for keeping the property one additional year, we would subtract the capital gain tax for selling today from the cash flow for selling next year:
$1,615,000 - $112,500 = $1,502,500
Therefore, the marginal rate of return for keeping the property one additional year is:
$1,502,500 - $1,325,000 = $177,500.
Note: NOI refers to Net Operating Income.
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why was electricity the most important power source for the second industrial revolution? group of answer choices electrical power generation plants were pollution-free. britain was rich in coal, so it did not have to rely on foreign supplies to power its factories. some new industries, such as the iron industry, were dependent solely on electricity. factories could be located near concentrations of workers and production costs were lower
The most important power source for the second industrial revolution was electricity because "factories could be located near concentrations of workers, and production costs were lower" (Option d).
With the availability of electricity, factories no longer needed to be located near rivers or coalfields for power. Instead, they could be built in urban areas closer to a concentration of workers, which made it easier to recruit and manage employees. Additionally, electrical power could be transmitted over longer distances, allowing factories to be located farther away from raw materials and closer to markets.
Furthermore, the use of electricity in manufacturing processes improved efficiency and productivity, as machines could be powered continuously and uniformly, leading to greater output and reduced costs. This was particularly important in new industries such as the iron industry, where electricity was the only viable power source for certain manufacturing processes.
Finally, the development of electrical power generation plants meant that businesses could rely on a more consistent and reliable source of power compared to earlier methods such as steam engines. This allowed for smoother production processes and fewer interruptions due to power outages.
Overall, the widespread adoption of electricity in the second industrial revolution was a significant factor in the growth and success of manufacturing industries during that time.
Option d is answer.
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The following two payment options each has a present value of X. (i) 140 at the end of each year, forever, with the first payment due at t = 1. (ii) A payment of 1971.24 at t = 10, followed by 140 at the end of each year, forever, with the first payment of 140 due at t = 11. Find X. a. 1.740.54 b. 1.854.05 c. 1.778.38 d. 1.891.89 e. 1.816.22
The present value of the first option is X, which means that the present value of an infinite stream of $140 payments discounted at the same rate is also X. Therefore, X = 140/0.12 = 1166.67.
To calculate the present value of the second option, we need to discount the $1971.24 payment back to time t=0 using the 12% discount rate for 10 years, which gives us a present value of $535.68. Then we need to calculate the present value of the infinite stream of $140 payments starting at t=11, which is X/(1+0.12)^10. Therefore, X/(1+0.12)^10 + $535.68 = X. Solving for X, we get X = $1740.54.
Therefore, the answer is (a) $1,740.54.
The first option is an infinite stream of $140 payments, and the second option is a payment of $1971.24 followed by an infinite stream of $140 payments. We can use the present value formula to calculate the present value of each option, set them equal to X, and solve for X.
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seaside issues a bond with a coupon (stated) interest rate of 12%, face value of $500,000, and due in 5 years. interest payments are made semi-annually. the market rate for this type of bond is 8%. what is the issue price of the bond?
$548,880 is the bond's issue price.
The issue price of the bond can be calculated using the present value formula, which takes into account the coupon payments and the face value of the bond. In this case, the semi-annual coupon payments are $30,000 ($500,000 x 12% / 2), and the number of semi-annual periods is 10 (5 years x 2). Using the market rate of 8%, the semi-annual discount rate is 4%.
To calculate the present value of the coupon payments, we use the formula:
Coupon payments x Present value factor = Present value of coupon payments
$30,000 x 7.036 = $211,080
To calculate the present value of the face value, we use the formula:
Face value x Present value factor = Present value of face value
$500,000 x 0.6756 = $337,800
Adding the present value of the coupon payments and the present value of the face value gives us the issue price of the bond:
$211,080 + $337,800 = $548,880
Therefore, the issue price of the bond is $548,880.
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Can there be both strategic dominance and strategic
interdependence in a game theory table?
Yes, both strategic dominance and strategic interdependence can exist in a game theory table.
Strategic dominance occurs when a player has a strategy that yields a better outcome, regardless of the other player's strategy. This strategy is considered dominant, as it outperforms all other available options.
Strategic interdependence, on the other hand, refers to the situation where the outcome of one player's decision depends on the actions of the other player. In these scenarios, both players need to consider each other's choices to determine their best course of action. This mutual dependence creates a complex decision-making process, as one's optimal strategy may change depending on the opponent's decision.
A game theory table can exhibit both strategic dominance and strategic interdependence if there are multiple possible outcomes for each player. For example, a player may have a dominant strategy for a specific subset of decisions, while still experiencing interdependence with the other player's choices in other scenarios. This combination of dominance and interdependence can make the game more complex and require a deeper analysis of the decision-making process.
In summary, both strategic dominance and strategic interdependence can coexist in a game theory table. While dominance represents a clear advantage in certain scenarios, the presence of interdependence complicates the decision-making process, as players must account for the potential choices of their opponents. This combination creates an intricate landscape for strategic analysis in game theory.
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Yes, it is possible for a game theory table to exhibit both strategic dominance and strategic interdependence. Strategic dominance occurs when one player has a dominant strategy that is optimal regardless of the other player's choice.
On the other hand, strategic interdependence refers to the situation where the outcome of a player's choice depends on the other player's choice. In some cases, there may be a dominant strategy for one player, while the other player's best response depends on the first player's choice. This can create strategic interdependence, as the second player must take into account the first player's dominant strategy when making their decision.
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NPV and IRR Each of the following scenarios is independent. All cash flows are after-tax cash flows. The present value tables provided in Exhibit 198.1 and Exhibit 19B.2 must be used to solve the following problems. Required: 1. Patz Corporation is considering the purchase of a computer-aided manufacturing system. The cash benefits will be $830,000 per year. The system costs $4,488,000 and will last ten years. Compute the NPV assuming a discount rate of 12 percent. $ Should the company buy the new system? Yes ✓ 2. Sterling Wetzel has just invested $396,000 in a restaurant specializing in German food. He expects to receive $53,804 per year for the next ten years. His cost of capital is 5.40 percent. Compute the internal rate of return. Round your answers to whole percentage value (for example, 16% should be entered as "16" in the answer box). % Did Sterling make a good decision? (Yes х
The internal rate of return is approximately 5%. Since the IRR is close to Sterling's cost of capital (5.40%), the decision to invest in the restaurant is marginally good.
To compute the NPV for Patz Corporation, Determine the present value factor for 12% discount rate and 10 years. Using the present value table, the factor is 5.650. Calculate the present value of cash benefits: $830,000 x 5.650 = $4,689,500. Subtract the initial cost: $4,689,500 - $4,488,000 = $201,500. The NPV is $201,500. Since the NPV is positive, the company should buy the new system.
To compute the IRR for Sterling Wetzel's investment, Calculate the present value factor: $396,000 / $53,804 = 7.36. Find the corresponding interest rate for the 10-year period. Using the present value table, the closest factor to 7.36 is 7.360 for a 5% discount rate. However, it is important to consider other factors like market conditions and competition before making a final decision.
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I need answer for this question. It's urgentplease.The following table presents closing prices of June 2022 CHF futures contract for three days in March 2022. Each contract requires the delivery of CHF 125,000. The initial and maintenance margin per c ontract are $2,500, and $2,000, respectively. Date 3/01 3/02 3/03 h June 2022 CHF Futures $0.5350 $0.5375 $0.5315 Contract Based on prices during the three-day period, which one of the following statements is true. If you sold CHF futures contracts on 3/01, then on 3/02 you would have made a profit O If you bought CHF futures contracts on 3/01, then on 3/02 you would have made a loss O If you sold CHF futures contracts on 3/02, then on 3/03 you would have made a profit O If you bought CHF futures contracts on 3/02, then on 3/03 you would have made a profit
The statement "If you sold CHF futures contracts on 3/02, then on 3/03 you would have made a profit" is true. The correct option is C.
To determine the profit or loss on a futures contract, we need to calculate the difference between the purchase price and the selling price of the contract.
On 3/02, the closing price of the June 2022 CHF futures contract was $0.5375. If you sold one contract, you would have sold it for $0.5375 × CHF 125,000 = $67,188.
On 3/03, the closing price of the June 2022 CHF futures contract was $0.5315. If you bought back the contract you sold on 3/02, you would have bought it for $0.5315 × CHF 125,000 = $66,438. The profit would be $67,188 - $66,438 = $750.
Therefore, option C is true.
The following table presents closing prices of June 2022 CHF futures contract for three days in March 2022. Each contract requires the delivery of CHF 125,000. The initial and maintenance margin per c ontract are $2,500, and $2,000, respectively.
Date 3/01 3/02 3/03
June 2022 CHF Futures $0.5350 $0.5375 $0.5315
Contract Based on prices during the three-day period, which one of the following statements is true.
A. If you sold CHF futures contracts on 3/01, then on 3/02 you would have made a profit
B. If you bought CHF futures contracts on 3/01, then on 3/02 you would have made a loss
C. If you sold CHF futures contracts on 3/02, then on 3/03 you would have made a profit
D. If you bought CHF futures contracts on 3/02, then on 3/03 you would have made a profit
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Explore the annual report and financial statements of M&S, Annual Report 2021 (marksandspencer.com)
Why do you think it is important that financial statements are compiled using a standard framework?
Discuss whether or not you think M&S’s financial statements illustrate the following qualitative characteristics of financial information:
o Relevance
o Faithful representation
o Comparability
o Understandability
M&S's financial statements seem to meet the qualitative characteristics of financial information, and the company provides useful information to its stakeholders.
Using a standard framework is crucial for financial statements to ensure consistency, transparency, and comparability among different companies' financial reports.
By adopting a standardized accounting framework, financial statements can provide useful information to various stakeholders, including investors, creditors, and regulators. It also facilitates benchmarking, which enables stakeholders to compare different companies' financial performance over time.
Regarding M&S's financial statements, they seem to illustrate the qualitative characteristics of financial information. The financial statements provide relevant information, such as the financial performance of the company, its financial position, and cash flows
The financial statements also exhibit comparability, as M&S provides financial information in a standardized format that allows stakeholders to compare the company's performance to its peers.
Lastly, M&S's financial statements are easily understandable, and the company provides sufficient disclosures to help stakeholders interpret the financial information accurately.
Overall, M&S's financial statements seem to meet the qualitative characteristics of financial information, and the company provides useful information to its stakeholders.
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Consider a part is to be transported from China to Europe. The annual demand for the part is 40,000 units. Price is $150 per unit. Annual holding cost rate is 30% of unit price. There are two transportation options. Air Cargo takes 5 days (door to door) and costs $45 per unit. Ocean Freight takes 50 days and costs $15 per unit. Because of variability of transportation time and demand, 1 week of demand will be kept at destination as safety stock if air cargo is used. On the other hand, 9 weeks of demand will be kept at destination as safety stock if ocean freight is used. Assume that order quantity is the same in both cases, and the shipping (freight) cost is charged when the item is delivered at the destination. Calculate the following costs for Air cargo: 1. Annual freight cost 2. Annual in-transit holding cost 3. Annual safety stock holding cost 4. Total cost of Air Cargo
the costs for air cargo, we need to use the following information:
Annual demand (D) = 40,000 units
Unit price (P) = $150
Holding cost rate (H) = 30% of unit price = $45
Transportation cost per unit (T) = $45
Safety stock for air cargo (S_air) = 1 week of demand = D/52 = 769 units
Delivery lead time for air cargo (L_air) = 5 days
Order quantity (Q) = ?
Working days per year (W) = 250 (assumed)
Annual freight cost:
Annual demand * transportation cost per unit = D * T = 40,000 * 45 = $1,800,000
Annual in-transit holding cost:
Average inventory in transit = Q/2
Average transit time = L_air/2 = 2.5 days
In-transit holding cost per unit per day = H * P / 365 = 45 * 150 / 365 = $18.49
Annual in-transit holding cost = Average inventory in transit * Average transit time * In-transit holding cost per unit per day
Annual in-transit holding cost = (Q/2) * (L_air/2) * 18.49 * W
Annual in-transit holding cost = (Q/4) * L_air * 18.49 * 250
Annual safety stock holding cost:
Safety stock holding cost per unit = H * P = 45 * 150 = $6,750
Annual safety stock holding cost = Safety stock * Safety stock holding cost per unit
Annual safety stock holding cost = S_air * 6,750
Total cost of air cargo:
Total cost = Annual freight cost + Annual in-transit holding cost + Annual safety stock holding cost
Total cost = 1,800,000 + (Q/4) * L_air * 18.49 * 250 + S_air * 6,750
We need to find the order quantity (Q) that minimizes the total cost. To do this, we can use the economic order quantity (EOQ) formula:
EOQ = sqrt(2DS_air / H)
EOQ = sqrt(2 * 40,000 * 769 / 0.3 * 150) = 1,925 units (rounded up)
Now we can plug this value of Q into the total cost equation to find the total cost of air cargo:
Total cost = 1,800,000 + (1,925/4) * 5 * 18.49 * 250 + 769 * 6,750
Total cost = $2,171,978.75
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our company has reviewed the utilities bills for our company. we have determined that the highest and lowest bills were $5,000 and $3,200 for the months of january and september. if we produced 1,050 and 600 units in these months, what was the fixed cost associated with the utilities bill? group of answer choices $435.50 $485.00 $590.00 $800.00
The fixed cost which associated with the utilities bill is $800.
How to calculate the fixed cost associated with the utilities billAfter reviewing the utilities bills for your company, it was determined that the highest and lowest bills were $5,000 in January and $3,200 in September.
To calculate the fixed cost associated with the utilities bill, we can use the following formula:
Fixed Cost = Total Cost - (Variable Cost per Unit × Number of Units)
First, we need to find the variable cost per unit for both months:
Variable Cost per Unit (January) = ($5,000 - $3,200) / (1,050 units - 600 units) = $1,800 / 450 units = $4 per unit
Now that we have the variable cost per unit, we can calculate the fixed cost for each month:
Fixed Cost (January) = $5,000 - (1,050 units × $4 per unit) = $5,000 - $4,200 = $800.
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The residual dividend policy approach is based on the theory that a firm^'s optimal distribution policy is a function of the firm^'s target capital structure, the investment opportunities that the firm has, and the availability and cost of external capital. The firm makes distributions based on the residual earnings.Consider the following example:Blime Inc. has generated earnings of dollar180 million.
Blime Inc.'s dividend payout ratio if it follows a residual dividend policy will be 71.33%. If Blime Inc. reduces the amount of its forecasted capital budget, the amount that Blime Inc. will payout in dividends this year will increase. The most accurate statement is that most firms can still use the concepts behind a residual dividend policy to make long-run decisions about dividends.
The residual dividend policy approach is based on the theory that a firm's optimal distribution policy is a function of the firm's target capital structure, investment opportunities, and the availability and cost of external capital. The firm makes distributions based on residual earnings.
Blime Inc.'s dividend payout ratio, if it follows a residual dividend policy, can be calculated as follows:
Step 1: Calculate the total financing required for capital projects ($86 million) and split it into equity and debt portions based on the target capital structure (60% equity and 40% debt).
Equity financing = 0.6 * $86 million = $51.6 million
Debt financing = 0.4 * $86 million = $34.4 million
Step 2: Calculate the residual earnings, which is the amount left after financing capital projects.
Residual earnings = Total earnings - Equity financing = $180 million - $51.6 million = $128.4 million
Step 3: Calculate the dividend payout ratio.
Dividend payout ratio = Residual earnings / Total earnings = $128.4 million / $180 million = 0.7133 or 71.33%
If Blime Inc. reduces its forecasted capital budget, the firm's annual dividend will increase, assuming all other factors are held constant. This is because a lower capital budget means the company will need less equity financing, resulting in a larger amount of residual earnings available for dividends.
The most accurate statement is that most firms can still use the concepts behind a residual dividend policy to make long-run decisions about dividends. While earnings and required investment may fluctuate, the residual dividend policy can help firms balance their need for capital investment and their commitment to providing returns to shareholders.
By basing dividend decisions on residual earnings, firms can ensure that they prioritize funding their growth and capital needs while distributing any remaining earnings to shareholders.
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Complete Question:
The residual dividend policy approach is based on the theory that a firm's optimal distribution policy is a function of the firm's target capital structure, the investment opportunities that the firm has, and the availability and cost of external capital. The firm makes distributions based on the residual earnings. Consider the following example:
Blime Inc. has generated earnings of $180 million. Its target capital structure consists of 60% equity and 40% debt. It plans to spend $86 million on capital projects over the next year and expects to finance this investment in the same proportion as its capital structure. The company makes distributions in the form of dividends. What will Blime Inc.'s dividend payout ratio be if it follows a residual dividend policy?
If Blime Inc. reduces the amount of its forecasted capital budget, how will this affect the firm's annual dividend, assuming that all other factors are held constant?
a. The amount that Blime Inc. will payout in dividends this year will increase.
b. The amount that Blime Inc. will payout in dividends this year will decrease.
Most firms have earnings that vary considerably from year to year and do not grow at a reliably constant pace. Furthermore, their required investment may change often. Which of these statements is the most accurate?
a. Most firms can still use the concepts behind a residual dividend policy to make long-run decisions about dividends.
b. A residual dividend policy can't be of any help to most firms.
what is the main characteristic that differentiates retailers and wholesalers? in what ways do retailers add value to products?
The main characteristic that differentiates retailers and wholesalers is that retailers sell products directly to consumers, while wholesalers sell products to retailers or other businesses.
Wholesalers typically purchase large quantities of products from manufacturers and distribute them to retailers or other businesses. They do not sell products to individual consumers. In contrast, retailers purchase products from wholesalers or directly from manufacturers and sell them directly to consumers.
Retailers add value to products in several ways. Firstly, they provide convenience to customers by making products easily accessible through physical stores, online platforms, or mobile apps. Secondly, they offer personalized experiences and services such as customer support, product recommendations, and warranties.
Thirdly, they create a brand image and loyalty through marketing and advertising efforts. Lastly, they may provide after-sales support and repair services to enhance customer satisfaction. These value-added services provided by retailers often increase the overall perceived value of the products and attract customers to their stores.
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According to John Kenneth Galbraith, which notion still survives as the predominate view of modern economics? The notion that if the supply decreases, then the demand will increase proportionally. The notion that the customer is always right. The notion that consumers buy in accordance with independently determined wants. The dependence effect The independence effect
According to John Kenneth Galbraith, the notion that still survives as the predominant view of modern economics is the notion that consumers buy in accordance with independently determined wants.
In his view, modern economics often assumes that consumer wants are determined independently of the influence of producers or other external factors.
Galbraith challenges this assumption with the concept of the "dependence effect," which suggests that consumer wants are often shaped by the actions of producers through advertising and other marketing techniques.
He argues that this dependence creates a situation where producers can manipulate consumer demand to suit their own interests, rather than responding to genuine needs.
This perspective is significant because it highlights the importance of understanding the complex relationship between consumers and producers in shaping economic outcomes, and encourages economists to question the assumption of independent consumer wants.
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the change in disposable income is $200 and the change in saving is $40. what is the marginal propensity to consume (mpc)?
The Marginal Propensity to Consume (MPC) in this case is 0.8.
The Marginal Propensity to Consume (MPC) can be calculated using the formula:
MPC = Change in Consumption / Change in Disposable Income
In your case, the change in disposable income is $200, and the change in saving is $40. To find the change in consumption, subtract the change in saving from the change in disposable income:
Change in Consumption = Change in Disposable Income - Change in Saving
Change in Consumption = $200 - $40
Change in Consumption = $160
Now, you can calculate the MPC:
MPC = Change in Consumption / Change in Disposable Income
MPC = $160 / $200
MPC = 0.8
The Marginal Propensity to Consume (MPC) in this case is 0.8.
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Moral hazard arises from
A.
savers' difficulties in monitoring borrowers.
This is the correct answer.B.
the difficulty of distinguishing good−risk borrowers from bad−risk borrowers.
C.
borrowers' difficulties in locating savers.
D.
the likelihood that bad−risk borrowers are more likely to accept a loan than are good−risk borrowers.
Due to savers' inability to closely watch borrowers, moral hazard develops. When the borrower is aware that someone else will cover the cost of his error, it happens. Hence (a) is the correct option.
Consequently, he is motivated to take more daring actions as a result. Moral hazard is the term for this economic idea. Moral hazard refers to the possibility that one of the parties to a transaction did not do so in good faith or that they gave false information regarding their resources, liabilities, or creditworthiness.The moral hazard issue occurs when one side in a trade or transaction feels more at ease taking risks, whether they are financial or physical, since they are aware that they will not be held accountable for any unfavourable outcomes, but rather the party not taking the risks.
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Moral hazard arises from
A.savers' difficulties in monitoring borrowers.
B.the difficulty of distinguishing good−risk borrowers from bad−risk borrowers.
C.borrowers' difficulties in locating savers.
D.the likelihood that bad−risk borrowers are more likely to accept a loan than are good−risk borrowers.
Inflation, nominal interest rates, and real rates. Given the following information estimate the real rate with the approximate nominal interest rate equation and the true nominal interest rate equation (Fisher effect) for each set of nominal and inflation rates
Nominal Rate Inflation Rate Aproximate Real Rate True Real Rate
13.0 % 5.0%
9.0 % 3.5%
22.0 % 13.0%
4 % 8.0%
The approximate real rate is calculated using the equation: Approximate Real Rate = Nominal Rate - Inflation Rate.
Using this equation, we can calculate the approximate real rates as follows:
Nominal Rate Inflation Rate Approximate Real Rate True Real Rate
13.0% 5.0% 8.0% 7.58%
9.0% 3.5% 5.5% 5.38%
22.0% 13.0% 9.0% 8.99%
4.0% 8.0% -4.0% -4.16%
The true real rate is calculated using the Fisher effect equation: True Real Rate = [tex][(1 + Nominal Rate) / (1 + Inflation Rate)] - 1.[/tex]
Using this equation, we can calculate the true real rates as follows: Nominal Rate Inflation Rate Approximate Real Rate True Real Rate
13.0% 5.0% 8.0% 7.54%
9.0% 3.5% 5.5% 5.37%
22.0% 13.0% 9.0% 8.83%
4.0% 8.0% -4.0% -4.08%
In both cases, we can see that as the inflation rate increases, the true real rate decreases. Additionally, we can see that for the last scene where the inflation rate is higher than the nominal rate, the real rate is negative, indicating that the investor is actually losing money due to inflation.
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Employees who believe they control the events in their lives by their own effort and skill have aNoSelect one:a. external locus of control.b. moral intensityc. obedience to authorityd. opportunitye. internal locus of control.
Employees who believe they control the events in their lives through their own effort and skill have an internal locus of control. An internal locus of control refers to the belief that one can influence and control the events in their life through their own efforts and skills.
People with an internal locus of control believe that they are responsible for their own success or failure and that their actions have a direct impact on the outcome of situations. This belief can lead to higher motivation, self-confidence, and a sense of empowerment.
On the other hand, an external locus of control refers to the belief that events in one's life are determined by factors outside of their control, such as luck or the actions of others. Individuals with an external locus of control may feel powerless or that their efforts do not significantly affect the outcomes of situations.
In the context of employees, having an internal locus of control can result in a more proactive approach to problem-solving and decision-making, as well as a stronger commitment to achieving goals and improving personal skills.
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Suppose world described by 1-factor model (F), and we have 2 following securities ra= -0.050 – 1.2F + EA TB = 0.050 +0.8F+EB a. [2pts] What are the weights on each security A and B if we want to track the asset that has a loading of 0.5 on factor F? b. [3pts] What is the expected risk-free rate in this world? (Hint: construct the tracking portfolio that has zero loading on factor F) 1 c. [3pts] What is the expected return of factor F? (Hint: construct the tracking portfolio that has a loading of 1 on factor F) d. [1pt] Is there any arbitrage opportunity if expected return on asset, that has a loading of 0.5 on factor F, is 4.50%?
If the expected securities risk-free rate is less than 4.50%, then there is an arbitrage opportunity because we can borrow at the risk-free rate and invest in the tracking portfolio to earn a riskless profit.
If the expected risk-free rate is greater than 4.50%, then there is no arbitrage opportunity. If the expected risk-free rate is exactly 4.50%, then the situation is indeterminate because the expected return of the tracking portfolio is also 4.50%.
a. To track the asset that has a loading of 0.5 on factor F, we need to find the weights that will make the portfolio have a loading of 0.5 on factor F. Let x be the weight on security A and (1-x) be the weight on security B. The portfolio's factor loading is then:
0.5 = 0.5(-1.2x + 0.8(1-x))
0.5 = -0.6x + 0.4
0.1 = x
Therefore, the weights on securities A and B are 0.1 and 0.9, respectively.
b. To construct the tracking portfolio that has zero loading on factor F, we need to find the weights that will make the portfolio have a loading of zero on factor F. Let y be the weight on security A and (1-y) be the weight on security B. The portfolio's factor loading is then:
0 = -1.2y + 0.8(1-y)
0 = -0.4y + 0.8
y = 2
This is not a valid solution because it implies a negative weight for security B. Therefore, there is no portfolio that has zero loading on factor F.
c. To construct the tracking portfolio that has a loading of 1 on factor F, we need to invest entirely in security A. The expected return of factor F is then the expected return of security A, which is:
E(ra) = -0.050 - 1.2E(F) + E(EA)
We don't have information about E(EA), so we cannot compute E(ra) directly.
d. There may be an arbitrage opportunity if the expected return on the asset that has a loading of 0.5 on factor F is 4.50%, depending on the risk-free rate in this world. To see this, we need to compute the expected return of the tracking portfolio we found in part a:
E(rp) = 0.1E(ra) + 0.9E(rb)
E(rp) = 0.1(-0.050 - 1.2(0.5)) + 0.9(0.050 + 0.8(0.5) = 0.035
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What is risk management? Explain exposure identification? Riskevaluation? Risk control?Why is it wise to have a risk management policy statement?When is self-insurance wise? Explain pooling.
Risk management is the process of identifying, evaluating, and controlling risks in order to minimize the negative impact they may have on an organization.
Exposure identification is the process of identifying potential sources of risk within an organization.
Risk evaluation is the process of assessing the likelihood and impact of identified risks.
Risk control involves the development and implementation of strategies to minimize the negative impact of identified risks.
It is wise to have a risk management policy statement because it provides a clear framework for managing risks within an organization.
Self-insurance may be wise in certain circumstances, such as when the cost of insurance premiums is prohibitive or when an organization has a high degree of control over the risks it faces.
Pooling is a risk management strategy in which multiple organizations or individuals share the costs and benefits of risk management.
Risk management is the process of identifying, evaluating, and controlling potential threats or uncertainties that may have an impact on an organization's objectives. It involves exposure identification, risk evaluation, risk control, and implementing a risk management policy statement.
Exposure identification involves assessing and recognizing potential risks or hazards that an organization may face. This step is crucial for understanding what threats the organization is vulnerable to and how they may affect its goals. This involves identifying all areas of the organization that may be vulnerable to risk, including physical assets, financial resources, and human resources.
Risk evaluation refers to analyzing and prioritizing the identified risks based on their likelihood of occurrence and potential impact. This involves evaluating the potential consequences of each risk, such as financial losses, legal liabilities, or damage to the organization's reputation.
Risk control involves implementing strategies and measures to reduce the likelihood and impact of identified risks. These strategies can include avoidance, mitigation, transfer, or acceptance of the risks. Effective risk control helps protect an organization's assets and ensures its continuity.
It is wise to have a risk management policy statement because it communicates the organization's commitment to managing risks effectively, defines its risk appetite, and outlines the roles and responsibilities of individuals involved in the risk management process. It also provides guidance to employees and stakeholders on how to identify and manage risks effectively. This policy statement helps ensure a consistent approach to risk management across the organization.
Self-insurance is wise when an organization has the financial resources to cover potential losses and can manage risks effectively without relying on external insurance providers. This approach can lead to cost savings and greater control over risk management processes.
Pooling is a risk management technique where multiple organizations or individuals share their risks to reduce the overall impact of potential losses. By spreading the risk among a larger group, the financial burden of an individual loss is minimized, and the costs of risk management are more evenly distributed. Pooling may provide cost savings and increased protection against risks, but it also involves a loss of control over risk management decisions.
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When computing the expected return on a portfolio of stocks the portfolio weights are based on the:
number of shares owned in each stock.
price per share of each stock.
market value of the total shares held in each stock.
original amount invested in each stock.
cost per share of each stock held.
When it comes to computing the expected return on a portfolio of stocks, it's crucial to consider the portfolio weights. Portfolio weights refer to the proportion of each stock's total value that is represented in the overall portfolio. These weights are typically based on the market value of the total shares held in each stock.
The market value of a stock refers to the price at which it is currently being traded in the market. The more shares of a particular stock held in a portfolio, the greater the weight of that stock in the portfolio. For example, if a portfolio has $10,000 worth of Stock A and $5,000 worth of Stock B, then Stock A has twice the weight of Stock B in the portfolio.
It's important to note that portfolio weights can change over time as stock prices fluctuate. When a particular stock's market value rises or falls, its weight in the portfolio will also change accordingly.
Overall, portfolio weights are a key factor in computing the expected return on a portfolio of stocks. By taking into account the market value of each stock and its weight in the portfolio, investors can make informed decisions about their investments and potentially maximize their returns.
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A 25 year bond was issued 10 years ago. It has 51.000 par value band has an 8,5% annual payment coupon. The band currently sells for $825. Ir the yield to maturity remains its current rate, what will the price be 3 years from now?
a. $842.55 b. $815.08 c. $856.82 d. $818.83 e. $835.17 f. $825.00
The price of the bond 3 years from now will be $842.55 (option a).
Bond pricing formula:
[tex]P = C x (1 - (1 + r)^-^n) / r + F x (1 + r)^-^n[/tex]
Where:
P = price of the bond
C = coupon payment
r = yield to maturity
n = number of periods
F = face value or par value of the bond
Bond has a par value of $51,000, a coupon rate of 8.5%, and it was issued 10 years ago, so it has 15 years left until maturity. We also know that it currently sells for $825.
Using the bond pricing formula, for the current yield to maturity:
[tex]825 = 4,325 x (1 - (1 + r)^-^1^5) / r + 51,000 x (1 + r)^-^1^5[/tex]
Simplifying and solving for r using a financial calculator or spreadsheet software, we get:
r = 0.105 or 10.5%
Now, the price of the bond 3 years from now. Since the bond has a remaining term of 15 years and 10 years have already passed, the remaining term will be 12 years. Using the same formula, but with a different number of periods, we get:
[tex]P = 4,325 x (1 - (1 + 0.105)^-^1^2) / 0.105 + 51,000 x (1 + 0.105)^-^1^2[/tex]
P = $842.55
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assume you borrow $10,000 from the bank and promise to repay the amount in 5 equal installments beginning one year from today. the stated interest rate on the loan is 5%. what is the unknown variable in this problem? multiple choice question. the future value the payment amount the present value of the annuity the number of periods
The unknown variable in this problem is the payment amount. The unknown variable in this problem is the payment amount, which is $2,199.61. Here option B is the correct answer.
To solve this problem, we need to use the formula for calculating the payment amount of an annuity, which is:
Payment amount = Present value of the annuity / Present value factor
The present value of an annuity is the sum of the present values of all the payments in the annuity. In this case, there are 5 equal payments of $2,000 each (since $10,000 / 5 = $2,000).
To calculate the present value of each payment, we need to discount it back to the present using the stated interest rate of 5%. Since each payment is due one year from today, we need to discount each payment back one year. The present value factor for a single payment due in one year at a 5% interest rate is 0.9524.
So the present value of each payment is $2,000 x 0.9524
= $1,904.80.
The present value of the annuity is the sum of the present values of all the payments, which is $1,904.80 x 5 = $9,524.
Now we can use the formula for calculating the payment amount:
Payment amount = $9,524 / Present value factor
The present value factor for a 5-year annuity with a 5% interest rate is 4.3295.
Payment amount = $9,524 / 4.3295
= $2,199.61
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Complete question:
Assume you borrow $10,000 from the bank and promise to repay the amount in 5 equal installments beginning one year from today. the stated interest rate on the loan is 5%. What is the unknown variable in this problem?
A) The future value
B) The payment amount
C) The present value of the annuity
D) The number of periods
Portfolio beta
An individual has $15,000 invested in a stock with a beta of 0.4 and another $30,000 invested in a stock with a beta of 1.1. If these are the only two investments in her portfolio, what is her portfolio's beta? Round your answer to two decimal places.
The investor's portfolio beta is 0.77, indicating that it has a moderate level of risk. The portfolio beta is a measure of the overall risk of an investor's portfolio, taking into account the individual betas of each investment.
In this case, the individual has $15,000 invested in a stock with a beta of 0.4 and $30,000 invested in a stock with a beta of 1.1. To calculate the portfolio beta, we need to use the weighted average of the two betas, based on the proportion of the total investment that each stock represents.
To do this, we first calculate the total investment in the portfolio, which is $15,000 + $30,000 = $45,000. Next, we calculate the weight of each stock in the portfolio by dividing the individual investment by the total investment.
The weight of the stock with a beta of 0.4 is $15,000 / $45,000 = 1/3, and the weight of the stock with a beta of 1.1 is $30,000 / $45,000 = 2/3.
Finally, we calculate the portfolio beta by multiplying the weight of each stock by its beta and adding the results. So, the portfolio beta is (1/3 * 0.4) + (2/3 * 1.1) = 0.7667, which we round to 0.77.
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The Yurdone Corporation wants to set up a private cemetery business. According to the CFO, Barry M. Deep, business is "looking up." As a result, the cemetery project will provide a net cash inflow of $115,000 for the firm during the first year, and the cash flows are projected to grow at a rate of 5.8 percent per year forever. The project requires an Initial investment of $1,380,000. a. If the company requires a return of 12 percent on such undertakings, what is the NPV of the project? (Do not round Intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. The company is somewhat unsure about the assumption of a growth rate of 5.8 percent in its cash flows. At what constant growth rate would the company just break even if it still required a return of 12 percent on its investment? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) eBook Print - NPV b. Minimum growth rate %
A. The NPV of the cemetery project is -$72,753.12, indicating that the project is not profitable and should not be undertaken by the company.
B. The minimum constant growth rate required for the company to break even with a required return of 12 percent is 2.2%. This means that if the cash flows do not grow at a rate of at least 2.2%, the project will not be profitable.
A. To calculate the NPV of the project, we need to discount the future cash flows at the required rate of return. The NPV formula is:
NPV = -Initial investment + ∑(Cash flows / (1 + r)^t)
Where r is the required rate of return and t is the time period.
Plugging in the values, we get:
NPV = -$1,380,000 + ($115,000 / (1 + 0.12)^1) + ($115,000 * 1.058 / (0.12 - 0.058))
NPV = -$72,753.12
Since the NPV is negative, the project is not profitable and should not be undertaken by the company.
B. To calculate the minimum growth rate required for the company to break even, we can use the following formula:
Minimum growth rate = (Initial investment / Annual cash flow)^(1/n) - 1
Where n is the number of years.
Plugging in the values, we get:
Minimum growth rate = ($1,380,000 / $115,000)^(1/∞) - 1
Minimum growth rate = 2.2%
This means that if the cash flows do not grow at a rate of at least 2.2%, the project will not be profitable, assuming a required rate of return of 12%.
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. While growth rates are hard to predict, stock prices do reflect expected future growth opportunities . In late 2008, the consensus EPS forecast for P&G was $4.28. If investors believed that P&G was going to stop reinvesting and distribute all earnings in perpetuity, what is the implied stock price? Assume cost of equity is 10%. . The stock price of P&G at that time was $62.50.
The implied stock price of P&G if it stopped reinvesting and distributed all earnings in perpetuity would be $42.80. This is lower than the actual stock price of $62.50 at the time, suggesting that investors expected P&G to continue to reinvest earnings and grow its dividends.
To calculate the implied stock price of P&G if it stopped reinvesting and distributed all earnings in perpetuity, we can use the Gordon Growth Model, which is a formula used to calculate the intrinsic value of a stock based on the assumption that dividends will grow at a constant rate indefinitely.
The formula for the Gordon Growth Model is:
P0 = D1 / (ke - g)
Where P0 is the current stock price, D1 is the expected dividend in the next period, ke is the required rate of return, and g is the expected constant growth rate of dividends.
Using the information given in the problem:
Expected EPS = $4.28
Payout ratio (assuming all earnings are distributed) = 100%
Expected dividend per share = Expected EPS x Payout ratio = $4.28 x 100% = $4.28
Required rate of return (ke) = 10%
Expected constant growth rate of dividends (g) = 0% (since all earnings are being distributed)
Plugging these values into the formula, we get:
P0 = $4.28 / (0.10 - 0) = $42.80
The implied stock price of P&G if it stopped reinvesting and distributed all earnings in perpetuity would be $42.80. This is lower than the actual stock price of $62.50 at the time, suggesting that investors expected P&G to continue to reinvest earnings and grow its dividends.
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how do gains in labor productivity lead to gains in gdp per capita
The GDP per capita will increase when people create more since their earnings will grow and they'll have more money to spend.
The value of the goods and services produced in a given hour of work determines worker productivity. To calculate per capita GDP, one must divide the entire value of goods and services produced inside a country by the total number of people living there.
The standard of living rises as labor productivity increases. This is a result of the fact that as workers produce more items, their earnings rise. They will thus have more accessible discretionary cash. Employees will be able to eat more as a result. As a result, the GDP per person will rise. Productivity improvements enable businesses to produce more for the same level of input, create more revenues, and eventually yield a larger Gross Domestic Product.
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A firm expects to sell 25,900 units of its product at $11. 90 per unit and to incur variable costs per unit of $6. 90. Total fixed costs are $79,000. The total contribution margin is:
The overall contribution margin is thus $129,500. The difference between the sales price per unit and the variable cost per unit is known as the contribution margin.
Sales price per unit less variable cost per unit equals contribution margin per unit.
Contribution margin per unit is equal to $11.90 minus $6.90, or $5.00.
We must multiply the contribution margin per unit by the quantity of units sold in order to determine the overall contribution margin:
Contribution margin overall is Contribution margin per unit times the quantity of units sold.
$5 times 25,900 equals the total contribution margin.
$129,500 is the total contribution margin.
The overall contribution margin is thus $129,500.
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(a) Outline any FIVE (5) factors that determine the moneymultiplier. (15marks)
The five factors that determine the money multiplier are reserve requirements, excess reserves, currency drains, borrowing from the central bank, and the public's desire to hold cash.
The reserve requirement is the amount of funds that banks must keep on hand to meet customer withdrawal demands. If the reserve requirement is lowered, banks have more money available to lend out, thus increasing the money multiplier. Excess reserves are funds that banks have in excess of their reserve requirements. If banks have more excess reserves, they can lend more money, which increases the money multiplier. Currency drains occur when customers withdraw cash from their bank accounts, reducing the amount of money available for lending. Borrowing from the central bank also increases the money supply, as this provides banks with more funds to lend out. Finally, the public's desire to hold cash affects the money multiplier, as customers withdrawing money from banks can reduce the amount of money available for lending.The money multiplier is influenced by various factors, and understanding these factors is crucial for managing the money supply in an economy.
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if an organization was going to make radical changes to one of its departments, which type of transformation tool would it use? business process reengineering (bpr) reengineering process control (rpc) engineering control system (ecs) system process control (spc)
If an organization was going to make radical changes to one of its departments the type of transformation tool would it use A. Business Process Reengineering (BPR).
BPR is a strategic approach that focuses on redesigning and restructuring the core processes within an organization to achieve significant improvements in efficiency, effectiveness, and customer satisfaction. This approach aims to analyze existing processes and identify areas for improvement or elimination, enabling the organization to achieve dramatic changes in performance.
In contrast, the other options like Reengineering Process Control (RPC), Engineering Control System (ECS), and System Process Control (SPC) do not fit the context of making radical changes to a department. RPC and SPC are not well-defined concepts in the management field, while ECS is more related to technical and engineering controls in a system.
To summarize, when an organization is looking to make radical changes to one of its departments, it would typically choose Business Process Reengineering (BPR) as its transformation tool. BPR focuses on analyzing and redesigning core processes to achieve significant improvements in efficiency, effectiveness, and customer satisfaction, ensuring a lasting impact on the organization's performance. Therefore, the correct option is A.
The question was incomplete, Find the full content below:
if an organization was going to make radical changes to one of its departments, which type of transformation tool would it use?
A. Business process reengineering (BPR)
B. Reengineering process control (RPC)
C. Engineering control system (ECS)
D. System process control (SPC)
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all of the following are costs of inflation, except a. money neutrality. b. menu costs. c. shoe-leather costs. d. redistribution of wealth.
Inflation has five costs: menu prices, shoe-leather expenses, relative pricing fluctuation, tax distortions, and inconvenience and confusion. Hence (a) is the correct option.
Inflation has a number of negative effects, including the potential for reduced investment and slower economic growth due to volatility and uncertainty. Because many people believe it to be a serious economic issue, inflation is a subject that generates a lot of debate. Inflation can reduce an individual's savings value and shift income away from savers and towards lenders and those with assets in society.The term "inflation" only refers to an increase in the market's overall level of prices for commodities, not a fall in those values. Deflation, not inflation, is what causes the drop in the level of commodity prices.
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Inflation, has real costs on the economy, and policymakers need to be mindful of these costs when formulating monetary policy. By keeping inflation in check, policymakers can help minimize the costs associated with inflation and promote long-term economic growth and stability.The correct answer is option (a) - money neutrality.
Money neutrality is a concept that suggests that changes in the money supply do not have any real effects on the economy, including inflation. In other words, money neutrality implies that changes in the money supply will only result in proportional changes in prices, leaving output and employment unaffected.On the other hand, menu costs, shoe-leather costs, and redistribution of wealth are all costs of inflation.
Menu costs refer to the cost that firms incur in changing their prices due to inflation, such as the costs associated with printing new menus, catalogs, and price lists. Shoe-leather costs refer to the cost that individuals incur when they reduce their money balances to avoid the inflation tax, such as the cost of time and effort spent on frequent trips to the bank or ATM. Finally, inflation also leads to the redistribution of wealth from lenders to borrowers, as inflation reduces the real value of the money borrowed, and increases the real value of the money lent.The correct answer is option (a) - money neutrality.
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