The call price is 90.288 and can be computed by using the put-call parity formula for European options on bonds.
The put-call parity formula is:
Call Price = Put Price + Present Value of Strike Price - Present Value of Bond
Here are the given values:
- Put Price (P) = 1.3
- Strike Price (K) = 93
- Maturity (T) = 1
- Present Value of 1-year Zero Bond (Z(0,1)) = 0.968
- Present Value of 2-year Zero Bond (Z(0,2)) = 0.936
Now we'll plug these values into the put-call parity formula:
Call Price = 1.3 + (93 * 0.968) - (0.936)
Call Price = 1.3 + 89.924 - 0.936
Call Price = 1.3 + 88.988
Call Price = 90.288
So, the call option price is 90.288.
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the inflation rate in yinland was 14 percent last year. the government of yinland just revalued its currency (the yin) by 15 percent against the dollar. even though it produces products similar to those of the united states, it has much trade with the united states and very little trade with other countries. it presently has trade restrictions imposed on all non-u.s. countries. will the revaluation of the yin increase or reduce inflation in yinland? briefly explain.the revaluation wouldinflation because there is competition from foreign producers.
Imports from the United States to Yinland will become cheaper, and inflation reduces, while Yinland's exports to the United States will become more expensive.
How will the revaluation of the yin increase or reduce inflation in yinland?The revaluation of the yin by 15 percent against the dollar means that the yin is now stronger relative to the dollar. As a result, imports from the United States to Yinland will become cheaper, while Yinland's exports to the United States will become more expensive.
This will likely increase the demand for U.S. goods in Yinland, which could result in increased competition with domestic producers, leading to a reduction in prices and ultimately reducing inflation.
However, it is important to note that trade restrictions imposed on non-U.S. countries could limit the impact of the revaluation on Yinland's economy. With limited trade with non-U.S. countries, the effect of the revaluation may not be as significant as it would have been otherwise.
Other factors, such as changes in the domestic money supply, government policies, and global economic conditions, could also influence inflation in Yinland.
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lisa invests $5000 in a savings account with a fixed annual interest rate of 5% compounded quarterly. what will the account balance be after 10 years? (round to the nearest dollar)
The account balance will be $8,162 after 10 years.
Using the formula for compound interest, the balance after 10 years can be calculated as:
A = P * (1 + r/n)^(n*t)
A = the account balance after 10 years
P = the principal investment of $5000
r = the annual interest rate of 5% (expressed as a decimal)
n = the number of times the interest is compounded per year (quarterly compounding means n = 4)
t = the number of years (10 years in this case)
Plugging in the values:
A = 5000 * (1 + 0.05/4)^(4*10) = $8,162 (rounded to the nearest dollar)
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costco has built its successful retail chain using a cost-based pricing strategy. costco marks up products a maximum of 15% to ensure a profit but keep prices lower than competitors' prices. this works for costco because they are in a market where: select one: a. the price is set based on fixed and variable costs of production b. the price is regulated by the government c. the retail price takes customer needs into account d. differentiation is minimal and customers are price sensitive e. customers are willing to pay for different levels of product performance
Costco's success with its retail chain can be attributed to its cost-based pricing strategy, which is effective due to the market conditions where differentiation is minimal and customers are highly sensitive to price (option D).
Costco's success can be attributed to their ability to keep prices low through a cost-based pricing strategy, which is effective in markets where customers are price-sensitive and there is minimal product differentiation. By keeping their markup at a maximum of 15%, they are able to generate profits while still offering lower prices than their competitors.
This pricing strategy appeals to customers who prioritize value and are willing to forgo additional features or services in exchange for lower prices. Additionally, by maintaining a limited selection of products and focusing on bulk sales, Costco is able to reduce costs and offer even lower prices to customers. This pricing strategy has helped Costco establish itself as a major player in the retail industry.
Option D holds true.
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These two things are at the core of the balanced Scorecard. Organizational culture and vision Business performance and competitive advantage Organizational vision and strategy
The two things that are at the core of the balanced Scorecard are Organizational vision and strategy.
The balanced scorecard entails measuring 4 major factors of a commercial enterprise: Learning and growth, commercial enterprise processes, customers, and finance. BSCs permit groups to pool records in a unmarried report, to offer records into provider and first-class further to economic performance, and to assist enhance efficiencies. The capabilities of the Balanced Scorecard: Clarify and speak commercial enterprise priorities and targets to the complete organization. Define and control motion plans to make certain that there are sports and packages with the intention to supply the strategic targets. Monitor and degree development on strategic targets.
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The two things that are at the core of the balanced Scorecard are organizational culture and vision, and business performance and competitive advantage.
Organizational culture refers to the shared values, beliefs, behaviors, and attitudes that shape how people work together and interact within an organization. A strong organizational culture can help to drive employee engagement, productivity, and retention, which are all critical factors for achieving long-term success. On the other hand, an unhealthy or toxic culture can have a detrimental effect on employee morale, performance, and overall business outcomes.
Vision is also a critical component of the balanced Scorecard, as it provides a clear and compelling direction for the organization to follow. A well-defined vision can help to align employees and stakeholders around a common purpose and inspire them to work towards a shared goal. In addition, it can help to drive innovation and creativity by encouraging employees to think outside the box and pursue new ideas and opportunities.
In summary, a strong organizational culture and vision are essential for driving business performance and competitive advantage. By focusing on these core components, organizations can build a foundation for long-term success and achieve their strategic objectives.
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hich of the following processes involves allocating cost estimates in order to establish a cost baseline for measuring project performance? question 1 options: a) cost estimating b) cost control c) activity cost estimating d) cost budgeting
Cost budgeting is the process that involves allocating cost estimates in order to establish a cost baseline for measuring project performance. Option D.
A financial plan and budget are created utilizing cost estimates through the process of cost budgeting. Professionals can manage their money with the help of a budget. When creating a cost budget, all anticipated expenses for a given time period are added together.
When developing a budget for new projects, project managers frequently employ cost estimation. Cost budgeting can be used by business leaders and financial experts to develop quarterly or annual budgets. To evaluate the success of their projects and spending patterns, these experts can use a cost budget.
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16. an increase in aggregate supply could be caused by: group of answer choices businesses paying more for health insurance for their workers. an increase in oil prices. a drop in energy costs from cheaper natural gas. an increase in government purchases. g
An increase in aggregate supply could be caused by C: a drop in energy costs from cheaper natural gas.
Aggregate supply refers to the total amount of goods and services produced in an economy at a given price level. Factors that can increase aggregate supply include improvements in technology, increased productivity, and lower input costs, such as energy costs.
In this scenario, cheaper natural gas leads to a drop in energy costs for businesses. When energy costs decrease, businesses can produce goods and services at a lower cost, which allows them to increase their overall production. As a result, the aggregate supply in the economy rises.
Options A (businesses paying more for health insurance for their workers) and B (an increase in oil prices) would actually decrease aggregate supply, as they lead to higher production costs for businesses. Option D (an increase in government purchases) impacts aggregate demand rather than aggregate supply, as it represents a change in the total spending on goods and services in the economy. Therefore, the correct option is C.
The question was incomplete, Find the full content below:
16. an increase in aggregate supply could be caused by: group of answer choices
A. businesses paying more for health insurance for their workers.
B. an increase in oil prices.
C. a drop in energy costs from cheaper natural gas.
D. an increase in government purchases.
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Longbow Lumber is purchasing a new horizontal resaw at a cost of $375,000. There is an additional $10,000 delivery and installation cost. The machine has a capital cost allowance (CCA) rate of 20%. What is the incremental undepreciated capital cost (UCC) for year 2?
A.) $346,500
B.) $385,000
c.) $337,500
d.) $192,500
e.) $375,000
To calculate the incremental undepreciated capital cost (UCC) for year 2, we need to determine the UCC for year 1 and then subtract the CCA for year 1 to find the UCC for year 2.
First, we need to calculate the initial UCC, which is the total cost of the asset:
Total cost = Cost of horizontal resaw + Delivery and installation cost
Total cost = $375,000 + $10,000
Total cost = $385,000
Next, we need to calculate the CCA for year 1:
CCA for year 1 = Initial UCC x CCA rate
CCA for year 1 = $385,000 x 20%
CCA for year 1 = $77,000
Now we can calculate the UCC for year 1:
UCC for year 1 = Initial UCC - CCA for year 1
UCC for year 1 = $385,000 - $77,000
UCC for year 1 = $308,000
Finally, we can calculate the UCC for year 2:
UCC for year 2 = UCC for year 1 - CCA for year 2
UCC for year 2 = $308,000 - ($385,000 x 20%)
UCC for year 2 = $308,000 - $77,000
UCC for year 2 = $231,000
Therefore, the answer is (d) $192,500.
Scenario Borrowing Method Bank Capital Frayer Bank typically has an abundance of funds in its accounts, but out of nowhere, several investors come to the bank looking to borrow a total of $45 million in funds that the bank simply does not have. The bank wants a temporary source of funds for two weeks and doesn't want to borrow from the federal funds market or a source outside of the United States. Bond Issuances Eurodollar Borrowing Federal District Banks Flow Financial Bank wants to temporarily sell $100 million worth of its Treasury bills, with an agreement to buy them back in one year for $102 million. Federal Funds Market Repurchase Agreements First Guaranty Bank wants to borrow funds to purchase a $22 million building for its new branch location and wants to issue long-term securities to cover the financing of the new branch location. Diligence Bank has a shortage of funds and wants a temporary source of funds for two days to make up the difference. They have great relationships with banks outside of the United States and want to borrow funds from Deutsche Bank in Germany. True or False: The majority of all United States bank liabilities are made up of sources other than deposit accounts. True False
Its false because in the given scenario, Frayer Bank is looking to use a borrowing method to acquire $45 million in bank capital for two weeks without relying on the federal funds market or sources outside the United States.
Flow Financial Bank, on the other hand, wants to engage in repurchase agreements, temporarily selling $100 million worth of Treasury bills and buying them back in one year for $102 million.First Guaranty Bank aims to issue long-term securities to finance a new branch location, while Diligence Bank seeks a temporary source of funds for two days by borrowing from Deutsche Bank in Germany.
Regarding United States bank liabilities, the majority of them are made up of sources other than deposit accounts. True or false? False.
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Resources are scarce therefore the value maximization
is stretched. Discuss
Resources are scarce, and as a result, value maximization becomes stretched because the opportunity cost of using a resource for one purpose rather than another increases.
Scarcity refers to the limited availability of resources, which leads to a competition among individuals, businesses, and nations to acquire these resources. Due to scarcity, economic agents need to make choices about how to allocate resources efficiently, leading to the concept of value maximization. Value maximization is the process of optimizing the use of scarce resources to generate the greatest possible value, often measured in terms of profit, utility, or welfare. When resources become scarcer, it becomes increasingly difficult to achieve this goal, as more trade-offs and compromises need to be made.
As scarcity intensifies, the opportunity cost of using a resource for one purpose rather than another increases, forcing decision-makers to prioritize and make more careful choices. This stretching of value maximization can lead to tougher competition and innovation, as businesses and individuals seek new ways to make the most of their limited resources. However, it can also result in negative consequences, such as resource depletion and social inequity, if the focus is solely on short-term maximization rather than long-term sustainability and well-being.
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9. At time t = 0, Paul deposits P into a fund crediting interest at an effective annual interest rate of 6.9%. At the end of each year in years 12 through 31, Paul withdraws an amount sufficient to purchase an annuity-due of 120 per month for 5 years at a nominal interest rate of 7.2% compounded monthly. Immediately after the withdrawal at the end of year 31, the fund value is zero. Calculate P.
The value of P is : $717.35.
Number of years of the annuity due = 5 years
Total number of monthly annuity payments in 5 years = 5x12 =60Periodic annuity amount i.e. PMT =$120
Interest rate = 7.2% p.a. compounding monthly
interest rate per month = 7.2/12 = 0.60%
=PV(rate,nper,-pmt,fv,1)
=PV(0.0060,60,-120,0,1)
=$6067.64433692
The withdrawal which is made from year 12 to 31 has a worth of $6067.64433692 at the end of 31 years.
total number of withdrawals from year 12 to year 31 = 20
the effective interest rate earned on the account from where withdrawal is made i.e. rate = 6.9% p.a.
the periodical withdrawal amount has future value of $6067.64433692 hence FV =6067.64433692
Now to compute the periodical withdrawal amount we can use the pmt function of excel as follows:
=PMT(Rate,nper,pv,-fv)
=PMT(0.069,20,0,-6067.64433692)
=$149.63137229
the worth of initial deposit at the end of year 12 from where first withdrawal is made as follows:
=PV(rate,nper,-pmt,fv)
here rate = 6.9% p.a.
nper = 20 years ( from year 12 to year 31)
pmt as computed = 149.63137229
and future value =0 (
=PV(0.069,20,-149.63137229,0)
=$1597.59249591
the worth of deposit today by discounting the future value of it 12 years back as follows:
=PV(rate,nper,pmt,-fv)
=PV(0.069,12,0,-1597.59249591) (PMT =0 ,no periodical withdrawal)
=$717.35
Hence P =$717.35
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why should firms that own and operate multiple businesses that have different risk characteristics use business-specific, or divisional costs of capital? a. use of the same weighted average cost of capital for all divisions may result in too much money being allocated to the least risky division. b. not all business divisions have equal risk and the firm will likely become less risky in the future. c. not all divisions have equal risk and the firm might accept projects whose returns are higher than are deemed appropriate. d. not all lines of business have equal risk and it is likely that the firm will accept projects whose returns are unacceptably low in relation to the risk involved.
Firms that operate multiple businesses with different risk characteristics should use business-specific, or divisional costs of capital because "not all lines of business have equal risk and it is likely that the firm will accept projects whose returns are unacceptably low in relation to the risk involved". Option D is correct.
Using the same weighted average cost of capital for all divisions may result in too much money being allocated to the least risky division, and the firm might accept projects with returns that are not appropriate for the level of risk. By using divisional costs of capital, firms can better allocate resources and evaluate projects based on the specific risk characteristics of each business division.
Also, by using business-specific costs of capital, the firm can account for the different risk profiles of each division and ensure that the allocation of resources and acceptance of projects are aligned with their respective risk levels. This can lead to better decision-making and a more efficient use of the firm's resources.
Option D holds true.
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to check the compliance with an slas (service level agreement) uptime requirement, what report can the auditor analyze? system logs availability reports utilization reports system error reports
To check compliance with an SLA uptime requirement, the auditor can analyze the availability reports. Option B is correct.
Availability reports provide information on the amount of time a system or service was available during a given time period. By analyzing availability reports, the auditor can determine whether the uptime requirement specified in the SLA has been met.
These reports are important for tracking the performance and reliability of a system or service, and for assessing compliance with SLAs and other performance targets.
Availability reports may be generated automatically by monitoring tools or manually compiled by system administrators or auditors. They can be used to identify trends in system availability over time, track the impact of changes or upgrades to the system, and pinpoint areas for improvement in system design or maintenance.
System logs, utilization reports, and system error reports can provide additional information about the performance and reliability of the system or service, but they do not directly measure uptime compliance.
Hence, B. is the correct option.
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--The given question is incomplete, the complete question is
"To check the compliance with an SLA's (service level agreement) uptime requirement, what report can the auditor analyze? A) system logs B) availability reports C) utilization reports D) system error reports."--
Required Rate of Return Suppose rRF = 6%, rM = 10%, and rA = 11%. 1. Calculate Stock A's beta. Round your answer to two decimal places. 2. If Stock A's beta were 2.4, then what would be A's new required rate of return? Round your answer to two decimal places. %
1. Stock A's beta is 1.00.
2. If Stock A's beta were 2.4, the new required rate of return for Stock A would be 16.4%.
1. How to calculate Stock A's beta?The capital asset pricing model (CAPM) can be used to calculate Stock A's beta:
rA = rRF + betaA x (rM - rRF)
where:
rRF = risk-free rate
rM = market rate of return
rA = expected rate of return for Stock A
betaA = beta of Stock A
Plugging in the values given in the problem, we can solve for betaA:
11% = 6% + betaA x (10% - 6%)
betaA = 1.00
Therefore, Stock A's beta is 1.00.
2. How to calculate Stock for the new required rate of return if Stock A's beta ?Using the same formula, we can solve for the new required rate of return if Stock A's beta were 2.4:
rA = 6% + 2.4 x (10% - 6%)
rA = 16.4%
Therefore, if Stock A's beta were 2.4, the new required rate of return for Stock A would be 16.4%.
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Kaufman Enterprises has bonds outstanding with a $1,000 face value and 10 years left until maturity. They have an 11% annual coupon payment, and their current price is $1,185. The bonds may be called in 5 years at 109% of face value (Call price = $1,090).
a) What is the yield to maturity?
b) What is the yield to call if they are called in 5 years?
c) Which yield might investors expect to earn on these bonds? Why?
a) The yield to maturity is 9.09%. This is calculated by taking the present value of all the bond's future cash flows and subtracting the bond's current price.
b) The yield to call if the bonds are called in 5 years is 8.24%. This is calculated by taking the present value of the future cash flows up to the call date and subtracting the bond's current price.
c) Investors might expect to earn the yield to call, since the company has the option to call the bonds in 5 years, and the current call price is lower than the face value. If the company does not call the bonds, then the investors will earn the yield to maturity.
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Describe, in detail, the four (4) ways in which
business-to-business (B2B) firms segment their markets.
The four ways in which business-to-business (B2B) firms segment their markets are: Demographic segmentation, Geographic segmentation, Industry segmentation, and Behavioral segmentation.
1. Demographic segmentation: B2B firms segment their markets based on demographic factors such as company size, number of employees, and revenue. This helps them target specific businesses with products and services tailored to their size and financial capabilities.
2. Geographic segmentation: This involves dividing the market based on geographical locations, such as countries, regions, or cities. B2B firms use this strategy to offer customized solutions and services that cater to the unique needs and preferences of businesses in different locations.
3. Industry segmentation: B2B firms can also segment their markets by focusing on specific industries, such as healthcare, manufacturing, or technology. This helps them develop specialized products and services that cater to the unique requirements and challenges of businesses operating within these industries.
4. Behavioral segmentation: This type of segmentation focuses on the behavior of businesses, such as their purchasing patterns, decision-making processes, and loyalty to suppliers. B2B firms use this information to better understand their customers and offer solutions that meet their specific needs and preferences.
In summary, B2B firms segment their markets using demographic, geographic, industry, and behavioral segmentation strategies. This enables them to target specific businesses with tailored products and services, resulting in more effective marketing efforts and increased customer satisfaction.
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Sponsors of real estate deals often raise money from many partners. To avoid cumbersome federal regulatory filings (by meeting exemptions under Reg. D), these offerings are often limited to: Ch18
a. "Accredited" investors
b. Broker dealer networks
c. Licensed CPA's and investment advisors
d. Real estate professionals
In order to avoid complex federal regulatory filings and comply with exemptions under Regulation D, these offerings are often limited to "accredited" investors (option a).
Sponsors of real estate deals frequently raise money from multiple partners to finance their projects.
Accredited investors are individuals or entities with a certain level of financial sophistication, which allows them to participate in higher-risk investments. By limiting offerings to accredited investors, sponsors can meet the requirements of Regulation D and bypass some of the more cumbersome filing processes. This enables sponsors to efficiently raise funds while ensuring that their investors are well-informed and capable of handling the associated risks.
Thus, the correct choice is A- "Accredited" investors
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What is Cost-push inflation? Mark all of the following that are true of Cost-Push inflation 4 correct o Happens while real output increase o Caused by an increase in the Aggregate Supply o Caused by a decrease in the Aggregate Supply o Caused by an increase in the Aggregate Demand o Caused by a decrease in Aggregate Demand o Can be caused by an increase in Resource prices like wages o Happens while real output decrease o is considered Negative growth o Can be caused by people spending to much money
Cost-push inflation is a type of inflation that occurs when the overall price level increases due to an increase in production costs, such as resource prices like wages. The following statements are true of Cost-Push inflation:
1. Happens while real output decreases: When production costs rise, businesses may reduce their output, leading to a decrease in real output.
2. Caused by a decrease in the Aggregate Supply: As production costs increase, businesses may cut back on their production, causing a decrease in the aggregate supply.
3. Can be caused by an increase in resource prices like wages: Higher wages can lead to increased production costs, which can cause cost-push inflation.
4. Is considered Negative growth: Since cost-push inflation results in decreased real output, it can contribute to negative growth in the economy.
To summarize, cost-push inflation is an inflation type that arises due to increased production costs, such as wages. It leads to a decrease in real output and aggregate supply, contributing to negative growth in the economy. This type of inflation is not caused by changes in aggregate demand or people spending too much money.
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One possible response to managing negative risk it to accept the potential effects from the risk. True or False
The statement "one possible response to managing negative risk is to accept the potential effects of the risk" is true. Negative risk refers to the potential adverse consequences or losses that may arise from a particular event or decision.
These risks can impact various aspects of a project or organization, such as finances, reputation, or operations. Accepting the potential effects of a negative risk involves recognizing that the risk exists and making a conscious decision to tolerate the possible consequences.
This approach is often taken when the cost or effort required to mitigate the risk is too high or when the potential impact of the risk is deemed manageable. In these situations, it may be more feasible and cost-effective to accept the risk and focus on managing its consequences if it materializes, rather than attempting to prevent or minimize its occurrence.
To effectively accept and manage negative risks, it is crucial to establish a risk management process that includes identifying, assessing, and prioritizing potential risks. This involves evaluating the likelihood and impact of each risk and determining the appropriate response based on the organization's risk appetite and available resources.
Additionally, communication and monitoring of the accepted risks are essential to ensure that any changes in the risk landscape are identified and addressed promptly.
In conclusion, accepting the potential effects of a negative risk can be a valid and pragmatic response to managing such risks, especially when mitigation efforts are deemed impractical or cost-prohibitive. This approach requires careful assessment, prioritization, communication, and monitoring of risks to ensure that any adverse consequences are managed effectively.
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Estimate income growth based on:
Today, Time0, is year-end (YE): 2018
TICKER ABAB
P/E ttm 29.5
P/E forw 19.5
PEG 2.23
EPS0 2018 4.88
EPS 2017 3.78
Equity /Sh 40.67
Payout % 0.39
What is the long-term growth rate implied by the PEG ratio (typically a 5 year estimate)?
Group of answer choices
a. 0.0947
b. 0.0845
c. 0.0928
d. 0.0898
e. 0.0874
The long-term growth rate implied by the PEG ratio is 0.0845 (option b).
To find the long-term growth rate, divide the P/E ratio by the PEG ratio. In this case, the forward P/E ratio is 19.5 and the PEG ratio is 2.23. So, the growth rate can be calculated as follows:
1. Divide the forward P/E ratio by the PEG ratio: 19.5 / 2.23
2. The result is approximately 0.0845
Thus, the long-term growth rate implied by the PEG ratio is 0.0845, which is typically a 5-year estimate. This value can be used to help make investment decisions by comparing it to the growth rates of other companies in the same industry.
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which of the following is true? group of answer choices an increase in sales price per unit decreases the contribution margin per unit. an increase in sales price per unit increases the number of units required to break even. when the sales price per unit decreases, the breakeven point increases. when the sales price per unit increases, the contribution margin per unit remains the same.
The following statement that is true is when the sales price per unit decreases, the break-even point increases. The correct option is C.
The break-even point is the point where the total revenues equal the total costs, and the company is neither making a profit nor a loss. The break-even point can be calculated by dividing the fixed costs by the contribution margin per unit, which is the difference between the sales price per unit and the variable cost per unit.
When the sales price per unit decreases, the contribution margin per unit decreases as well. This means that each unit sold contributes less towards covering the fixed costs and reaching the break-even point. Therefore, to reach the break-even point, the company needs to sell more units than before the decrease in the sales price per unit, and the break-even point increases.
In contrast, when the sales price per unit increases, the contribution margin per unit also increases, and the company needs to sell fewer units to reach the break-even point.
Therefore, the other statements in the question are false. An increase in sales price per unit increases the contribution margin per unit, and it does not increase the number of units required to break even. When the sales price per unit increases, the contribution margin per unit also increases. So, the correct option is C.
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Suppose that a U.S. FI has the following assets and liabilities: Assets Liabilities $300 million U.S. loans (one year) in dollars $500 million U.S. CDs (one year) in dollars $200 million equivalent German loans (one year) in euros The promised one-year U.S. CD rate is 4 percent, to be paid in dollars at the end of the year; one- year, default risk-free loans in the United States are yielding 6 percent; and default risk-free one-year loans are yielding 10 percent in Germany. The exchange rate of dollars for euros at the beginning of the year is $1.10/€1. a. Calculate the dollar proceeds from the German loan at the end of the year, the return on the FI's investment portfolio, and the net interest margin for the FI if the spot foreign exchange rate has not changed over the year. b. Calculate the dollar proceeds from the German loan at the end of the year, the return on the FI's investment portfolio, and the net interest margin for the FI if the spot foreign exchange rate falls to $1.00/€1 over the year. c. Calculate the dollar proceeds from the German loan at the end of the year, the return on the FI's investment portfolio, and the net interest margin for the FI if the spot foreign exchange rate rises to $1.20/€1 over the year.
a. To calculate the dollar proceeds from the German loan at the end of the year, we need to convert the euro amount of the loan into dollars at the beginning of the year's foreign exchange rate
[tex]$200 million[/tex]× [tex]$1.10/€1[/tex]
= [tex]$220 million[/tex]
At the end of the year, the German loan will earn an interest rate of 10 percent, which is equivalent to €20 million. Therefore, the dollar proceeds from the German loan at the end of the year will be:
[tex]€20 million[/tex]× [tex]$1.10/€1[/tex] = [tex]$22 million[/tex]
The return on the FI's investment portfolio can be calculated as the sum of the interest earned on all assets minus the interest paid on all liabilities divided by the total assets.
Interest earned on US loans =[tex]$300 million*6[/tex]% = $[tex]18 million[/tex]
Interest earned on US CDs = $[tex]500 million*4[/tex]% = $[tex]20 million[/tex]
Interest earned on German loans = €[tex]20 million[/tex] = $[tex]22 million[/tex]
Total interest earned = $60 million
Interest paid on US CDs = $[tex]500[/tex]million × [tex]4[/tex]% = $[tex]20[/tex] million
Net interest income = $[tex]40[/tex]million
The net interest margin for the FI is:
Net interest income / Total assets = $[tex]40[/tex] million / ($[tex]300[/tex] million + $[tex]500[/tex] million + $[tex]220[/tex] million) = [tex]6.45[/tex]%
b. If the spot foreign exchange rate falls to $[tex]1.00/[/tex]€1 over the year, the dollar proceeds from the German loan at the end of the year will be:
€[tex]20[/tex]million × $[tex]1.00[/tex]/€1 = $[tex]20[/tex] million
The return on the FI's investment portfolio will not change, as the interest rates on all assets and liabilities remain the same. Therefore, the return on the FI's investment portfolio will still be $60 million.
The net interest margin for the FI will be:
Net interest income / Total assets = $[tex]40[/tex]million / ($[tex]300[/tex] million + $[tex]500[/tex]million + $[tex]200[/tex]million) = [tex]6.06[/tex]%
c. If the spot foreign exchange rate rises to $1.20/€1 over the year, the dollar proceeds from the German loan at the end of the year will be:
€[tex]20[/tex]million × $[tex]1.20[/tex]/€1 = $[tex]24[/tex] million
The return on the FI's investment portfolio will not change, as the interest rates on all assets and liabilities remain the same. Therefore, the return on the FI's investment portfolio will still be $60 million.
The net interest margin for the FI will be:
Net interest income / Total assets = $[tex]40[/tex]million / ($[tex]300[/tex] million + $[tex]500[/tex] million + $[tex]240[/tex] million) =[tex]6.38[/tex]%
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Identify the correct sequence of events in organizational strategic planning. - Goals, Processes, Technology, Profits - Available Technology, Goals, Mission Objectives - Mission Available Technology, Objectives, Environmental Analysis - Mission, Environmental Analysis, Goals, Objectives
The correct sequence of activities in organizational strategic planning is mission, Environmental analysis, goals, objectives.
The first step in strategic planning is to outline the business enterprise's mission, which is a declaration that outlines the corporation's purpose, values, and common course.
Subsequent, an environmental analysis is conducted to identify external factors that may impact the business enterprise's ability to attain its project, which includes financial developments, competition, and regulatory modifications.
Based on the mission and environmental analysis, precise goals are mounted to manual the corporation's movements and decisions.
Finally, objectives are identified with a purpose to assist the enterprise obtain its desires, and techniques are evolved to perform the ones objectives.
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The correct sequence of events in organizational strategic planning is Mission, Environmental Analysis, Goals, and Objectives.
The organization's goals and core beliefs are outlined in the mission statement. The environmental analysis looks at both internal and external elements that might have an impact on how successful an organization is. The objectives are the precise, quantifiable steps required to carry out the particular, long-term consequences that the organization has set as its goals. This process guarantees that the organization has a clear grasp of its goals and values, the possibilities and difficulties it must overcome, and a plan for accomplishing its objectives.
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A case study in the chapter analyzed purchasing power party for several countries using the price of Big Macs. Here are data for a few mom countries
For each country, select the predicted exchange rate of the local currency per U.S. dollar. (Mint Recall that the u.. price of a Big Mac was $5.58) Country Price of a Big Mac Predicted Exchange Rate Actual Exchange Rate Costa Rica 2,290 colones 607 colones's Pakistan 460 rupees 139 rupees/ Thailand 119 bant 32 baht/s China 20.9 yuan 6.85 yuan/s New Zealand 6.20 NZS 1.48 NZ$$ According to purchasing power parity, the predicted exchange rate between the Pakistani rupee and the New Zealand dollar is Zealand dollar. However, the actual exchange rate is rupees per New Zealand dollar Grado It Now Save & Continue Continue without saving
Large Mac PPP is a colloquial statistic used to contrast the buying power of various currencies with the cost of a Big Mac at McDonald's. The Big Mac Index is another name for the Big Mac PPP. The cost of a Big Mac in that country's currency is used to compare currencies.
The Big Mac Index's purpose is what?To gauge the differences in consumer purchasing power between countries, the Big Mac Index was developed. The burger takes the place of the "basket of goods" that economists previously used to gauge variations in consumer pricing.
Which of the following keeps tabs on Big Mac prices globally?The Big Mac Index, a study conducted by The Economist, looks at the relative overvaluation or undervaluation of currencies using the relative cost of a Big Mac around the world.
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wesson company provides health care to its retirees. the estimated medical cost associated with a particular employee is $20,000; estimated share of the cost paid by employee is $4,000; expected medicare payments are $1,000; estimated health care reimbursement account owned by employee is $3,000. the net cost of the benefit to the employer is
The net cost of the benefit of providing healthcare to retirees to the company is $12,000.
How to find the net cost ?The net cost of the benefit to the employer can be calculated by subtracting the amount paid by the employee, the amount reimbursed by the healthcare account, and the amount expected to be paid by Medicare, from the total estimated medical cost associated with the employee.
Net cost to employer = Total estimated medical cost - (Employee share of the cost + Expected Medicare payments + Estimated health care reimbursement account owned by employee)
Net cost to employer = $20,000 - ($4,000 + $1,000 + $3,000)
Net cost to employer = $12,000
Therefore, the net cost of the benefit to the employer is $12,000.
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You are considering purchasing your first home in about two years in the Durham region (Oshawa, ON) at a cost of about $800,000. You want to make sure that you will qualify for the mortgage and you have the following personal situation.
Assets Value Liabilities Balance
Savings Account = $30,000 Credit Card = $0 (credit limit $10,000)
Car = $10,000 Car Loan = $5,000 ($300/month)
Wealthsimple TFSA = $3,000 Credit Line = $0 (credit limit $15,000)
Based on your personal information, what will you need to qualify for the mortgage in about two years? Consider the following to justify your reasoning but please note that there will be other factors to consider.
Down payment
Income
5Cs
Capacity requirements
Assume Property Taxes in Oshawa of about $6,000 per year.
Assume Utilities of about $300 per month.
To qualify for the mortgage in about two years for an $800,000 home in the Durham region, you should consider the following: down payment, income, the 5 Cs, and capacity requirements.
1. Down payment: A typical down payment ranges from 5% to 20%. For an $800,000 home, a minimum down payment of 5% ($40,000) is required, but a 20% down payment ($160,000) would help avoid mortgage default insurance costs. With your current savings of $30,000, you should focus on increasing your savings to meet the required down payment.
2. Income: Lenders typically use the gross debt service (GDS) and total debt service (TDS) ratios to assess your ability to afford the mortgage. To qualify, your GDS should be below 32% and your TDS below 40%. You'll need a stable income sufficient to cover the mortgage, property taxes, utilities, and other debts.
3. 5Cs: The five Cs of credit—character, capacity, capital, collateral, and conditions—will be evaluated by the lender. Make sure you have a good credit history (character), sufficient income and savings (capacity and capital), and provide collateral (your home). Additionally, consider current market conditions.
4. Capacity requirements: Ensure that you meet the lender's capacity requirements, including credit score, employment history, and debt-to-income ratio.
To improve your chances of qualifying for the mortgage, focus on increasing your savings for the down payment, maintaining a stable income, and improving your credit score. Keep in mind that other factors, such as interest rates and housing market conditions, may also affect your eligibility.
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7. A country has the following rates of unemployment. 1. Cyclical = 5% 2. Frictional = 2% 3. Structural = 1% The Natural Rate of Unemployment is ... 3% O 1% 2% O 5%
The Natural Rate of Unemployment in this country is 3%.
1. Cyclical unemployment is 5%. This type of unemployment occurs due to fluctuations in the business cycle and is not part of the Natural Rate of Unemployment.
2. Frictional unemployment is 2%. This type of unemployment occurs when people are transitioning between jobs, entering the workforce, or searching for new opportunities.
3. Structural unemployment is 1%. This type of unemployment results from a mismatch between the skills of the workforce and the available job opportunities, often due to changes in technology or industry demands.
To find the Natural Rate of Unemployment, add the Frictional and Structural unemployment rates:
Natural Rate of Unemployment = Frictional Unemployment + Structural Unemployment
Natural Rate of Unemployment = 2% + 1%
Therefore, the Natural Rate of Unemployment in this country is 3%.
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The Natural Rate of Unemployment is the sum of the frictional and structural unemployment rates, which is 3% in this case. Therefore, the answer is 3%.
The Natural Rate of Unemployment refers to the rate of unemployment that exists when the labor market is in equilibrium and there are no cyclical fluctuations in the economy.
It is the sum of the frictional and structural unemployment rates in an economy. In the given scenario, the country's natural rate of unemployment would be 3%, which is the sum of the frictional rate of 2% and the structural rate of 1%.
The cyclical rate of 5% indicates that the economy is currently experiencing a downturn or recession, which is characterized by a higher-than-normal unemployment rate. As the economy recovers, the cyclical rate of unemployment should decrease and eventually return to the natural rate of 3%.
Therefore, the Natural Rate of Unemployment in this country is 3%.
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which of the following statements is true? group of answer choices corporations are required by law to report all activities to their stockholders each month. the common stockholders elect the board of directors and must approve major changes to corporate policies. stockholders must approve the sale of all goods and services by the company. corporations are required by law to have two stockholder meetings each year. stockholders may vote only by proxy.
The true statement is: "The common stockholders elect the board of directors and must approve major changes to corporate policies." The correct answer is B.
Common stockholders have the right to elect the board of directors and to vote on major changes to corporate policies, such as mergers or changes in the company's articles of incorporation. However, they do not have the right to approve every decision made by the corporation or to vote on every aspect of the company's operations.
Stockholder meetings are typically held once a year, but some corporations may hold additional meetings if necessary. Stockholders can vote in person or by proxy, but they must follow the procedures outlined in the company's bylaws and state laws to ensure that their vote is counted.
Option B holds true.
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a cell phone manufacturer wants to assemble a team to market a new cell phone across the country. a(n) group would be best for this purpose.
A cell phone manufacturer wants to assemble a team to market a new cell phone across the country. A cross-functional group would be best for this purpose.
A cross-functional team consists of members with diverse skill sets, backgrounds, and expertise, all working together towards a common goal. In this case, the goal is to market a new cell phone across the country.
By assembling a cross-functional team, the cell phone manufacturer can ensure that all aspects of the marketing campaign are effectively addressed. The team can include members from various departments such as marketing, sales, product development, and customer support. This diversity enables the team to develop a comprehensive marketing strategy that takes into account the unique strengths and challenges of the product, as well as the preferences and needs of the target audience.
The team can leverage the expertise of each member to create a cohesive, well-rounded approach to marketing the new cell phone. For instance, product developers can provide insights into the device's features, while marketing professionals can develop effective promotional campaigns. Sales representatives can provide input on the best distribution channels and strategies, and customer support can help address potential concerns from users.
By collaborating across departments and sharing knowledge, the cross-functional team can create a synergistic effect that allows them to achieve their goal of successfully marketing the new cell phone across the country. This approach also helps to improve communication, enhance decision-making, and foster innovation within the organization.
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QUESTION 17 Assume the same company in the 20% tax bracket with interest expense of $100,000. The after tax cost of the interest expense would be: O A $100,000 OB. $80,000 OC$20,000 OD. none of the above
The same company in the 20% tax bracket with interest expense of $100,000. The after tax cost of the interest expense would be option B. $80,000.
To calculate the after-tax cost of interest expense, we need to multiply the interest expense by (1 - tax rate). In this case, since the company is in the 20% tax bracket, the tax rate is 0.2. Therefore, the after-tax cost of the interest expense is:
$100,000 x (1 - 0.2) = $80,000
This means that the company can deduct the interest expense from its taxable income, which reduces the amount of income tax it has to pay. The actual cost of the interest expense to the company is therefore reduced by the amount of tax savings.
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3. Assume an investor is very risk-averse and is creating a portfolio based on the mean-variance model and the risk-free asset. The investor will most likely choose an investment on A. the left-hand side of the efficient frontier. B. the right-hand side of the efficient frontier. C. the line segment connecting the risk-free rate to the market portfolio. D. the line segment extending to the right of the market portfolio.
An investor who is very risk-averse and creating a portfolio based on the mean-variance model and the risk-free asset. The investor will most likely choose an investment on C. the line segment connecting the risk-free rate to the market portfolio.
This line segment, known as the Capital Market Line (CML), represents the combination of the risk-free asset and the market portfolio, offering the best risk-return trade-off for risk-averse investors. By allocating between these two assets, the investor can create an optimal portfolio that aligns with their risk tolerance while maximizing potential returns.
Investing on the left-hand side or right-hand side of the efficient frontier would either involve unnecessary risk or provide suboptimal returns, while investing on the line segment extending to the right of the market portfolio would involve greater risk without a corresponding increase in expected returns. Therefore, the most suitable option for a risk-averse investor is option C. the line segment connecting the risk-free rate to the market portfolio.
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