Answer:
$10
Explanation:
As the bond is priced at $1035, the par value is $1000.
Calculation of the amount of the next interest payment
= Par value * Coupon rate/12
= $1000 * 12%/12
= $1000 * 1%
= $10
So, the amount of the next interest payment is $10.
"S Company reported net income for 2021 in the amount of $460,000. The company's financial statements also included the following: Increase in accounts receivable $ 75,000 Decrease in inventory 62,000 Increase in accounts payable 230,000 Depreciation expense 103,000 Gain on sale of land 147,000 What is net cash provided by operating activities under the indirect method?"
Answer:
$633,000
Explanation:
Calculation to determine net cash provided by operating activities under the indirect method
Using this formula
Net cash provided by operating activities=Net income-(+Increase in accounts receivable)-(-Decrease in inventory )+Increase in accounts payable+Depreciation expense -Gain on sale of land
Let plug in the formula
Net cash provided by operating activities=$460,000 -(+$75,000)-(-$62,000) + $230,000 +$103,000 - $147,000
Net cash provided by operating activities=$633,000
Therefore net cash provided by operating activities under the indirect method is $633,000
84,000 on January 1, 2021. The equipment is expected to have a five-year life and a residual value of $3,300. Using the straight-line method, the book value at December 31, 2021, would be:
Answer:
$67,860
Explanation:
Depreciation = Cost - Residual amount ÷ Useful life
= ($84,000 - $3,300) ÷ 5
= $16,140
Book Value = Cost - Accumulated depreciation
therefore,
Book Value = $84,000 - $16,140
= $67,860
thus
The book value at December 31, 2021, would be: $67,860
Alberton Electronics makes inexpensive GPS navigation devices and uses a normal cost system that applies overhead based on machine hours. The following current year budgeted data are available:
Variable factory overhead at 100,000 machine hours $2,750,000
Variable factory overhead at 150,000 machine hours 4,125,000
Fixed factory overhead at all levels between 10,000 and 180,000 machine hours 3,168,000
Practical capacity is 180,000 machine hours; expected capacity is two-thirds of practical.
Required:
a. What is Alberton Electronics’ predetermined VOH rate?
b. What is the predetermined FOH rate using practical capacity?
c. What is the predetermined FOH rate using expected capacity?
d. During 2013, the firm records 110,000 machine hours and $2,710,000 of overhead costs. How much variable overhead is applied? How much fixed overhead is applied using the rate found in (b)? How much fixed overhead is applied using the rate found in (c)? Calculate the total under- or overapplied overhead for 2013 using both fixed OH rates.
Answer:
Alberton Electronics
a. Alberton Electronics' predetermined VOH rate = $27.50 ($1,375,000/50,000)
b. The predetermined FOH rate using practical capacity = $17.60 ($3,168,000/180,000)
c. The predetermined FOH rate using expected capacity = $26.40 ($3,168,000/120,000)
d. Variable overhead applied = $3,025,000 (110,000 * $27.50)
Fixed overhead applied using $17.60 FOH rate = $1,936,000 (110,000 * $17.60)
Fixed overhead applied using $26.40 FOB rate = $2,904,000 (110,000 * $26.40)
The Total under-or applied overhead for 2013:
a) Overapplied overhead = $2,251,000 ($4,961,000 - $2,710,000)
b) Overapplied overhead = $3,219,000
Explanation:
a) Data and Calculations:
Variable factory overhead at 100,000 machine hours $2,750,000
Variable factory overhead at 150,000 machine hours 4,125,000
Difference = 50,000 machine hours and $1,375,000
Variable overhead rate = $1,375,000/50,000 = $27.50
Fixed factory overhead between 10,000 and 180,000 machine hours = $3,168,000
Practical capacity = 180,000
Expected capacity = 120,000 (180,000 * 2/3)
a. Alberton Electronics' predetermined VOH rate = $27.50 ($1,375,000/50,000)
b. The predetermined FOH rate using practical capacity = $17.60 ($3,168,000/180,000)
c. The predetermined FOH rate using expected capacity = $26.40 ($3,168,000/120,000)
d. Variable overhead applied = $3,025,000 (110,000 * $27.50)
Fixed overhead applied using $17.60 FOH rate = $1,936,000 (110,000 * $17.60)
Fixed overhead applied using $26.40 FOB rate = $2,904,000 (110,000 * $26.40)
The Total under-or applied overhead for 2013:
a) Total overhead applied = $4,961,000 ($3,025,000 + $1,936,000)
Overapplied overhead = $2,251,000 ($4,961,000 - $2,710,000)
b) Total overhead applied = $5,929,000 ($3,025,000 + $2,904,000)
Overapplied overhead = $3,219,000 ($5,929,000 - $2,710,000)
Diego owns 1,000 shares of Carmen. If Carmen Company issues an additional 100,000 shares of common stock, how many additional shares does Diego have the opportunity to buy
Answer:
Number of additional shares Diego has the opportunity to buy is 500 shares.
Explanation:
Note: This question is not complete. The complete question is therefore provided before answering the question as follows:
Carmen Company has the following equity amounts and no dividends in arrears.
Preferred stock, $1,000 par $24 million
Common stock, $100 par $20 million
Paid-in capital in excess of par $36 million
Retained earnings $18 million
Diego owns 1,000 shares of Carmen. If Carmen Company issues an additional 100,000 shares of common stock, how many additional shares does Diego have the opportunity to buy?
a. 500 b. 1,000 c. 2,000 d. 3,000
The explanation of the answer is now given as follows:
Current number of Carmen's Common stock shares outstanding = Common stock value / Common stock par value = $20,000,000 / $100 = 200,000 shares
Current percentage of Diego ownership in Carmen = Current number of Diego;s shares / Current number of Carmen's Common stock shares outstanding = 1,000 / 200,000 = 0.005, or 0.50%
Number of additional shares Diego has the opportunity to buy = Number of additional shares Camen wants to issue * Current percentage of Diego ownership in Carmen = 100,000 * 0.50% = 500 shares
Daniel was surprised his store ran out of marshmallows so quickly. This typically does not happen during the spring, so he runs a(n) ________ to gather unplanned information to support if he should stock up on marshmallows.
Answer:
Ad-hoc report
Explanation:
From the question we are informed about how Daniel was surprised his store ran out of marshmallows so quickly. This typically does not happen during the spring, so in this case, he runs an Ad-hoc report to gather unplanned information to support if he should stock up on marshmallows.
Ad hoc report can be regarded as
a report that is created just for a one-time-use I e for a specific purpose.
With the use of BI tool there is possibility of anyone in an organization answering a specific business question and give presentation of that data in a visual format, even without given IT staff problems, Ad hoc report is different from structured report.
On January 12, 2021, Jefferson Corporation purchased bonds of Rose Corporation for $77 million at par and classified the securities as available-for-sale. On December 31, 2021, these bonds were valued at $72 million. Nine months later, on October 3, 2022, Jefferson Corporation sold these bonds for $93 million.
As part of the multistep approach to record the 2022 transaction Jefferson Corporation should next take the second step of:________
a. Reversing total accumulated unrealized holding gains of $25 milion.
b. Reversing total accumulated unrealized holding gains of $18 milion
c. Reversing total accumulated unrealized holding gains of S7 million
d. Reversing total accumulated unrealized holding gains of $11 milion
Answer:
a
Explanation:
Palmer Corp. is considering the purchase of a new piece of equipment. The cost savings from the equipment would result in an annual increase in net income after tax of $179,850. The equipment will have an initial cost of $545,000 and have a 7 year life. If the salvage value of the equipment is estimated to be $34,000, what is the accounting rate of return
Answer:
So, accounting rate of return = 33 %
Explanation:
given data
net income after tax = $179,850
initial cost = $545,000
time = 7 year
salvage value = $34,000
we will get here the accounting rate of return
solution
as we know that accounting rate of return is express as
accounting rate of return = Net income ÷ initial investment .................1
put here value and we get
accounting rate of return = [tex]\frac{179850}{545000}[/tex]
So, accounting rate of return = 33 %
SegR-7268 Corporation has two divisions, East and West. The following information was taken from last year's income statement segmented by division: East Division West Division Sales $3,700,000 $2,300,000 Contribution margin $1,650,000 $1,000,000 Divisional segment margin $1,100,000 $350,000 Net operating income last year for SegR-7268 Corporation was $600,000. In last year's income statement segmented by division, what were SegR-7268's total common fixed expenses?
a. $2,050,000
b. $850,000
c. $2,300,000
d. $1,200,000
Answer:
b. $850,000
Explanation:
Divisional Segment Margin = $1,100,000 + $350,000
Divisional Segment Margin = $1,450,000
Net Operating Income = $600,000
Common fixed expenses = Divisional Segment Margin - Net Operating Income
Common fixed expenses = $1,450,000 - $600,000
Common fixed expenses = $850,000
So, SegR-7268's total common fixed expenses will be $850,000.
Assume that interest rate parity (IRP) exists. You expect that the one-year nominal interest rate in the U.S. is 7%, while the one-year nominal interest rate in Australia is 11%. The spot rate of the Australian dollar is $0.60. You will need 10 million Australian dollars in one year. Today, you purchase a one-year forward contract in Australian dollars. How many U.S. dollars will you need in one year to fulfill your forward contract
Answer:
US $5,784,000
Explanation:
As per interest rate parity, forward rate = Spot rate*(1+Interest rate U.S.)/(1+interest rate Australia)
= 0.60*(1.07)/(1.11)
= 0.5784 /A$
Australian Dollars required in one year = 10,000,000
U.S. Dollars required = 10,000,000 * 0.5784 /A$
U.S. Dollars required = $5,784,000
So, the number of U.S. dollars you will need in one year to fulfill the forward contract is 5,784,000.
4 types of market efficiency measures.
Answer:
Information arbitrage efficiency. ...
Fundamental valuation efficiency. ...
Full insurance efficiency. ...
Functional/Operational efficiency. ...
Mark as brainliest
Brief Exercise 18-5 a1-a2 Crane Corp. has collected the following data concerning its maintenance costs for the past 6 months. Units Produced Total Cost July 19,960 $46,020 August 35,488 53,232 September 39,924 60,995 October 24,398 48,965 November 44,360 82,620 December 42,142 68,758 (a1) Compute the variable cost per unit using the high-low method. (Round answer to 2 decimal places, e.g. 2.25.) Variable cost per unit
Answer:
A.$1.50 per units
B. $16,080
Explanation:
Computation for the variable cost per unit using the high-low method.
Using this formula
Variable cost per unit= High activity cost -Low Activity cost /High activity cost -Low Activity cost
Let plug in the formula
Variable cost per unit=(82,620-$46,020)/(44,360-19,960)
Variable cost per unit=$36,600/$24,400
Variable cost per unit= $1.5 per units
Therefore the variable cost per unit using the high-low method is $1.50 per units
B. Computation for the fixed cost element unit using the high-low method.
Fixed cost element=82,620-(1.50*44,360)
Fixed cost element=82,620-66,540
Fixed cost element=$16,080
Therefore the fixed cost element unit using the high-low method is $16,080
When suppliers collaborate with the firm overall performance has been known to improve up to _________
Hi, you've asked an incomplete question. Answered from a general business perspective.
Explanation:
Note, a firm may measure its overall performance using some of the metrics below:
amount of sales in dollarsthe total cost of production,production capacity, etc.Only when the firm's suppliers are reliable, affordable, and efficient, would the firm be able to meet their product demand.
Terp Corp.'s transactions for the year ended December 31, 2021 included the following: Purchased real estate for $1,250,000 cash which was borrowed from a bank. Sold investment securities for $1,000,000. Paid dividends of $1,200,000. Issued 500 shares of common stock for $500,000. Purchased machinery and equipment for $250,000 cash. Paid $900,000 toward a bank loan. Reduced accounts receivable by $200,000. Increased accounts payable $400,000. The net cash used in financing activities for 2021 was
Answer:
$1,600,000
Explanation:
Cashflow from financing activities
Dividends ($1,200,000)
Issue of Stocks $500,000
Bank Loan Repayment ($900,000)
Net Cash flow ($1,600,000)
thus
The net cash used in financing activities for 2021 was $1,600,000
Sun Co. was constructing fixed assets that qualified for interest capitalization. Sun had the following outstanding debt issuances during the entire year of construction: $6,000,000 face value, 8% interest $8,000,000 face value, 9% interest None of the borrowings were specified for the construction of the qualified fixed asset. Average expenditures for the year were $1,000,000. What interest rate should Sun use to calculate capitalized interest on the construction
Answer:
the interest rate that should be determined the capitalized interest is 8.57%
Explanation:
The computation of the interest rate that should be determined the capitalized interest is shown below;
= $6,000,000 ÷ ($6,000,000 + $8,000,000) × 0.08 + $8,000,000 ÷ ($6,000,000 + $8,000,000) × 0.09
= 0.0857
= 8.57%
Hence, the interest rate that should be determined the capitalized interest is 8.57%
The same would be considered
A similarity between monopoly and monopolistic competition is that in both market structures a. there are only a few buyers but many sellers. b. there are a small number of sellers. c. sellers are price makers rather than price takers. d. strategic interactions among sellers are important.
Answer:
c
Explanation:
A monopolistic competition is when there are many firms selling differentiated products in an industry. A monopolistic competition has characteristics of both a monopoly and a perfect competition. the demand curve is downward sloping. it sets the price for its goods and services.
An example of monopolistic competition are restaurants
When firms are earning positive economic profit, in the long run, firms enter into the industry. This drives economic profit to zero
If firms are earning negative economic profit, in the long run, firms leave the industry. This drives economic profit to zero
in the long run, only normal profit is earned
A monopoly is when there is only one firm operating in an industry. there are usually high barriers to entry of firms. the demand curve is downward sloping. it sets the price for its goods and services.
An example of a monopoly is a utility company
A price maker is a seller that sets the price for its goods and services. A monopoly and a monopolistic competition are price makers
Hammerhead Inc. uses practical capacity as the denominator to set the cost of supplying capacity and for the current period the budgeted cost per unit of supplying capacity was $42. Practical capacity was set at 10,000 units with theoretical capacity at 14,000 units. During the period, only 4,000 units were produced while the master budget assumed that the company would produce 9,000 units. What is the value of the manufacturing resources NOT used during the period
Answer:
the value of the manufacturing resources not used is $252,000
Explanation:
The computation of the value of the manufacturing resources not used is shown below
= (practical capacity - number of units produced) × budgeted cost per unit of supplying capacity
= (10,000 units - 4,000 units) × $42
= 6,000 units × $42
= $252,000
Hence, the value of the manufacturing resources not used is $252,000
65 employees have earned two weeks of vacation time to be taken the following year. If the average weekly salary for these employees is $900, what is the required journal entry to accrue compensated absences
Answer: Debit Salaries and Wages Expense $117000
Credit Salaries and Wages Payable $117000
Explanation:
Based on the information given in the question, the required journal entry to accrue compensated absences will be as follows:
First, we need to know the amount of the compensated absence which will be:
= 65 employees × $900 × 2 Weeks vacation
= $117000
Therefore, the journal entry is:
Debit Salaries and Wages Expense $117000
Credit Salaries and Wages Payable $117000
Fill in the missing amounts.
Crane Company Sheridan Company
Sales revenue $94,200 $enter a dollar amount Sales returns and allowances enter a dollar amount $ 3,000 Net sales 80,200 100,000 Cost of goods sold 54,200 enter a dollar amount Gross profit $enter a subtotal of the two previous amounts 50,000 Operating expenses 14,700 enter a dollar amount Net income $enter a total net income 15,600
Calculate the profit margin and the gross profit rate for each company. (Round answers to 1 decimal place, e.g. 15.5%. )
Crane Company Sheridan Company
Profit margin
Gross profit rate
SHOW LIST OF ACCOUNTS
LINK TO TEXT LINK TO TEXT
Answer:
Find my analysis below
Explanation:
The gross profit rate is the portion of net sales earned as gross profit prior to considering operating expenses as indicated by the formula below:
gross profit rate=gross profit/net sales
The profit margin measures the net income as a percentage of net sales
profit margin=net income/net sales
Crane company Sheridan company
Sales revenue $94,200 $103,000
sales returns and allowance $14,000 $3,000
Net sales $80,200 $100,000
cost of goods sold $54,200 $50,000
Gross profit $26,000 $50,000
Operating expenses $14,700 $34,400
Net income $11,300 $15,600
Gross profit rate=gross profit /net sales 32.4% 50.0%
Profit margin=net income/net sales 14.1% 15.6%
Crane company Sheridan company
Sales revenue 94200 =F5+F4
sales returns and allowance =E3-E5 3000
Net sales 80200 100000
cost of goods sold 54200 =F5-F7
Gross profit =E5-E6 50000
Operating expenses 14700 =F7-F9
Net income =E7-E8 15600
Gross profit rate=gross profit /net sales =E7/E5 =F7/F5
Profit margin=net income/net sales =E9/E5 =F9/F5
Hillary considers herself a shrewd commodities investor. She bought a May cotton contract (50,000 pounds) at a pound, and later sold it at a pound. What were her profit and her return on invested capital if her initial margin was and the size of a cotton futures contract is 50,000 pounds of cotton?
Answer: See explanation
Explanation:
Based on the information given in the question, the profit will be calculated as:
Profit = (Selling price - Buying Price) × Size
= ($0.6485 - $0.6264)*50,000
= $0.0221 × 5000
= $1,105
Then, the return on the invested capital will be:
= Profit/Initial Margin
= 1105/1060
= 1.0425
= 104.25%
Roberto Corporation was organized on January 1, 2021. The firm was authorized to issue 84,000 shares of $5 par common stock. During 2021, Roberto had the following transactions relating to shareholders' equity: Issued 10,800 shares of common stock at $6.00 per share. Issued 20,400 shares of common stock at $8.20 per share. Reported a net income of $108,000. Paid dividends of $59,000. Purchased 3,100 shares of treasury stock at $10.20 (part of the 20,400 shares issued at $8.20). What is total shareholders' equity at the end of 2021
Answer:
$249,460
Explanation:
Calculation to determine the total shareholders' equity at the end of 2021
Issued of stock $64,800
(10,800 shares * $6.00 per share)
Issued of stock $167,280
(20,400 shares * $8.20 per share)
Net income $108,000
Less dividends ($59,000)
Less Treasury stock $31,620
( 3,100 shares* $10.20)
Total shareholders' equity $249,460
Therefore total shareholders' equity at the end of 2021 is $249,460
Consumers know that some fraction x of all new cars produced and sold in the market are defective. The defective ones cannot be identified except by those who own them. Cars do not depreciate with use. Consumers are risk-neutral and value nondefective cars at $10,000 each. New cars sell for $8,000 and used ones for $2,000. (Note that since buyers are risk-neutral, the price of a new car reflects the expected value of purchasing a car that may or may not be defective.)What is the fraction x?Instructions: Enter x as a number rounded to two decimal places. For example, if x = 1/3 enter 0.33.
Answer:
0.25
Explanation:
Given :
The [tex]$\text{consumers value}$[/tex] the non defective cars = [tex]$\$ 10,000$[/tex]
We will consider all the defective [tex]$\text{ cars are used cars}$[/tex] only. This is only because the value of the used car is $ 2000 and it is lower than the price of a good car that is $10,000. Thus only defective cars are being sold as the old cars.
For a risk neutral customer, the price that he is ready to give for the new car is the reservation price of a non defective car. It means that (the amount of $ 8000 is the value of the good car x chances of getting a good car) +( the value of the bad car x chances of getting a bad car).
Since we know that x is the fraction of all the cars sold in the market are defective, it means that the fraction of the good cars is 1 - x. Thus putting the values,
[tex]$x\times 2000+(1-x)\times 10000=8000$[/tex]
[tex]$10000-8000x=80000$[/tex]
[tex]$8000x=2000$[/tex]
[tex]$x=\frac{2}{8}$[/tex]
= 0.25
Thus the value of :
[tex]$x=\frac{2}{8} = 0.25$[/tex]
the month-end bank stataement of der torossian incorporated shows a balance of 36,500, deposits in transit are 6500 outstanding checks are 12000. there also shows a credit memo of 1,000 for the interest income collected on a note recievable. the adjusted balance per bank at month end is
Answer:
$31,000
Explanation:
Calculating the adjusted balance per bank at month end.
Details Amount
Unadjusted Balance $36,500
Add: Deposits in Transit $6,500
Less: Outstanding Checks $12,000
Adjusted Balance $31,000
The balance in retained earnings at December 31, 2020 was $1440000 and at December 31, 2021 was $1168000. Net income for 2021 was $1008000. A stock dividend was declared and distributed which increased common stock $499000 and paid-in capital $99000. A cash dividend was declared and paid.
The amount of the cash dividend was:___________
a) $381000.
b) $781000.
c) $682000.
d) $1280000.
Answer:
C. $682,000
Explanation:
Given the above information, the computation of cash dividend is seen below;
Beginning retained earnings (2020) + net income - Stock dividend - Cash dividend = Retained earnings
$1,440,000 + $1,008,000 - ($499,000 + $99,000) - Cash dividend = $1,168,000
$2,448,000 - $598,000 - Cash dividend = $1,168,000
Cash dividend = $2,448,000 - $598,000 - $1,168,000
Cash dividend = $682,000
Identify the type of adjustment that would most likely be needed. Business B purchased a piece of equipment to be used in operations for $5,000 during the middle of October. Today is December 31st, the end of the 4th quarter and financial reports are being produced. g
Answer: c . Depreciation
Explanation:
When accounting for fixed assets, it is important that they are recorded at their book value to reflect the effects of being utilized. This means that depreciation needs to be charged on fixed assets.
Even though the equipment in question was only purchased 2.5 months prior to the financial reports being made, depreciation still needs to be accounted for such that the equipment is represented at its book value in the financial statement.
Assume that at the end of 2020, Clampett, Incorporated (an S corporation) distributes property (fair market value of $40,000, basis of $5,000) to each of its four equal shareholders (aggregate distribution of $160,000). At the time of the distribution, Clampett, Incorporated, has no corporate earnings and profits and J.D. has a basis of $50,000 in his Clampett, Incorporated, stock. What is J.D.'s stock basis after the distribution
Answer:
$45,000
Explanation:
Calculation to determine J.D.'s stock basis after the distribution
Using this formula
J.D.'s stock basis=Original basis+distributive share of the gain on the distribution -Distribution
Let plug in the formula
J.D.'s stock basis=$50,000+($40,000-$5,000)-$40,000
J.D.'s stock basis= $50,000 + $35,000 − $40,000
J.D.'s stock basis= $45,000
Therefore J.D.'s stock basis after the distribution
is $45,000
Use the following Balance Sheet and Income Statement data of Bronson Corporation to calculate its debt to total assets ratio as of December 31, 2017:
Current assets $9,000 Net income $70,000
Current liabilities 4,000 Common stock 10,000
Average assets 28,000 Total liabilities 6,000
Total assets 30,000 Retained earnings 20,000
Write your response rounded to the nearest whole number only.
Answer:
20 %
Explanation:
The Debt to Total Assets ratio is used to measure financial risk, the higher the ratio the more financial risk there is.
Debt to Total Assets ratio = Total debt / Total Assets x 100
therefore,
Debt to Total Assets ratio = $6,000 / $30,000 x 100 = 20 %
thus,
The debt to total assets ratio as of December 31, 2017: 20 %
Sam has two jobs, one for the winter and one for the summer. In the winter, he works as a lift attendant at a ski resort where he earns $13 per hour. During the summer, he drives a tour bus around the ski resort, earning $11 per hour. Assume that Sam has an upward-sloping labor supply curve. If the opportunity cost of Sam's leisure time increases, he will respond by working:__________
Answer:
more hours
Explanation:
Opportunity cost of the next best option forgone when one alternative is chosen over other alternatives
time is a limited resource that has to be shared between work and leisure. If the opportunity cost of leisure increases, it means he is giving up more work to rest. As a result, he would increase his work hours
Which structure is used to supply customers (often other MNEs) in a coordinated and consistent way across various countries
Answer:
Global account structure.
Explanation:
Global account structure can be regarded as structure that enables the account that has been globally standardised or having compatible products as well as services in various locations at internationally level. Global Account Management enables Global account managers to navigate along with their teams the internal as well as external challenges. It should be noted that structure used to supply customers (often other MNEs) in a coordinated and consistent way across various countries is Global account structure.
If markets are in equilibrium, which of the following conditions will exist? a. Each stock's expected return should equal its realized return as seen by the marginal investor. b. Each stock's expected return should equal its required return as seen by the marginal investor. c. All stocks should have the same expected return as seen by the marginal investor. d. The expected and required returns on stocks and bonds should be equal. e. All stocks should have the same realized return during the coming year.
Answer:
a
Explanation:
Equilibrium is a market exists when quantity demanded equals the quantity supplied. At equilibrium, demand equals supply. Above equilibrium there is a surplus and below equilibrium there is scarcity.
When there is equilibrium in the stock market, each stock's expected return should equal its realized return as seen by the marginal investor
If there is a surplus in the stock market, realized return would be greater than expected return
If there is a scarcity in the stock market, expected return would be greater than realized return
onsider the following scenario. Inflation in Argentina pushes the price of Argentine wine up 25%. Inflation in the United States pushes the price of California wine up 10%. If the exchange rate remains constant, the U.S. demand for wine from Argentina a. decreases. b. increases. c. remains constant. d. California wine is better than Argentine wine, so there never is a U.S. demand for wine from Argentina.
Answer:
If the exchange rate remains constant, the U.S. demand for wine from Argentina
a. decreases.Explanation:
Since the inflation rate in Argentina is much higher than the inflation rate in the United States, the price of Argentinean wine will increase in its domestic currency, the Argentinean peso. If the exchange rate is fixed, then Argentinean wine will become more expensive. As a good becomes more expensive, its demand tends to decrease.