The amount Jody invested in an account paying 3% simple interest is $12900.
Let, x represents the amount Jody invested in an account paying 5% simple interest.
Let, y represents the amount Jody invested in an account paying 3% simple interest.
In verbal model,
Jody invested $ 4700 less in the account paying 5% simple interest than she did in the account paying 3% simple interest.
(Amount invested in the account paying 5% simple interest)- (Amount invested in the account paying 3% simple interest)=4700
If r is the rate of interest, then the interest for an amount P in n years is PNR
(Interest from the account paying 5% simple interest)
+(Interest from the account paying 3% simple interest)
= (Total interest at the end of first year)
y-x=4700 …… (i)
(x x 1 x 0.05)+(y x 1 x 0.03)=797…… (ii)
This system can be solved either by substitution method or the addition method. We will solve by using the substitution method. The variable y in equation (i) is the easiest variable to isolate.
y-x=4700
y=x+4700
Substituting y=x+4700 in equation (ii) and solving for x,
(x*1*0.05)+(y*1*0.03)=797
0.05x+0.03y=797
0.05x+0.03(x+4700)=797
x=8200
Now,
Substituting x=8200 in y=x+4700, we have
y=12900
Therefore, the amount Jody invested in the account paying 5% simple interest is =$8200
And the amount Jody invested in an account paying 3% simple interest is $12900.
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Complete question:
Jody invested $4700 less in an account paying 5% simple interest than she did in an account paying 3% simple interest. At the end of the first year, the total interest from both accounts was $797. Find the amount invested in each account.
What is the after-tax present worth of a chip placer if it costs $75,000 and saves $23,000 per year? The after tax interest is 10%. Assume the device will be sold for $7500 salvage value at the end of its 6 year life. Assume the chip placer falls under CCA Class 8. The corporate income tax rate is 54%.
The after-tax present worth of a chip placer is $54,414.64.
To calculate the after-tax present worth, follow these steps:
1. Determine the cash flow generated by the chip placer: Annual savings - (Annual savings * Corporate income tax rate) = $23,000 - ($23,000 * 0.54) = $10,580.
2. Calculate the present value of the cash flows for 6 years: PV = CF * [(1 - (1 + i)⁻ⁿ) / i], where PV is present value, CF is cash flow, i is the after-tax interest rate (0.10), and n is the number of years (6). PV = $10,580 * [(1 - (1 + 0.10)⁻⁶) / 0.10] = $45,914.64.
3. Calculate the present value of the salvage value: PV = SV / (1 + i)ⁿ, where PV is present value, SV is salvage value ($7,500), i is the after-tax interest rate (0.10), and n is the number of years (6). PV = $7,500 / (1 + 0.10)⁶ = $8,500.
4. Subtract the cost of the chip placer from the sum of the present values of cash flows and salvage value: After-tax present worth = (Present value of cash flows + Present value of salvage value) - Cost of chip placer = ($45,914.64 + $8,500) - $75,000 = $54,414.64.
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T/F a primary goal of managerial accounting is to provide information to investment managers who analyze a company’s stock for external investors.
The given statement "A primary goal of managerial accounting is not to provide information to investment managers who analyze a company's stock for external investors" is false because managerial accounting, also known as management accounting, focuses on providing relevant and timely financial and non-financial information to internal managers for decision-making purposes.
This branch of accounting assists managers in planning, controlling, and evaluating business operations to achieve organizational goals and improve efficiency. In contrast, financial accounting is the branch that primarily provides information to external parties such as investors, creditors, and regulators. Financial accounting follows Generally Accepted Accounting Principles (GAAP) and produces standardized financial statements, which are utilized by external stakeholders to analyze a company's financial health and performance.
While both managerial and financial accounting serve crucial functions, their primary goals and audiences differ significantly. Managerial accounting is mainly concerned with providing information to internal managers for effective decision-making, whereas financial accounting caters to the information needs of external stakeholders like investment managers.
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Assume the large-company stocks had an average rate of return of 18.5 percent over the past 55 years while T-bills returned average of 2.4 percent and inflation average 1.8 percent.
The nominal risk premium for large stocks was?
The nominal risk premium for large stocks was 16.1 percent.
To calculate the nominal risk premium, you need to subtract the average return of T-bills from the average return of large-company stocks. In this case, the average return of large-company stocks was 18.5 percent, while the average return of T-bills was 2.4 percent. Using these values, the calculation is as follows:
Nominal Risk Premium = Large-Company Stocks Return - T-Bills Return
Nominal Risk Premium = 18.5% - 2.4%
Nominal Risk Premium = 16.1%
Thus, the nominal risk premium for large stocks over the past 55 years was 16.1 percent. This value represents the additional return investors can expect from investing in large-company stocks instead of T-bills, without considering the impact of inflation.
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Compare the financial fates of two workers. (Round all finalanswers to the nearest DOLLAR.)WORKER A starts to save money early forretirement and puts away $300 a month in a retirement accountpayinCompare the financial fates of two workers. (Round all final answers to the nearest DOLLAR.) WORKER A starts to save money early for retirement and puts away $300 a month in a retirement account payin g on average 8.5% for 45 years. WORKER B starts late and puts away $1,500 a month for 10 years in an account paying 8.5%. WORKER A: FUTURE VALUE Total Contribution= Interest WORKER B: FUTURE VALUE Total Contribution- Interest
The financial fates are: WORKER A: FUTURE VALUE = $3,066,000 Total Contribution = $216,000, WORKER B: FUTURE VALUE = $2,085,000 Total Contribution = $180,000.
What is financial fates?Financial fates is a term used to refer to the future of a company’s financial state. This can include the company’s financial health, performance, and ability to meet obligations such as debt payments. Companies can have good or bad financial fates, and it is important for those in the corporate and finance industries to be aware of these changes in order to make informed decisions.
In total, Worker A has contributed $216,000 and earned an interest of $2,850,000, resulting in a future value of $3,066,000. On the other hand, Worker B, who has saved for a shorter period of time and contributed less money, has a future value of $2,085,000. This is because Worker B has only contributed $180,000 and earned an interest of $1,905,000. The difference in the future values of the two workers is $981,000.
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You pay $9850 for a 180 -day T-bill. It is worth $10.000 at maturity. What is its investment rate? O 3.09% O 2.95% O 4.01% O 3.54%
The investment rate of the 180-day T-bill is approximately 3.09%.
To calculate the investment rate of a 180-day T-bill, you can use the following formula:
Investment Rate = ((Maturity Value - Purchase Price) / Purchase Price) * (365 / Number of Days) * 100
Plugging in the given values:
Investment Rate = (($10,000 - $9,850) / $9,850) * (365 / 180) * 100
Investment Rate = ($150 / $9,850) * (365 / 180) * 100
Investment Rate ≈ 0.01523 * 2.028 * 100
Investment Rate ≈ 3.09%
So, the investment rate of the 180-day T-bill is approximately 3.09%.
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The
so-called currency velocity V refers to the ratio of actual GNP to
actual currency holdings, V=Y/(M/P). Use the equation Ms/P =L(R,Y)
)to derive an expression for the velocity of money and explain
The equation shows that the velocity of money is a function of the demand for real money balances (L(R,Y)) and real GDP (Y), and inversely related to the nominal money supply (Ms).
Starting from the equation M * V = P * Y, which represents the quantity theory of money, where M is the money supply, V is the velocity of money, P is the price level, and Y is real output or real GDP.
We can rearrange this equation to get V = (P * Y) / M.
Substituting M/P for 1/V, we get V = Y / (M/P).
Now, using the equation Ms/P = L(R,Y), which represents the demand for real money balances, where Ms is the nominal money supply, P is the price level, R is the interest rate, and L(R,Y) is the demand for real money balances, we can solve for M/P as follows:
M/P = Ms / (L(R,Y))
Substituting this expression for M/P in the velocity equation, we get:
V = Y / (Ms / L(R,Y))
Multiplying numerator and denominator by L(R,Y), we get:
V = (Y * L(R,Y)) / Ms
Explannation : The velocity of money is the number of times that the average unit of currency is used to purchase goods and services in a given period. It depends on how much money people want to hold for transactions and how quickly they spend it. When people hold more money, the velocity of money decreases, and when they hold less, it increases.
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Consider a hypothetical security that pays a continuous dividend over time according to D(t) = Do(1 + t). Assuming a constant) CC rate of interest, r, write a SIMPLIFIED expression for the present value and the duration of this security. If 10% what maturity ZC bond matches the duration? =
The simplified expression for the present value is PV = Do/(r^2 + r) and the duration of this security is Duration = Do * (2r + 1)/(r^2 + r)^2.
To find the present value of the security, we use the continuous dividend discount model: PV = ∫[0,∞] D(t)e^(-rt) dt
Substituting the dividend function D(t) = Do(1 + t) gives:
PV = Do ∫[0,∞] (1 + t)e^(-rt) dt
Using integration by parts, we get:
PV = Do [(1 + r)^(-2)] = Do/(r^2 + r)
To find the duration of the security, we use the formula: Duration = (-1/PV) * dPV/dr
Differentiating the present value expression with respect to r, we get:
dPV/dr = -Do/(r^2 + r)^2 * (2r + 1)
Substituting this into the duration formula gives:
Duration = Do * (2r + 1)/(r^2 + r)^2
To find the maturity ZC bond that matches this duration, we solve the following equation: Duration of ZC bond = Duration of security
Using the duration formula for a ZC bond, we get:
Duration of ZC bond = Maturity
Substituting this into the equation above and solving for maturity, we get:
Maturity = (2r + 1)/(r^2 + r)^2
If r = 10%, then the maturity of the ZC bond that matches the duration of the security is: Maturity = (2*0.1 + 1)/(0.1^2 + 0.1)^2 = 8.75 years (approximately).
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A subsistence economic system implies nearly total self-sufficiency of its members. The von Thünen model is based on the observation that the value of agricultural land is determined based on soil fertility and climate.
True. The von Thünen model is an economic theory that explains how agricultural land use is determined based on the location of the land and the cost of transportation. The theory was developed by Johann Heinrich von Thünen, a German economist and farmer, in the early 19th century.
One of the key assumptions of the von Thünen model is that a subsistence economic system implies nearly total self-sufficiency of its members. In other words, people who live in a subsistence economy produce most of what they consume and rely little on trade or market exchange.
The model is based on the observation that the value of agricultural land is determined based on soil fertility and climate. The most fertile land is typically located close to the city, where it can be easily transported and sold in the market. As one moves further away from the city, the land becomes less fertile and more difficult to transport, leading to lower land values.
The von Thünen model assumes that farmers will choose to cultivate crops that are most profitable given the location of their land and the cost of transportation.
On the other hand, if a farmer has land located far from the city, they are more likely to grow crops that are less perishable and have a lower value per unit of weight, such as grains and livestock.
The von Thünen model provides a useful framework for understanding how agricultural land use is determined based on location and transportation costs. While the model is not without limitations, it continues to be an important tool for economists and geographers studying agricultural systems and rural development.
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Complete question is:
A subsistence economic system implies nearly total self-sufficiency of its members. The von Thünen model is based on the observation that the value of agricultural land is determined based on soil fertility and climate. True/False
The von Thünen model is based on the assumption that farmers in a subsistence economy prioritize their needs based on proximity to the market.
The von Thünen model is an economic theory that explains the spatial distribution of agriculture in a hypothetical, isolated, and subsistence economy. It assumes that farmers prioritize their needs based on the proximity to the market, with more perishable goods being produced closer to the market and fewer perishable ones further away. In a subsistence economy, farmers focus on self-sufficiency and prioritize the production of food and other essential items needed for survival. The model also assumes that the value of agricultural land is determined by soil fertility and climate, which can vary with distance from the market. As a result, the model predicts that farmers will produce crops with the highest value per unit of land closest to the market and move outwards to less valuable crops as they move further away.
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you have been assigned mary johnson's theft claim. in order for you to do a thorough investigation you need her to provide documentation to you. how long do you have
Typically, insurance companies require claimants to submit documentation within a specific time frame, which can range from 30 to 90 days after the incident.
How long to effectively handle Mary Johnson's theft claimTo effectively handle Mary Johnson's theft claim, it's important to obtain the necessary documentation in a timely manner.
Typically, claimants have a specific period to submit their documents, which may vary depending on the insurance company's policies or local regulations. It's common for this period to be within 30 to 90 days from the date of the theft.
To conduct a thorough investigation, request essential documents such as a detailed list of stolen items, their values, proof of ownership, and a police report.
Maintaining clear communication with Mary and providing guidance on required documentation can facilitate a smoother process
. Remember to adhere to the specified deadline and maintain professionalism and accuracy throughout the investigation to ensure a fair outcome for Mary Johnson's theft claim.
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What loan alternative would you choose? (just take into account the interest rate):
a. loan at 15.5% per annum, computed annually
b. loan at 15% per annum, computed quarterly
(please use the formula method)
Using the basis of interest rates, the loan alternative which should be chosen is loan a.
To compare the loan alternatives and choose the better option, we will use the effective annual rate (EAR) formula. The EAR allows us to compare loans with different compounding periods on an equal basis. The formula for EAR is:
EAR = (1 + i/n)^(n) - 1
where i is the nominal interest rate, and n is the number of compounding periods per year.
For loan a:
i = 15.5% (0.155) and n = 1 (annual compounding)
EAR_a = (1 + 0.155/1)^1 - 1 = 0.155 = 15.5%
For loan b:
i = 15% (0.15) and n = 4 (quarterly compounding)
EAR_b = (1 + 0.15/4)^4 - 1 ≈ 0.15856 = 15.856%
Comparing the two loans, loan a has an effective annual rate of 15.5%, while loan b has an effective annual rate of 15.856%. Based on the interest rates, I would choose loan a, as it has a lower effective annual rate (15.5%) compared to loan b (15.856%).
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forgoing current consumption so that those resources can be used to produce new capital is called: a. scarcity. b. absolute advantage. c. comparative advantage. d. saving. e. investment.
Ongoing current consumption so that those resources can be used to produce new capital is called investment. The correct answer is e Investment
Investment refers to the process of forgoing current consumption so that those resources can be used to produce new capital. In this context, "capital" represents physical assets or resources used to produce goods and services, such as machinery, buildings, or technology.
When individuals or businesses decide to invest, they are choosing to sacrifice immediate consumption or satisfaction in order to potentially increase their productivity or income in the future. This decision is driven by the desire for economic growth and a higher standard of living over time.
Investment is distinct from the other options listed. Scarcity (a) refers to the limited availability of resources; absolute advantage (b) describes a country's ability to produce a good more efficiently than another country; and comparative advantage (c) is the ability to produce a good at a lower opportunity cost than another country. Saving (d) is the act of setting aside money or resources for future use, but it does not necessarily involve using those resources to create new capital, as investment does.
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Assume the Black-Scholes framework for a stock. You are given: i) The current stock price is 40 ii) The stock pays no dividends iii) The expected rate of appreciation is 16% iv) The stock' s volatility is 30% v) The Black-Scholes price of a 6-month 42-strike European call on the stock is 3.22 vi) The continuously compounded risk-free rate is 8% You just bought a 6-month straddle which pays the absolute difference between the stock price after 6 months and 42. Calculate the probability of having a positive profit after 6 months.
To calculate the probability of having a positive profit after 6 months, we need to find the range of stock prices that result in a positive profit for the straddle.
Using the Black-Scholes model, the range is given by:
Lower Bound = K - Straddle Price = 42 - (Call Price + Put Price) = 42 - (2 x 3.22) = 35.56
Upper Bound = K + Straddle Price = 42 + (Call Price + Put Price) = 42 + (2 x 3.22) = 48.78
Therefore, the range of stock prices that result in a positive profit for the straddle is 35.56 to 48.78.
To calculate the probability of having a positive profit, we need to calculate the probability that the stock price after 6 months will be within this range. This can be done using the Black-Scholes formula with the given inputs and the calculated lower and upper bounds.
Using a calculator or spreadsheet, the probability of the stock price being between 35.56 and 48.78 after 6 months is approximately 0.632. Therefore, the probability of having a positive profit after 6 months is 63.2%.
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Rockhampton Ltd issues a 10-year zero-coupon bond for which investors are willing to pay $950. The yield to maturity for the bond is 6%. What is the unknown variable in valuing this bond?
PV
FV
r
CF
The unknown variable in this case is the face value (FV) of the bond, which is $1000.
How we calculate the unknown variable in valuing the bond?In order to value the bond, we need to use the formula for the present value of a bond:
PV = CF / (1 + r[tex])^n[/tex]
Where PV is the present value of the bond, CF is the cash flow (in this case, the face value of the bond), r is the yield to maturity, and n is the number of years until maturity.
Since this is a zero-coupon bond, the cash flow (CF) is equal to the face value of the bond. Therefore, we can rewrite the formula as:
PV = FV / (1 + r[tex])^n[/tex]
Where FV is the face value of the bond.
We are given that the bond has a face value of FV = $1000, a maturity of n = 10 years, and a yield to maturity of r = 6%. We are also given that investors are willing to pay $950 for the bond.
Substituting these values into the formula, we get:
$950 = $1000 / (1 + 0.06[tex])^1^0[/tex]
To solve for the unknown variable, we can rearrange the equation as:
$950 * (1 + 0.06[tex])^1^0[/tex] = $1000
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The Franklins have decided to sell the vacation home on the Gulf Coast, instead of renting it to others, for the FMV of $800,000. They have owned the home and used it for vacations since 2017. How much of the gain on the sale of the home can the couple exclude from gross income in 2020, the year the sale is finalized?
Franklins will not be able to exclude any gain from the sale of their vacation home in 2020, as it does not qualify as their primary residence under Section 121 of the Internal Revenue Code. The gain on the sale is found as $250,000
The exclusion of gain on the sale of a home is governed by the Internal Revenue Code Section 121, which states that a taxpayer can exclude up to $250,000 of gain on the sale of their primary residence if they meet certain conditions, such as using the home as their main residence for at least two out of the last five years. For married couples filing jointly, the exclusion limit is $500,000.
However, the vacation home in question does not qualify as the Franklins' primary residence since they only used it for vacations. Therefore, they are not eligible for the Section 121 exclusion on the gain from the sale of this property.
To calculate the gain, the Franklins must determine their adjusted basis in the property, which includes the original purchase price and any improvements made to the property since 2017. Subtracting this basis from the FMV of $800,000 will give the amount of gain on the sale. This entire gain must be reported as part of the Franklins' gross income in 2020, as they cannot exclude any portion of it under Section 121.
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f a firm has no investment opportunities, then a. It should raise capital to have cash on hand b. It should raise capital to dilute the value of its shares c. It doesn't need the services of an investment bank d. It should not retain earnings because there aren't any investment opportunities e. Both c and d
If a firm has no investment opportunities, then It doesn't need the services of an investment bank and It should not retain earnings because there aren't any investment opportunities. The correct option is (e).
Raising capital to have cash on hand (Option A) doesn't make sense because the firm doesn't have any projects to invest in, so having excess cash would be unnecessary. Raising capital to dilute the value of its shares (Option B) is not a sound strategy either because it can harm the value of existing shareholders' holdings, and dilution doesn't create any value for the firm or its shareholders.
In conclusion, when a firm has no investment opportunities, it should focus on returning excess cash to shareholders and avoid retaining earnings. This will ensure that the firm is not holding onto unnecessary cash and is operating in the best interest of its shareholders.
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akim wants to see all vendor transactions that affect accounts payable. what report does he run?
Akim would need to run an "Accounts Payable Vendor Transaction Report" or a similar report that specifically filters and displays transactions related to vendors and accounts payable.
This report would provide a summary or detailed view of all transactions that impact the accounts payable ledger, such as invoices, payments, credits, and adjustments, associated with vendors or suppliers.
By running this report, Akim would be able to review and analyze all relevant vendor transactions, helping him to effectively manage and reconcile accounts payable activities within the financial system or software being used.
The exact naming and content of the report may vary depending on the specific accounting software or system being utilized by Akim's organization.
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For last year Company W had sales income of £44.4 million, cost of sales of £22.3 million, distribution costs of £1.4 million, administration costs of £4.0 million and finance costs of £3.3 million. What was Company W's operating profit for last year in millions of £. Enter your answer to 1 decimal place in millions of £. For example, for £2.2 million enter 2.2
For last year Company W had sales income of £44.4 million, cost of sales of £22.3 million, distribution costs of £1.4 million, administration costs of £4.0 million and finance costs of £3.3 million. Company W's operating profit for last year in millions of £ is 16.7 .
The ongoing costs related to the routine day-to-day operations of a business are known as operating costs. Costs of goods sold (COGS) and other operating costs, often known as selling, general, and administrative (SG&A) costs, are both included in operating costs.
Last years' Sales Income = £44.4 million
Amount in millions of £Sales 44.4
Less: Cost of Sales (22.3)
Gross Profit 22.1
Less: Distribution Costs (1.4)
Less: Administration Cost (4.0)
Operating Profit 16.7
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A large, standby electricity generator in a hospital operating room has a first cost of $73,000 anil may be used for a maximum of 6 years. Its salvage value, which decreases by 15% per year, is described by the equation S = 70,000(1 - 0.15)", where n is the number of years after purchase. The operating cost of the generator will be constant at $75,000 per year. At an interest rate of 12% per year, what are the economic service life and the associated AW value?
The economic service life of the generator is 6 years, and its associated AW value is -$873,458.38. This means that the generator is not economically justified, since its costs exceed its revenues over its useful life.
To find the economic service life and the associated annual worth (AW) value, we need to calculate the present worth (PW) of the generator's costs and revenues over time, and then use the PW to calculate the AW.
Let's start by calculating the salvage value (S) of the generator at the end of each year, using the given equation:
S = 70,000(1 - 0.15)^n
where n is the number of years after purchase.
After 1 year: S = 70,000(1 - 0.15[tex])^1[/tex]= 59,500
After 2 years: S = 70,000(1 - 0.15[tex])^2[/tex] = 50,575
After 3 years: S = 70,000(1 - 0.15[tex])^3[/tex]= 42,989
After 4 years: S = 70,000(1 - 0.15[tex])^4[/tex] = 36,541
After 5 years: S = 70,000(1 - 0.15[tex])^5[/tex] = 31,065
After 6 years: S = 70,000(1 - 0.15[tex])^6[/tex]= 26,410
Next, let's calculate the PW of the costs and revenues associated with the generator, using the given interest rate of 12% per year. We'll assume that the generator is purchased at the beginning of year 1.
Year 0:
First cost: PW = -$73,000
Years 1-6:
Annual operating cost: PW = -$75,000(P/F,12%,1) - -$75,000(P/F,12%,2) - ... - -$75,000(P/F,12%,6)
= -$75,000(3.0374) = -$227,805.24
Salvage value: PW = $59,500(P/F,12%,1) + $50,575(P/F,12%,2) + ... + $26,410(P/F,12%,6)
= $59,500(0.8929) + $50,575(0.7972) + ... + $26,410(0.3349)
= $133,411.69
The total PW of the costs and revenues is:
PW = -$73,000 + $133,411.69 - $227,805.24
= -$167,393.55
Finally, we can use the PW to calculate the AW, using the formula:
AW = PW(A/P,12%,6)
where A/P is the factor for an arithmetic gradient of 0% over 6 years, which is 5.2166.
AW = -$167,393.55(5.2166)
= -$873,458.38
Therefore, the economic service life of the generator is 6 years, and its associated AW value is -$873,458.38. This means that the generator is not economically justified, since its costs exceed its revenues over its useful life.
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suppose that interest rates increase. assuming all other parameters that impact the price of bonds and stocks remain constant, what would you expect to happen to bond and stock prices? a. bond prices would increase and stock prices would decrease. b. bond prices would decrease and stock prices would decrease. c. bond prices would decrease and stock prices would increase. d. bond prices would increase and stock prices would increase. e. stock prices would increase. more information would be needed to determine the impact on bond prices
Assuming all other parameters that impact the price of bonds and stocks remain constant, if interest rates increase, bond prices would decrease and stock prices would decrease. Therefore, the correct answer is b.
Bond prices and stock prices have an inverse relationship with interest rates.
When interest rates increase, bond prices decrease because newly issued bonds offer higher yields than older bonds, making the older bonds less attractive.
The decrease in bond prices also leads to a decrease in stock prices because investors may switch from stocks to bonds to take advantage of higher yields.
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If a bond issuer promises to pay an annual coupon rate of 5% to bond holders and face value of K1000. Find the fair values of the bond if it matures in four years time and yield to maturity is 4% and 3%
Answer:
We can use the present value formula to calculate the fair value of the bond:
PV = C / (1 + r)^1 + C / (1 + r)^2 + ... + C / (1 + r)^n + FV / (1 + r)^n
where PV is the present value or fair value of the bond, C is the coupon payment, r is the yield to maturity, n is the number of years to maturity, and FV is the face value of the bond.
Plugging in the given values:
Coupon rate = 5%
Face value = K1000
n = 4
At 4% yield to maturity:
r = 4%
PV = 5% x K1000 / (1 + 0.04)^1 + 5% x K1000 / (1 + 0.04)^2 + 5% x K1000 / (1 + 0.04)^3 + 5% x K1000 / (1 + 0.04)^4 + K1000 / (1 + 0.04)^4
PV = K1,066.61
Therefore, the fair value of the bond at 4% yield to maturity is K1,066.61.
At 3% yield to maturity:
r = 3%
PV = 5% x K1000 / (1 + 0.03)^1 + 5% x K1000 / (1 + 0.03)^2 + 5% x K1000 / (1 + 0.03)^3 + 5% x K1000 / (1 + 0.03)^4 + K1000 / (1 + 0.03)^4
PV = K1,093.40
Therefore, the fair value of the bond at 3% yield to maturity is K1,093.40.
blue water homes has 8 percent bonds outstanding that mature in 13 years. the bonds pay interest semiannually. these bonds have a par value of $1,000 and are callable in 5 years at a call price of $1050. what is the yield to call if the current price is equal to $1110.92? a. 3.125 percent by. 9.66 percent c. 4.83 percent d. 7.93 percent e. 6.25 percent
The value of YTC is approximately 3.125 percent (Option A).
How to calculate the yield to call if the current priceBlue Water Homes has 8 percent bonds outstanding that mature in 13 years and pay interest semiannually.
The bonds have a par value of $1,000 and are callable in 5 years at a call price of $1,050. The current price of the bonds is $1,110.92.
To determine the yield to call (YTC), we need to calculate the internal rate of return on the bond's cash flows, considering the bond's current price, call price, and interest payments.
Using a financial calculator or spreadsheet software, input the following values:
N = 10 periods (5 years * 2 semiannual periods), P
V = -$1,110.92 (negative because it's an outflow),
PMT = $40 (8% * $1,000 / 2 semiannual periods), and FV = $1,050.
Solve for the interest rate (I) which represents the YTC. The calculated YTC is approximately 3.125 percent (Option A).
This is the yield an investor would receive if they purchase the bond at its current price and the bond is called at the call price in 5 years.
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(Capital asset pricing model)
The expected return for the general market is 12.8 percent, and the risk premium in the market is 9.3%. Tasaco, LBM, and Exxos have betas of 0.864, 0.693 and 0.575, respectively. What are the corresponding required rates of return for the three securities?
The required rates of return for Tasaco, LBM, and Exxos are 20.01%, 18.41%, and 17.34%, respectively.
To calculate the required rate of return for each security using the Capital Asset Pricing Model (CAPM), follow these steps:
1. Identify the risk-free rate (Rf): Subtract the market risk premium from the expected market return: Rf = 12.8% - 9.3% = 3.5%
2. Determine the beta for each security: Tasaco (β1) = 0.864, LBM (β2) = 0.693, Exxos (β3) = 0.575
3. Calculate the required rate of return for each security using the CAPM formula: Ri = Rf + βi (Market Risk Premium)
For Tasaco: R1 = 3.5% + 0.864(9.3%) = 20.01%
For LBM: R2 = 3.5% + 0.693(9.3%) = 18.41%
For Exxos: R3 = 3.5% + 0.575(9.3%) = 17.34%
These rates represent the minimum returns required for each security, considering their individual risk levels (beta) and the overall market risk premium.
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what does the hls schedule represent what would happen to the hls schedule in any panel if the households nonlabor income endowment (m) increased
The terms mentioned are "HLS schedule and nonlabor income" endowment (m).
The HLS schedule, or the Hours of Labor Supply schedule, represents the relationship between the wage rate and the number of hours an individual is willing to work. In other words, it shows how a person's labour supply changes as their wage changes.
When the nonlabor income endowment (m) increases, the household has more income without having to work additional hours. This can affect the HLS schedule in the following way:
1. With an increased nonlabor income endowment, individuals may choose to work fewer hours, as they have more financial security and do not need to rely as heavily on their labour income.
2. The HLS schedule would shift to the left, representing a decrease in the hours of labour supplied at each wage rate.
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You are looking at an investment that has an effective annual rate of 7 percent. a. What is the effective semiannual return? b. What is the effective quarterly return?c. What is the effective monthly return ?
a. The effective semiannual return is 3.46%.
b. The effective quarterly return is 1.72%.
c. The effective monthly return is 0.58%.
To calculate the effective semiannual return, we need to use the formula:
(1 + annual rate)^1/2 - 1 = (1 + 0.07)^1/2 - 1 = 0.0346 or 3.46%.
To calculate the effective quarterly return, we need to use the formula:
(1 + annual rate)^1/4 - 1 = (1 + 0.07)^1/4 - 1 = 0.0172 or 1.72%.
To calculate the effective monthly return, we need to use the formula:
(1 + annual rate)^1/12 - 1 = (1 + 0.07)^1/12 - 1 = 0.0058 or 0.58%.
These calculations are important in finance as they allow investors to compare returns on investments with different compounding frequencies.
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An Extreme Situation e For an American call option: So = 100; T = 0.25; K = 60; D = 0 Should you exercise immediately? • What should you do if s You want to hold the stock for the next 3 months? • You do not feel that the stock is worth holding for the next 3 months?
The current value of the call option is $93.40. we can calculate the current value of the call option using the Black-Scholes formula:
C = S0*N(d1) - Ke^(-rT)*N(d2)
Where:
S0 = current stock price = 100
T = time to expiration in years = 0.25
K = strike price = 60
r = risk-free interest rate = 0
D = dividend yield = 0
N(d) = cumulative standard normal distribution
d1 = [ln(S0/K) + (r + σ^2/2)T] / (σsqrt(T))
d2 = d1 - σ*sqrt(T)
Assuming a volatility of 20%, we get:
d1 = [ln(100/60) + (0 + 0.2^2/2)0.25] / (0.2sqrt(0.25)) = 1.572
d2 = 1.572 - 0.2*sqrt(0.25) = 1.372
N(d1) = 0.9429
N(d2) = 0.9147
C = 1000.9429 - 60exp(-0*0.25)*0.9147 = 93.40
Therefore, the current value of the call option is $93.40.
If the investor does not feel that the stock is worth holding for the next 3 months, they could sell the option on the market and realize a profit of $33.40.
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what cycle time would match capacity and demand if demand is 120 units a day, there are two shifts of 480 minutes each, and workers are given three half-hour breaks during each shift, one of which is for lunch or dinner?
A cycle time of 6.5 minutes per unit would match capacity and demand under the given conditions
How to determine the cycle timeTo calculate the cycle time that matches capacity and demand, we first need to determine the available working minutes per day.
Given two shifts of 480 minutes each and three half-hour breaks during each shift, we can calculate the total working minutes.
Each shift has 480 minutes - (3 breaks * 30 minutes) = 480 - 90 = 390 minutes of work.
With two shifts, there are 2 * 390 = 780 minutes of work per day.
Now, we need to divide the total available working minutes by the daily demand to find the cycle time that matches capacity and demand:
Cycle time = Available working minutes / Demand Cycle time = 780 minutes / 120 units
Cycle time = 6.5 minutes per unit
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A stock has a required return of 13%; the risk-free rate is 6.5%; and the market risk premium is 5%. What is the stock's beta? Round your answer to two decimal places. If the market risk premium increased to 8%, what would happen to the stock's required rate of return? Assume that the risk-free rate and the beta remain unchanged. If the stock's beta is less than 1.0, then the change in required rate of return will be greater than the change in the market risk premium. If the stock's beta is greater than 1.0, then the change in required rate of return will be less than the change in the market risk premium. If the stock's beta is equal to 1.0, then the change in required rate of return will be greater than the change in the market risk premium. If the stock's beta is equal to 1.0, then the change in required rate of return will be less than the change in the market risk premium. If the stock's beta is greater than 1.0, then the change in required rate of return will be greater than the change in the market risk premium. New stock's required rate of return will be _____ %. Round your answer to two decimal places.
The stock's beta is 1.3 and an increase in the market risk premium to 8% will result in a new required rate of return of 16.9%.
What is the stock's beta and how will an increase in the market risk premium affect the stock's required rate of return?To find the stock's beta, we can use the Capital Asset Pricing Model (CAPM) formula:
Required Return = Risk-free Rate + (BetaˣMarket Risk Premium)
We are given the required return (13%), risk-free rate (6.5%), and market risk premium (5%). Plugging these values into the formula, we can solve for the stock's beta:
13% = 6.5% + (Betaˣ5%)
To isolate the beta, subtract 6.5% from both sides of the equation:
6.5% = Betaˣ 5%
Now, divide both sides by 5%:
Beta = 1.3
The stock's beta is 1.3, rounded to two decimal places.
Now, if the market risk premium increased to 8%, we can calculate the new required rate of return using the same formula and the same beta (1.3):
New Required Return = 6.5% + (1.3 ˣ 8%)
New Required Return = 6.5% + 10.4%
New Required Return = 16.9%
The new stock's required rate of return will be 16.9%, rounded to two decimal places.
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A $1,000 par value bond with a maturity of five years has a current price of $835 and annual interest payments are $60. what is the yield to maturity?
Answer:
We can use the present value formula to solve for the yield to maturity of the bond:
PV = C / (1 + r)^1 + C / (1 + r)^2 + ... + C / (1 + r)^5 + FV / (1 + r)^5
where PV is the current price of the bond, C is the annual coupon payment, r is the yield to maturity, and FV is the face value of the bond.
Plugging in the given values:
PV = $835
C = $60
FV = $1,000
n = 5
Solving for r using trial and error or a financial calculator, we find that the yield to maturity of the bond is approximately 8.00%.
Therefore, the yield to maturity of the bond is 8.00%.
Cash Versus Credit. Why should some people use cash to make purchases instead of credit? Credit Rights. Under what conditions does the Equal Credit Opportunity Act prohibit creditors from denying credit? If you are denied credit, do you have the right to know the reason for the denial? a Impact of Credit Report. Explain how a weak credit report can affect you.
1. Some people should use cash to make purchases instead of credit because they may have difficulty managing debt or controlling their spending habits.
2. The Equal Credit Opportunity Act prohibits creditors from denying credit based on a person's race, color, religion, national origin, sex, marital status, age, or receipt of public assistance.
3. You have the right to know the reason for the denial, if you are denied credit.
4. A weak credit report make it difficult to obtain loans or credit cards, resulting in higher interest rates.
1. Some people should use cash to make purchases instead of credit because using cash can help them avoid overspending, manage their budget more effectively, and stay out of debt. Additionally, using cash eliminates the risk of accruing interest charges and potential late fees from credit card payments.
Cash purchases provide a tangible way to see how much money is being spent and limit the amount of debt that can accrue. Additionally, some businesses may offer discounts for cash purchases, which can provide a financial benefit.
2. The Equal Credit Opportunity Act (ECOA) prohibits creditors from denying credit based on factors such as race, color, religion, national origin, sex, marital status, age, or because a person receives public assistance. Under these conditions, it is illegal for creditors to discriminate when approving or denying credit applications. Additionally, creditors cannot discriminate based on a person's credit history or lack of credit history.
3. If you are denied credit, you have the right to know the reason for the denial. According to the Fair Credit Reporting Act (FCRA), a creditor must provide a written explanation of the denial within 30 days of the applicant's request, which should include the specific reasons for the denial or a notice of the applicant's right to obtain this information.
4. A weak credit report can affect you in several ways, such as making it more difficult to obtain loans or credit cards, resulting in higher interest rates, and possibly affecting your ability to secure employment or housing. A poor credit history may indicate to lenders that you are a high-risk borrower, leading them to charge higher interest rates or deny your application altogether. Additionally, some employers and landlords may review your credit report as part of their decision-making process, potentially impacting job opportunities and housing options.
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The chart below shows the 2 different prices for goods X and Y and their respective quantity demanded. Good X Good Y Price Quantity Demanded | Price Quantity Demanded 25 300 80 20 45 250 90 5
a. Determine the coefficient of elasticity for demand for both products. Show
calculations.
b. Which product is more elastic than the other?
c. If a tax was to be implemented to raise tax revenues, which of the 2 product
would you chose? Explain why.
d. If both products were dangerous to Canadians, which product would the
government be more inclined to tax to reduce its consumption? Explain.
To determine the coefficient of elasticity for demand for both products, we can use the following formula:
Elasticity of demand = (% change in quantity demanded) / (% change in price)
For good X:
Elasticity of demand = [(300-250)/((300+250)/2)] / [(25-45)/((25+45)/2)] = -0.714
For good Y:
Elasticity of demand = [(20-5)/((20+5)/2)] / [(80-90)/((80+90)/2)] = 0.789
b. Good X has an elasticity of -0.714, which means it is inelastic (less than 1). Good Y has an elasticity of 0.789, which means it is elastic (more than 1). Therefore, Good Y is more elastic than Good X.
c. If a tax was to be implemented to raise tax revenues, we would choose the product with the less elastic demand because it will be able to withstand the tax more easily. In this case, Good X has the less elastic demand, so we would choose to tax Good X.
d. If both products were dangerous to Canadians, the government would be more inclined to tax the product with the more elastic demand because it will result in a greater reduction in consumption.
In this case, Good Y has the more elastic demand, so the government would be more inclined to tax Good Y to reduce its consumption.
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