LTCM had to be bailed out by a consortium of banks led by the Federal Reserve Bank of New York, in what was then the largest bailout in history. The collapse of LTCM served as a warning to investors about the risks associated with highly leveraged investment strategies and the potential for systemic risk in the financial markets.
5. Long-term funding was crucial to LTCM's strategy because it allowed the firm to take advantage of arbitrage opportunities in the market. These opportunities typically involve small profit margins and require large amounts of capital to generate significant returns. Long-term funding provided LTCM with the necessary capital and stability to maintain its positions and leverage its investments, thus maximizing potential profits.
6. LTCM's major assets were its proprietary trading strategies, the intellectual capital of its founding principals, and its diverse portfolio of investments, which included government bonds, mortgage-backed securities, and interest rate swaps. Its major financing sources were equity investments from institutional investors, banks, and its partners, as well as borrowed funds from banks and other financial institutions, often through repurchase agreements (repos).
7. High credit ratings were crucial to LTCM's strategy because they allowed the firm to access capital at lower borrowing costs. With a high credit rating, LTCM was able to borrow funds at favorable interest rates, which in turn allowed the firm to increase its leverage and maximize returns on its investments. Additionally, a high credit rating also signaled to investors that LTCM was a low-risk, stable investment opportunity.
8. LTCM minimized its use of equity by relying heavily on borrowed funds, such as repos and loans from banks and other financial institutions. By doing so, the firm was able to increase its leverage, allowing it to invest in more assets and amplify its returns. Minimizing equity also enabled LTCM to maintain a low cost of capital, as borrowed funds typically had lower interest rates than the expected returns on equity investments.
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If bonds A and B are both issued by the same firm, their credit risk _____.
Group of answer choices
could still be different – depends on whether both bonds are senior/junior/subordinated
could still be different – depends on whether both bonds are secured/unsecured and whether both bonds are senior/junior/subordinated
must be the same since the probability of default is the same.
could still be different – depends on whether both bonds are secured/unsecured
If bonds A and B are both issued by the same firm, their credit risk could be different – as it depends on if bonds are secured/unsecured and senior/junior/subordinated
Bonds A and B could still have different credit risks even if they are issued by the same firm. This depends on various factors such as whether both bonds are secured or unsecured, senior or junior, or subordinated. If both bonds have the same features, such as being unsecured and senior, then their credit risk would be the same.
However, if one bond is secured and the other is unsecured, or if one bond is senior and the other is junior or subordinated, then their credit risk could differ. Ultimately, the credit risk of each bond is determined by its unique features and characteristics.
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Select Bata companies that you want to join after graduation and make a summary on the following topics: (Mininum word 2000)
a. A brief introduction of the company
b. What are the products of the company?
c. What is the business model of that company?
d. What is their recruitment process?
Bata offers a wide range of footwear products for men, women, and children. Their product lineup includes casual shoes, sports shoes, formal shoes, sandals, and fashion-forward footwear.
In addition to shoes, Bata also sells accessories such as bags, belts, and socks. Bata's business model focuses on providing quality footwear at affordable prices. They achieve this by investing in research and development, efficient manufacturing processes, and strong distribution networks. Bata also follows a vertically integrated model, which allows them to control every aspect of the production process, from design to retail, ensuring quality and cost-efficiency.
Bata's recruitment process typically begins with the submission of an application through their official website or a job portal. After reviewing applications, they shortlist candidates for interviews, which may be conducted over the phone or in person. Depending on the position, additional assessments, such as technical tests or group exercises, may be required. Once candidates pass all stages of the recruitment process, they receive a job offer from the company.
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Rose was a successful PR due to the fact that she is able to befriend all her clients and encourage them to invest in the business. Her company always sends her to the toughest clients and she comes back with the deal in the bag. Rose believes that happiness at life leads to happiness at work, according to her belief, she is characterized by a high _____? *
A. Conscientiousness and Openness at work
B. Conscientiousness at work
C. Extraversion
D. Emotional stability and openness at work
Rose believes that happiness at life leads to happiness at work, according to her belief, she is characterized by a high extraversion. The correct option is c) Extraversion.
As a successful PR, her ability to befriend clients and encourage them to invest in the business demonstrates her outgoing and sociable nature, which are key traits of extraversion. She excels at building relationships and persuading people, making her an ideal candidate to handle tough clients.
Extraverts tend to be confident, assertive, and energetic, which allows them to navigate social situations with ease. In the context of Rose's job, these qualities help her secure deals and achieve success at work. Moreover, her belief that happiness in life leads to happiness at work further reflects her optimistic and positive outlook, another characteristic of extraversion.
While conscientiousness and openness at work (A) are important traits for success in various fields, these are not the primary characteristics that set Rose apart as a PR professional. Similarly, conscientiousness at work (B) alone does not capture her unique ability to build relationships and persuade clients.
Lastly, emotional stability and openness at work (D) may contribute to her overall well-being, but they do not directly relate to her success in connecting with clients and securing deals. Therefore, the most appropriate answer is Extraversion (C), which highlights her exceptional social skills and optimistic nature that ultimately drive her success in the PR industry. The correct option is c) Extraversion.
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grason corporation is preparing a budgeted balance sheet for current year. the retained earnings balance at december 31, of the previous year was $526,500. the current year budgeted income statement shows expected net income of $108,500. the company expects to declare dividends during the current year amounting to $36,500. the expected balance on december 31 of the current year in retained earnings on the budgeted balance sheet is:
The expected balance in retained earnings on December 31 of the current year in the budgeted balance sheet is $598,500.
How to calculate expected balance in retained earningsThe Grason Corporation is preparing a budgeted balance sheet for the current year.
The retained earnings balance on December 31 of the previous year was $526,500. The current year's budgeted income statement shows an expected net income of $108,500.
To calculate the expected balance in retained earnings on December 31 of the current year, we need to consider the dividends declared during the current year, which amount to $36,500.
To find the expected retained earnings balance, we can use the following formula:
Retained Earnings (Ending) = Retained Earnings (Beginning) + Net Income - Dividends
Plugging in the given values, we get:
Retained Earnings (Ending) = $526,500 + $108,500 - $36,500
Retained Earnings (Ending) = $598,500
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If a producer misquoted the amount of premium due on a policy the insured may be charged with the additional premium if the?
1. Insured did not pay the premium in full
2. Misquot was due to an error in calculation
3. Misquoted was discovered within 48 hours
4. Insured did not pay any part of the premium
If a producer misquoted the amount of premium due on a policy and the insured did not pay the premium in full, then the insured may be charged with the additional premium if the misquote was due to an error in calculation.
However, if the misquote was discovered within 48 hours and the insured did not pay any part of the premium, then the insured may not be charged with the additional premium. It is important for both the producer and the insured to review the policy and premium payment information carefully to avoid any misquotes or errors.
If there are any discrepancies or concerns, they should be addressed promptly to avoid any potential financial consequences.
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kerekes manufacturing corporation has prepared the following overhead budget for next month. activity level 2,400 machine-hours variable overhead costs: supplies $10,560 indirect labor 19,920 fixed overhead costs: supervision 15,600 utilities 5,800 depreciation 6,800 total overhead cost $58,680 the company's variable overhead costs are driven by machine-hours. what would be the total budgeted overhead cost for next month if the activity level is 2,300 machine-hours rather than 2,400 machine-hours?
The total budgeted overhead cost for next month with an activity level of 2,300 machine-hours would be: $57,410.
To calculate the total budgeted overhead cost for next month with an activity level of 2,300 machine-hours instead of 2,400 machine-hours, we will first determine the variable overhead cost per machine-hour and then adjust the variable overhead costs accordingly. Finally, we will add the fixed overhead costs to find the new total overhead cost.
Step 1: Calculate the variable overhead cost per machine-hour.
Total variable overhead costs (for 2,400 machine-hours) = Supplies + Indirect labor = $10,560 + $19,920 = $30,480
Variable overhead cost per machine-hour = Total variable overhead costs / Activity level = $30,480 / 2,400 = $12.70
Step 2: Adjust the variable overhead costs for 2,300 machine-hours.
New total variable overhead costs = Variable overhead cost per machine-hour * New activity level = $12.70 * 2,300 = $29,210
Step 3: Add the fixed overhead costs to find the new total overhead cost.
Fixed overhead costs = Supervision + Utilities + Depreciation = $15,600 + $5,800 + $6,800 = $28,200
New total overhead cost = New total variable overhead costs + Fixed overhead costs = $29,210 + $28,200 = $57,410
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Complete question:
kerekes manufacturing corporation has prepared the following overhead budget for next month.
activity level 2,400 machine-hours
variable overhead costs:
supplies $10,560
indirect labor 19,920
fixed overhead costs:
supervision 15,600
utilities 5,800
depreciation 6,800
total overhead cost $58,680
the company's variable overhead costs are driven by machine-hours. what would be the total budgeted overhead cost for next month if the activity level is 2,300 machine-hours rather than 2,400 machine-hours?
each year picoso, inc., follows a budgeting process. the first step is always to look at the previous year's budget and see if anything needs to be updated. picoso uses ____ budgeting.
Each year Picoso, Inc. follows a budgeting process. The first step in this process is always to look at the previous year's budget and see if anything needs to be updated. Picoso uses incremental budgeting.
In Picoso's case, they begin their annual budgeting process by reviewing the previous year's budget. They analyze any variances between their budgeted and actual expenses, as well as evaluate their overall financial performance. This analysis helps them identify areas where they may need to make adjustments or allocate more resources.
Next, Picoso considers any changes in their business environment or operations that may affect their budget. This could include factors such as market trends, economic conditions, or new strategic initiatives. They then incorporate these factors into their updated budget, making adjustments to various line items as needed.
Once they have updated their budget based on these considerations, Picoso reviews and finalizes the new budget. This may involve discussions and negotiations between different departments within the organization, ensuring that everyone is aligned and in agreement on the budget allocations.
In conclusion, Picoso, Inc. uses incremental budgeting in their annual budgeting process. This method allows them to make updates and adjustments based on their performance and experience from the previous year's budget, helping them to optimize their financial planning and resource allocation for the upcoming year.
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Need help solving this ?Hint - Use the two stage growth model Good point. How much is their stock worth if they were to stop growing their dividend at 3.3% after 6 years and instead grow at 2.2% after that, indefinitely? (An
The value of the stock using the two-stage growth model would be:
PV of dividends from years 1-6 at 3.3% growth rate + PV of dividends from year 7 onwards at 2.2% growth rate = $86.70
To calculate the value of the stock using the two-stage growth model, we need to use the formula:
PV = D / (r-g)
where D is the dividend, r is the required rate of return, and g is the growth rate.
For the first six years, we use the 3.3% growth rate and for years 7 onwards, we use the 2.2% growth rate. We discount each year's dividend to its present value and sum them up to get the total value of the stock.
Given that the current dividend is $2.00, we can calculate the dividend for the next six years using the 3.3% growth rate, and then the dividend for year 7 onwards using the 2.2% growth rate. We can then discount each year's dividend to its present value using the required rate of return of 10%.
After summing up all the present values, we get a total value of $86.70 for the stock.
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plastics, inc. will pay an annual dividend of $1.85 next year. the company just announced that future dividends will be increasing by 2.25 percent annually. how much are you willing to pay for one share of this stock if you require a 16 percent return? group of answer choices $13.45 $13.61 $14.02 $14.45 $13.76
The amount one should be willing to pay is $13.76 for one share of this stock if you require a 16% return.
The value of a stock is determined by many factors such as the company's earnings, growth prospects, financial health, industry trends, and overall market conditions. A thorough analysis of these factors is typically required to determine the value of a stock.
To calculate the value of the stock, we need to use the dividend discount model, which is:
Value of stock = Dividend / (Required rate of return - Dividend growth rate)
Here, the dividend for next year is $1.85, and the dividend growth rate is 2.25%. The required rate of return is 16%. So, we can calculate the value of the stock as:
Value of stock = $1.85 / (0.16 - 0.0225) = $13.76
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Adam entered a utility bill via the Enter Bills window and paid it via the Write Checks window using a debit card. Later he notices that the transaction expense shows as twice the amount he paid. Why? Answer: A. He used a debit card when he should have used a credit card. B. O QuickBooks always shows double charges because of debits and credits C. O He used the Write Checks window instead of the Pay Bills window. D. O He entered the bill twice.
Option C. The transaction expense shows as twice the amount he paid because he used the Write Checks window instead of the Pay Bills window.
The Payments window has been merged with the Write Checks window. Write Checks allows you to quickly enter check details without manually distributing each item.
The Pay Bills window contains a record of all payments made on your account. For actions marked as Pay for Purchases by Invoice, use the Pay Invoice window. The Pay Bills window contains a record of all payments made on your account. Invoices entered in the Enter Invoices window can be paid from the Activities window. In QuickBooks, deposits are entered in the Pay Bills window.
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D. He entered the bill twice.C. He used the Write Checks window instead of the Pay Bills window.To avoid this issue, Adam should use the Pay Bills window to pay the utility bill, as it will link the payment to the existing bill entered in the Enter Bills window.
Adam made a mistake by paying the utility bill using the Write Checks window instead of the Pay Bills window. When he entered the bill in the Enter Bills window, it created an expense in QuickBooks. By using the Write Checks window to pay the bill, he unintentionally created a second expense, resulting in the transaction expense showing twice the amount he actually paid. D. He entered the bill twice.
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a company that strives to offer good products at the lowest prices possible is operating with which competitive advantage?
The company is operating with a cost advantage competitive strategy.
What's cost advantage competitive strategy.This strategy focuses on achieving a lower cost structure than competitors while maintaining product quality.
By offering good products at the lowest prices possible, the company can attract price-sensitive customers who are willing to sacrifice some features or benefits for lower prices.
This strategy can be achieved through various means, such as economies of scale, efficient supply chain management, or innovative production processes.
However, it is important to note that relying solely on cost advantage may not be sustainable in the long run as competitors may be able to replicate the strategy or offer better value to customers.
Therefore, companies should also consider incorporating other competitive strategies, such as differentiation or focus, to maintain a strong market position.
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Create a company name (maybe include a logo?). Your company is now hiring and it is time to write a job description.
Write a job description for a position in your place of business. This business will be related to your area of specialized training at SCC. Consider an entry-level position.
The job description must include the following parts.
1. Job Title
2. Position reports to (this will be the title of the position, ex. Supervisor, Owner Manager, Foreman, etc.)
3. General Description of Duties for this establishment. This will be a statement giving a broad, general description of the position. Example. The automotive technician will be responsible for the maintenance and repair of vehicles.
4. Description of Essential Duties and Tasks. List a minimum of six duties.
5. Description of Duties done on an infrequent basis.
6. Difficult and demanding aspects of the job.
7. Required Knowledge, Skills, and Abilities.
We have that, based on the construction of a company, when the company is already hiring and the time has come to write a job description, Where we will write a job description for a position in your company, would be given by:
Company name: TechSolutions Inc.
Job Title: Junior Software Developer
Position reports to: Senior Software Developer
Characteristic and overview of job title functions based on position report
Job Overview: The Junior Software Developer will be responsible for assisting in the development, testing, and maintenance of software applications in accordance with company goals and objectives.
Description of essential duties and tasks:
1. Assist in the design and development of software applications based on project requirements.
2. Collaborate with the development team to plan and prioritize tasks.
3. Participate in code reviews and follow coding standards.
4. Debug and fix problems in the existing code base.
5. Write unit tests and contribute to documentation maintenance.
6. Attend regular meetings to discuss progress, challenges, and future goals.
Description of infrequently performed duties:
1. Investigate and learn about new technologies and tools relevant to the company's projects.
2. Participate in training sessions and workshops to improve skills.
3. Assist in the implementation and maintenance of software applications.
Difficult and demanding aspects of the job:
1. Adaptation to new technologies and programming languages.
2. Meet tight deadlines and work under pressure.
3. Collaborate with cross-functional teams.
Knowledge, skills and abilities required:
1. Basic knowledge of programming languages such as Java, Python or C++.
2. Knowledge of software development principles and best practices.
3. Familiarity with version control systems like Git.
4. Strong problem solving skills and attention to detail.
5. Good communication skills, both written and verbal.
6. Ability to work independently and as part of a team.
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If elasticity of demand is -2, marginal cost is $4, and average cost is $6, a profit-maximizing markup price is: $8. b. $12. c. $10. d. $6.
Given the elasticity of demand, marginal cost, and average cost, the profit-maximizing markup price is $8. Thus, option a is correct.
The profit-maximizing markup price can be calculated using the formula:
Markup = (1/|Elasticity of Demand|) x (Marginal Cost/Average Cost) x Average Cost
By substituting the given values, we get:
Markup= (1/|-2|) x ($4/$6) x $6 = 1/2 x 2/3 x 6 = $2
Therefore, the profit-maximizing markup price can be calculated by adding the average cost and the markup, which is:
$6 + $2 = $8.
Thus, given the elasticity of demand, marginal cost, and average cost, the profit-maximizing markup price is $8. The correct answer to the given question is option a.
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which of the following statements regarding short-term objectives and actions plans are true? (check all that apply.) multiple select question. organizations enhance their performance when objectives are difficult, yet achievable. action plans play a critical role in implementing strategies. short-term objectives should be specific, measurable, attainable, and challenging. managers should only set objectives that employees can easily accomplish.
All of the statements regarding short-term objectives and action plans are true.
Setting difficult yet achievable objectives can motivate employees to perform at their best and improve organizational performance. Action plans are crucial in implementing strategies as they provide a roadmap for achieving objectives.
Short-term objectives should be specific, measurable, attainable, and challenging to ensure that they are effective in guiding employee behavior and driving results.
However, managers should avoid setting objectives that employees can easily accomplish as this can lead to complacency and hinder growth. In summary, short-term objectives and action plans are essential components of successful performance management, and organizations should prioritize their development and implementation.
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in emerging countries economies and continental europe, firms often can be characterized by all of the following except group of answer choices concentrated ownership. low family ownership and control. business group structures. weak legal protection for minority shareholders.
Firms in emerging economies and Continental Europe can be characterized by concentrated ownership, business group structures, and weak legal protection for minority shareholders, but not low family ownership and control.
Companies in developing nations and Western Europe frequently have concentrated ownership structures, meaning a small number of people or organisations control a large portion of the organisation. Additionally, a lot of businesses are set up as business groups, which can have advantages like sharing networks and resources but can also lead to conflicts of interest and less transparency.
Another prevalent trait is the lack of adequate legal protection for minority owners, which can lead to unjust treatment and restricted rights for these stakeholders. Family-owned businesses are frequently well-known and influential in these areas, so low family ownership and control are uncommon there.
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two towns, each with three residents, are deciding whether to put on a fireworks display to celebrate the new year. fireworks cost $360. in each town, some people enjoy fireworks more than others.a. in the town of bayport, each of the residents values the public good as follows:frank$50joe$100callie$300would fireworks pass a cost-benefit analysis? explain.b. the mayor of bayport proposes to decide by majority rule and, if the fireworks referendum passes, to split the cost equally among all residents. who would vote in favor, and who would vote against? would the vote yield the same answer as the cost-benefit analysis?c. in the town of river heights, each of the residents values the public good as
a. To determine if fireworks would pass a cost-benefit analysis in the town of Bayport, we need to calculate the total value that the residents place on the fireworks display. Frank values the fireworks at $50, Joe at $100, and Callie at $300. Therefore, the total value of the fireworks to the town is $50 + $100 + $300 = $450. Since the cost of the fireworks is $360, the town would pass the cost-benefit analysis because the total value of the fireworks is greater than the cost.
b. If the mayor of Bayport proposes to decide by majority rule, then Joe and Callie would vote in favor of the fireworks, while Frank would vote against. Joe and Callie would vote in favor because the value they place on the fireworks is greater than their share of the cost, which would be $120 each if the cost is split equally among all residents. Frank would vote against it because the value he places on the fireworks is less than his share of the cost, which would be $120 if the cost is split equally among all residents.
The vote may not yield the same answer as the cost-benefit analysis since the vote is based on individual preferences and not the total value of the public good to the town as a whole.
c. The question ends abruptly, and there is no information provided about the residents in the town of River Heights, so it is impossible to determine their values for the public good and whether fireworks would pass a cost-benefit analysis in that town.
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when making volume trade-off decisions managers should focus on which of the following? multiple choice contribution margin per unit gross margin per unit of the constraining resource gross margin per unit contribution margin per unit of the constraining resource
When making volume trade-off decisions, managers should focus on the contribution margin per unit of the constraining resource to maximize profitability.
Managers must weigh the pros and drawbacks of increasing production volume against the related costs and benefits when making volume trade-off choices. The disparity between the selling price and the variable cost per unit of the resource that constrains production should be managers' primary concern if they want to maximise profitability.
Managers may choose the most lucrative production level and strike a balance between volume and profitability by optimising the contribution margin per unit of the restricted resource.
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in which stage of the partner journey do partners earn the bulk of their benefits after they have met the minimum requirements?
Partners typically earn the bulk of their benefits in the "active partner" stage, which comes after they have met the minimum requirements and have demonstrated a commitment to the partnership.
In this stage, partners are able to take advantage of a wide range of benefits, including access to resources, training and support, and increased visibility and recognition. As partners continue to grow and develop their relationship with the company, they may also be eligible for additional benefits and incentives.
In the partner journey, partners typically earn the bulk of their benefits during the "Growth" stage, after they have met the minimum requirements. This stage focuses on expanding the partnership and capitalizing on the mutual benefits for both parties involved.
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In the initial stage, partners join the program and learn about the products or services they will be promoting. They may receive basic training and marketing materials to get started.
As partners progress through the program, they are expected to meet certain performance goals, such as generating a certain number of leads or closing a specific number of sales. Once they meet these minimum requirements, they enter the next stage of the journey, where they can start earning more significant benefits.
This stage is often referred to as the growth stage, and it's where partners can earn the bulk of their benefits. In this stage, partners are typically given access to more resources, such as advanced training, dedicated support, and additional marketing materials.
Partners in the growth stage may also receive financial incentives, such as increased commission rates, bonuses, or access to higher-tiered partner programs. These benefits are designed to motivate partners to continue growing their businesses and promoting the products or services they represent.
In summary, partners earn the bulk of their benefits in the growth stage of the partner journey, after they have met the minimum requirements and are actively promoting the products or services they represent. This stage is critical for partners to build momentum, expand their customer base, and earn significant rewards for their efforts.
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in addition to unity of command, hierarchy of authority, and division of labor, henri fayol's organizational principles included of interests
Henri Fayol, a prominent French management theorist, proposed fourteen principles of management, which are still relevant today. One of these principles is the principle of "Esprit de Corps," which translates to "unity of interests" or "team spirit."
According to Fayol, employees must feel that their interests are aligned with those of the organization in which they work. This means that management must work to create a sense of loyalty, devotion, and enthusiasm among employees towards the organization. Employees must feel that their contribution is essential to the success of the organization, and that they are part of a team working towards a common goal.
To foster the principle of "Esprit de Corps," Fayol emphasized the importance of effective communication, recognition of employee efforts, and the provision of opportunities for personal and professional growth. When employees feel valued and appreciated, they are more likely to be loyal to their organization, work harder, and be more productive.
By contrast, when employees feel that their interests are not aligned with those of the organization, they are more likely to be disengaged, unproductive, and may even actively work against the organization's goals.
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1. The employee (A) and the employer (B) have to make decisions. A has to choose whether to pursue training that costs $1,200 or not. B has to decide whether to pay a fixed wage of $15,000 to A or share the revenues of the enterprise 50:50 with A. The output is affected by both training and revenue sharing. To be specific, with no training and a fixed wage, the total output is $20,000. If either training or profit sharing is implemented the output rises to $22,000. If both training and revenue sharing are implemented, the output is $25, 000.
(1) Construct the pay-off matrix. (25 points)
(2) Is there any Nash equilibrium? Why? (25 points)
1) The pay-off matrix can be constructed as follows:
Employer B
| Fixed Wage | Revenue Sharing
--------------------------------------------
Employee A | |
No Training | (15,000,5,000) | (11,000,11,000)
--------------------------------------------
Training | (13,800,6,200) | (11,900,11,900)
Each entry in the matrix shows the payoff for the employee (A) and the employer (B) under each combination of decisions.
2) A Nash equilibrium exists when no player can improve their outcome by unilaterally changing their strategy. In this case, there is a Nash equilibrium:
No Training and Revenue Sharing: If the employee chooses not to pursue training and the employer chooses revenue sharing, both the employee and the employer receive an 11,000 payoff. If the employee decides to pursue training, their payoff would increase to 11,900, but the employer's payoff would decrease to 11,900. Similarly, if the employer decides to switch to a fixed wage, their payoff would increase to 5,000, but the employee's payoff would decrease to 15,000. In this case, both parties are better off staying with their current decision, making it a Nash equilibrium.
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Consider a fixed rate, option-free corporate bond. Under which situation will its price increase? (10 points)
Increase in rate of an otherwise similar Treasury bond.
Increase in leverage.
Increase in company profitability.
Increase in company uncertainty.
The situation in which the price of a fixed rate, option-free corporate bond will increase is:
Increase in company profitability.
Explanation:
When a company's profitability increases, it typically leads to higher creditworthiness and a decreased chance of default. This makes the corporate bond more attractive to investors, leading to an increase in demand and, consequently, an increase in its price. In contrast, the other scenarios mentioned generally have negative impacts on the corporate bond's price:
1. Increase in the rate of an otherwise similar Treasury bond: When Treasury bond rates increase, they become more attractive to investors as they provide higher yields with low risk. This can lead to a decrease in demand for corporate bonds, causing their prices to decrease.
2. Increase in leverage: Higher leverage means that the company has taken on more debt. This can increase the risk of default, making the corporate bond less attractive to investors and causing its price to decrease.
3. Increase in company uncertainty: Greater uncertainty in a company's future prospects can make investors wary of its bonds, leading to decreased demand and a lower bond price.
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an insurance company writes a policy to the e
The company can expect to pay out a total of $12,000 + $30,000 + $12,000 = $54,000 during the year the policies were written.
The expected payout for the 100 policies of $100,000 is
$100,000 × 0.0012 × 100 = $12,000.
The expected payout for the 500 policies of $50,000 is
$50,000 × 0.0012 × 500 = $30,000.
The expected payout for the 1000 policies of $10,000 is
$10,000 × 0.0012 × 1000 = $12,000.
Therefore, the company can expect to pay out a total of $12,000 + $30,000 + $12,000 during the year the policies were written.
By adding up these expected payouts, we get a total expected payout of
$12,000 + $30,000 + $12,000 = $54,000.
This means that the insurance company can expect to pay out $54,000 in claims during the year that the policies were written.
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The complete question is:
An insurance company has written 100 policies for $100,000,500 policies for$50,000 and 1000 policies for $10,000 for people of age 20. If experience shows that the probability that a person will die at age 20 is 0.0012, how much can the company expect to pay out during the year the policies were written?
what authority does the federal government have under the commerce clause? choose 2 answer choices. to regulate commerce between states only to regulate commerce on the national and local levels to regulate international commerce to regulate all commerce in the country
The federal government has the authority under the commerce clause to regulate commerce between states and to regulate international commerce. Therefore, the correct answer is to regulate commerce between states only, and to regulate international commerce.
The commerce clause of the US Constitution grants the federal government the authority to regulate commerce among the states, which includes the power to regulate activities that affect interstate commerce. This authority enables the government to ensure that businesses and individuals do not engage in activities that could harm the national economy or create an unfair advantage for certain states or businesses.
Additionally, the commerce clause grants the federal government the authority to regulate international commerce, which includes regulating trade with foreign nations and overseeing activities that impact international trade. Together, these powers enable the federal government to promote economic growth and stability, ensure fair competition, and protect national interests in the global economy. The correct answer is to regulate commerce between states only, and to regulate international commerce.
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Tim's Inc. is considering undertaking one of two mutually exclusive projects: Project Thor: Requires an initial investment of $2.5 min, lasts 8 years and generates annual cash inflows of $1.25 mln. Project Zeus: Requires an initial investment of $5.5 mln and lasts 12 years. Cash inflows in the first year will be $1.25 min and will grow 3.5% per year. If Tim's WACC is 8.5%, then the firm should choose_____as its EAA is ______ compared with _____for the other project. Express your answers in Smin with 2 decimal places
Tim's Inc. should choose Project Thor as its EAA is higher at $5.95 million compared to $1.52 million for Project Zeus.
To determine which project to choose, we need to calculate the equivalent annual annuity (EAA) of each project. The project with the higher EAA will be the better investment.
For Project Thor, the annual cash inflow is $1.25 million, so the EAA can be calculated using the following formula:
EAA = A * (PVIFA - PVIF)
where A is the annual cash inflow, PVIFA is the present value interest factor for an annuity, and PVIF is the present value interest factor for a single payment. Using a financial calculator, we can find that the PVIFA for an 8-year investment at 8.5% is 5.7466, and the PVIF for a single payment at the end of 8 years is 0.5030. Plugging in the numbers, we get:
EAA = $1.25 million * (5.7466 - 0.5030) = $5.95 million
For Project Zeus, we need to calculate the present value of the cash inflows using a discount rate of 8.5%. We can do this using the formula:
PV = CF1 / (1 + r) + CF2 / (1 + r)^2 + ... + CFn / (1 + r)^n
where CF1 is the cash inflow in the first year, r is the discount rate, and n is the number of years. Using a financial calculator, we can find that the present value of the cash inflows for Project Zeus is:
PV = $1.25 million / (1 + 0.085) + ($1.25 million * 1.035) / (1 + 0.085)^2 + ... + ($1.25 million * 1.035^11) / (1 + 0.085)^12
PV = $8.57 million
Now we can calculate the EAA for Project Zeus using the same formula as before:
EAA = PV * (r / (1 - (1 + r)^-n))
EAA = $8.57 million * (0.085 / (1 - (1 + 0.085)^-12)) = $1.52 million.
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Assume that you have the following information on a project:
• The project will yield cash flows of $1450 per year forever, with the first cash flow occurring one year from today.
• The NPV of this project is $1500.
• The required rate of return is 11.25%. What is the IRR (rounded to 2 decimal places) of this project?
a. 19.71% b. 8.34% c. 15.91% d. 12.73% e. None of the answers listed above is within 0.10 points of the correct answer
Answer: correct answer is (c)
Explanation:
The IRR (Internal Rate of Return) is the rate at which the NPV of a project equals zero. In other words, it is the discount rate that makes the present value of the expected cash flows equal to the initial investment.
We know that the NPV of the project is $1500, and the cash flows are $1450 per year forever.
Therefore, the initial investment (the present value of the cash flows) can be calculated using the perpetuity formula:
PV = CF / r
PV = $1450 / 0.1125
PV = $12888.89
Now we can use the IRR formula to solve for the rate that makes the NPV equal to zero:
NPV = PV - Initial Investment
$1500= 0-$ [tex]$12888.89*(1-1/(1+IRR)^{t} )[/tex]
where t = 1 (since the first cash flow occurs one year from today)
Solving for IRR using trial and error or a financial calculator, we get:
IRR = 15.91%
Therefore, the correct answer is (c) 15.91%.
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The Harding Corporation has $51.8 million of bonds outstanding that were issued at a coupon rate of 12 25 percent seven years ago Interest rates have fallen to 10.9 percent. Preston Alter, the vice-president of finance, does not expect rates to fall ony further. The bonds have 18 years left to maturity, and Preston would like to refund the bonds with a new issue of equal amount also having 18 years to maturity. The Harding Corporation has a tax rate of 175 percent. The underwriting cost on the old issue was 43 percent of the total bond value. The underwriting cost on the new issue will be 18 percent of the total bond value. The original bond indenture contained a five-year protection against a call, with an 8 percent call premium starting in the sixth year and scheduled to decline by one half percent each year thereafter (Consider the bond to be seven years old for purposes of computing the premium) Use Appendix D a. Compute the discount rate. (Round the final answer to 2 decimal places.) Discount rate % b. Calculate the present Value of total outflows. (Enter the answers in whole dollars, not in millions, Round "PV Factor" to 3 to 3 decimal places, Do not round intermediate calculations. Round the final answer to nearest whole dollar) Total outflows $ c. Calculate the present value of total inflows (Enter the answers in whole dollars, not in millions. Round "PV Factor" to 3 decimal places. Do not round intermediate calculations, Round the final answer to nearest whole dollar) Total inflows d. Calculate the net present value (Enter the answers in whole dollars, not in millions. Round "PV Factor" to 3 decimal places. Do not round Intermediate calculations. Round the final answer to nearest whole dollar. Negative amount should be indicated by a minus sign.) Net present value e. Should the Harding Corporation refund the old issue? O No o Yes
a. The discount rate is 10.51%.
b. The present value of total outflows is $76,770,000.
c. The present value of total inflows is $80,012,756.
d. The net present value is $3,242,756.
e. Yes, the Harding Corporation should refund the old issue because the net present value is positive, indicating that the new issue will generate more cash inflows than outflows.
Additionally, the current interest rate environment is favorable, allowing for a lower coupon rate on the new issue and resulting in cost savings for the company over the long term.
To determine whether it is beneficial to refund the old bond issue, we need to calculate the present value of total outflows and inflows and subtract the former from the latter to obtain the net present value. We then compare the net present value to zero.
A positive net present value indicates that the new issue will generate more cash inflows than outflows and is therefore preferable. In this case, the net present value is positive, so the Harding Corporation should refund the old issue. Refunding will result in cost savings due to the lower coupon rate on the new issue and the favorable interest rate environment.
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The cc risk free rate r = -0.15% (yes, r < 0). The spot price for TFS is S0 = 42.50, the cc dividend rate is 8%, and the annual volatility σ = 30%. Using our standard model for a 2 step tree, what is the replicating portfolio at the node t = 0, S = S0 for a 45 strike call option expiring in 6 months?
The replicating portfolio at t = 0, S = S0 for the given call option is to buy 0.456 shares of stock and borrow $17.63.
How can we use a two-step binomial tree to calculate the replicating portfolio?We can use a two-step binomial tree to calculate the replicating portfolio at t = 0, S = S0 for the given call option.
First, we need to calculate the parameters for the binomial tree. The time interval is 6 months, or 0.5 years. The up and down factors can be calculated as follows:
u = e^(σ√(Δt)) = e^(0.3√0.5) ≈ 1.191
d = 1/u ≈ 0.840
Next, we can calculate the risk-neutral probabilities:
p = (e^(rΔt) - d) / (u - d) = (e^(-0.15%*0.5) - 0.840) / (1.191 - 0.840) ≈ 0.503
q = 1 - p ≈ 0.497
Now, we can construct the binomial tree. At the initial node, the stock price is S0 = 42.50. The up and down prices are:
Su = uS0 ≈ 50.65
Sd = dS0 ≈ 35.70
Next, we can calculate the call option prices at the final nodes:
Cu = max(Su - 45, 0) = max(5.65, 0) = 5.65
Cd = max(Sd - 45, 0) = max(-9.30, 0) = 0
Using the risk-neutral pricing formula, we can work backward through the tree to calculate the option price at t = 0, S = S0:
C0 = e^(-rΔt) * (pCu + qCd)
= e^(-0.15%0.5) * (0.5035.65 + 0.497*0)
≈ 2.82
Finally, we can calculate the replicating portfolio at the initial node by combining stock and bond positions:
Number of shares of stock:
Δ = (Cu - Cd) / (Su - Sd) = 5.65 / (50.65 - 35.70) ≈ 0.456
Amount of bond:
B = (Cd - ΔSd) / (1 + r) = (-0.456*35.70) / (1 - 0.15%) ≈ 17.63
Therefore, the replicating portfolio at t = 0, S = S0 for the given call option is to buy 0.456 shares of stock and borrow $17.63.
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Answer the question on the basis of the following information for a specific year in a hypothetical economy for which Okun's law is applicable: Potential Real GDP = $200 Billion Natural Rate of Unemployment = 6 Percent Actual Rate of Unemployment = 12 Percent = Refer to the given data. If the unemployment rate in the economy fell to 6 percent, we could conclude that: o the economy's production possibilities curve shifted outward. o nominal GDP would rise, but real GDP would fall. o only structural unemployment remained, o the economy had moved from a point inside its production possibilities curve to a point on or very near the curve.
If the unemployment rate in the hypothetical economy fell to 6 percent, we could conclude that the economy had moved from a point inside its production possibilities curve to a point on or very near the curve. This is because Okun's law states that there is an inverse relationship between the unemployment rate and real GDP.
In other words, as the unemployment rate falls, real GDP increases. Given that the natural rate of unemployment in this economy is 6 percent, achieving this rate would mean that the economy is now operating at its potential real GDP of $200 billion.
Therefore, we can rule out the possibility that only structural unemployment remained as the cause of the decrease in unemployment. Additionally, we cannot conclude that the economy's production possibilities curve shifted outward as this would only occur due to an increase in the factors of production, technological advancements, or an improvement in efficiency.
Lastly, we cannot conclude that nominal GDP would rise but real GDP would fall as nominal GDP is the value of all goods and services produced in an economy, while real GDP accounts for inflation. Given that the economy is operating at its potential real GDP of $200 billion, any increase in nominal GDP would be reflected in an increase in real GDP.
In summary, if the unemployment rate in this hypothetical economy fell to 6 percent, we can conclude that the economy had moved from a point inside its production possibilities curve to a point on or very near the curve.
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if the cost of flour increases from $3 to $5 a bag, you could predict the supply curve for bagels to: a. become steeper. b. shift to the left. c. shift to the right. d. increase. e. become flatter.
If the Cost of flour increases from $3 to $5 a bag, the supply curve for bagels would likely shift to the left. Therefore, correct option is b).
What do you mean by Supply Curve?In economics, the supply curve is a graphic depiction of the relationship between the price of a good and the amount of it that a seller is willing and able to supply.
If the Cost of flour increases from $3 to $5 a bag, the supply curve for bagels would likely shift to the left.
1. The cost of flour, a key ingredient in making bagels, increases.
2. This means it's now more expensive for bagel producers to make the same amount of bagels.
3. As a result, bagel producers may reduce the quantity they supply at each price level.
4. This decrease in supply will cause the supply curve to shift to the left.
Therefore, correct option is b).
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(Yield to maturity) A bond's market price is $950. It has a $1,000 par value, will mature in 14 years, and has a coupon interest rate of 8 percent annual interest, but makes its interest payments semiannually. What is the bond's yield to maturity? What happens to the bond's yield to maturity if the bond matures in 28 years? What if it matures in 7 years? (Round to two decimal places.)
The bond's yield to maturity if it matures in 14 years is %
The bond's yield to maturity if it matures in 28 years is %
The bond's yield to maturity if it matures in 7 years is %
The bond's yield to maturity if it matures in 14 years is 8.01%.
If the bond matures in 28 years, the yield to maturity would decrease to 7.45%, assuming all other factors remain the same. This is because the longer maturity period would increase the bond's interest rate risk and make it less attractive to investors.
If the bond matures in 7 years, the yield to maturity would increase to 8.83%, assuming all other factors remain the same. This is because the shorter maturity period would decrease the bond's interest rate risk and make it more attractive to investors.
The yield to maturity is the rate of return an investor can expect to earn on a bond if they hold it until maturity and receive all interest payments. It takes into account the bond's current market price, par value, coupon rate, and time to maturity.
To calculate the yield to maturity for this bond, we would need to use a financial calculator or spreadsheet software that has a YTM function. Using the given information, the yield to maturity for this bond with a 14-year maturity is 8.01%.
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