The current value of the stock of New Gadgets is $10.46 if the required return is 16 percent.
To calculate the current value of the stock, we need to find the present value of all the expected future dividends and the expected future stock price at the end of year three.
We can use the dividend discount model to calculate the present value of the expected future dividends.
Using the dividend discount model, we can calculate the present value of the expected future dividends as follows:
PV = D1/(1 + r)^1 + D2/(1 + r)^2 + D3/(1 + r)^3 + P3/(1 + r)^3
Where PV is the present value of the stock, D1, D2, and D3 are the expected dividends for years 1, 2, and 3, respectively, P3 is the expected stock price at the end of year 3, r is the required return, and the ^ symbol represents exponentiation.
Substituting the given values into the formula, we get:
PV = 0.55/(1 + 0.16)^1 + 0.80/(1 + 0.16)^2 + 1.10/(1 + 0.16)^3 + (1.10 * 1.05)/(0.16 - 0.05)/(1 + 0.16)^3
PV = $0.421 + $0.584 + $0.743 + $8.712
PV = $10.46
Therefore, the current value of the stock of New Gadgets is $10.46.
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a corporate manager decides to build a new store on a lot owned by the corporation that could be sold to a local developer for $250,000. The lot was purchased for $50,000 twenty years ago. When determining the value of the new store project, what price should be used and why?
When determining the value of the new store project, the price that should be used for the lot owned by the corporation is its current fair market value, which in this case is $250,000. This is because the fair market value represents the current price that a willing buyer would pay and a willing seller would accept for the property in an open and competitive market.
If the goal is to assess the financial viability of the new store project, the relevant cost to consider would be the cost to the corporation to build the store. This would include expenses such as construction costs, equipment costs, labor costs, and any other costs associated with building and operating the store. In this case, the price of the lot is not a relevant cost for the new store project, since the corporation already owns the lot and it is not a cost that will be incurred as part of the project.
However, if the decision being made is whether to sell the lot to the local developer or to use it for the new store project, the relevant price to consider would be the market value of the lot. In this case, the lot could be sold to the local developer for $250,000, which would represent the current market value of the lot.
Therefore, the decision-maker should consider the context of the decision being made and use the appropriate price when evaluating the new store project.
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a business plan is best described as a a. money plan. b. contingency plan. c. crystal ball picture. d. game plan.
A business plan is best described as a d. game plan.
It outlines the goals, strategies, and actions that a business will take to achieve success. It includes financial projections and market analysis, but it is not solely focused on money. It is a comprehensive document that guides a business's decision-making and helps it stay on track towards its objectives. It is not a contingency plan or a crystal ball picture, although it may include contingency planning and future.
A business plan is best described as a d. game plan. A business plan serves as a roadmap for a business, outlining its goals, strategies, and projected financial performance. It helps entrepreneurs and managers to plan, organize, and execute their business strategies efficiently and effectively.
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A risk manager self-insured a property risk for one year. The following year, even though no losses occurred, the risk manager purchased property insurance to address the risk. What is the best explanation for the change in how the risk was handled, even though no losses had occurred?
The risk was handled, even though no losses occurred, is that the risk manager wanted to transfer the financial burden of potential property losses to an insurance company through property insurance.
In the first year, the risk manager self-insured the property risk, meaning they were responsible for covering any losses or damages to the property out of their own pocket. This approach may have been considered more cost-effective at the time or the risk manager felt confident in their ability to manage the risk.
However, the following year, the risk manager decided to purchase property insurance. This could be due to several reasons: they may have reassessed the potential risks and determined that the cost of insurance was more manageable than the potential financial loss from an unexpected event, or they may have simply desired the peace of mind that comes with having insurance coverage.
In summary, the risk manager's decision to purchase property insurance the following year, despite not experiencing any losses, was likely based on a desire to mitigate future financial risks and increase the level of protection for their property.
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assume that the physical property of a business is valued at $50,000. the company's commercial property policy contains a coinsurance clause with a stated percentage of 80 percent. the company insures the property for $30,000 (75 percent of the specified minimum). the company incurs a fire loss of $20,000. how much of the loss will the insurance company pay for?
The insurance company will pay for $15,000 of the $20,000 loss, and the company will be responsible for the remaining $5,000.
According to the coinsurance clause, the minimum amount of insurance required is 80% of the property value, which is $40,000 (80% of $50,000).
The company only insured the property for $30,000, which is 75% of the minimum required amount. Therefore, the company is underinsured by $10,000 ($40,000 - $30,000).
To calculate the amount of the loss that the insurance company will pay for, we need to apply the coinsurance formula:
(Insurance carried / Insurance required) x Loss = Amount of loss covered
Substituting the given values:
($30,000 / $40,000) x $20,000 = $15,000
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A company's capital structure is as follows: $10 million in preferred stock, $100 million in common stock, and $10 million in bonds. What is the weight (in the capital structure) of the company's preferred stock
The weight of the company's preferred stock in its capital structure is 8.33%. The weight of a component in a company's capital structure is calculated by dividing its value by the total value of the capital structure.
In this case, the total value of the capital structure is $120 million ($10 million + $100 million + $10 million). Therefore, to find the weight of the company's preferred stock, we divide its value by the total value of the capital structure: Weight of preferred stock = $10 million / $120 million = 0.0833 or 8.33%
Therefore, the weight of the company's preferred stock in its capital structure is 8.33%. This means that the preferred stock represents 8.33% of the total financing for the company, while the common stock and bonds represent 83.33% and 8.33%, respectively.
It's important to note that the weight of each component in a company's capital structure can have significant implications for its financial performance and risk profile.
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7. Goode Inc.'s stock has a required rate of return of 10.50%, and it sells for $23.00 per share. Goode's last dividend paid was $1. Find the constant growth rate for dividends? 8. The Timberlake Jack
Using the Dividend Discount Model (DDM), we can find the constant growth rate (g) for Goode Inc.'s dividends. The DDM formula is: P0 = D1 / (r - g). The constant growth rate for dividends is approximately 3.96%.
Where P0 is the current stock price ($23.00), D1 is the next year's expected dividend, r is the required rate of return (10.50%), and g is the constant growth rate. We know the last dividend paid was $1, so we need to find D1 and g.
Rearranging the formula to solve for g: g = r - (D1 / P0)
Since we don't know D1, we can represent it as D0*(1+g), where D0 is the last dividend paid: g = 0.105 - ((1 * (1+g)) / 23)
Solving for g: g ≈ 0.0396 or 3.96%. The constant growth rate for dividends for Goode Inc. is approximately 3.96%.
Constant growth rate is a crucial factor in evaluating a company's stock value and future dividends. By using the Dividend Discount Model, we can estimate the growth rate, which helps investors make informed decisions. In this case, Goode Inc.'s stock has a 10.50% required rate of return and sells for $23.00 per share.
The company's last dividend was $1, and we calculated the constant growth rate to be approximately 3.96%. This information is valuable for investors when analyzing the company's financial performance and making investment decisions.
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Suppose you just purchased a 6 year, $1.000 par value bond. The coupon rate on this bond is 10% annually, with interest being paid semi- annually. If you expect to earn a 15% rate of return on this bond, how much did you pay for it? (Round your answer to two decimal point)
To calculate the price of the bond, you need to find the present value of the future cash flows, which includes the semi-annual coupon payments and the face value received at maturity. You paid $[tex]900.42[/tex] for the bond.
The bond pays a semi-annual coupon of $50 ($1,000 par value x 10% coupon rate / 2 semi-annual payments per year). Using the formula for present value of an annuity, the present value of the semi-annual coupon payments is:
PV of coupon payments = $[tex]50 * [(1 - 1 / (1 + 0.075 / 2)^(6*2)) / (0.075 / 2)][/tex] = $431.06. Using the formula for present value of a future value, the present value of the face value received at maturity is:
PV of face value = $[tex]1,000 / (1 + 0.075 / 2)^(6*2)[/tex] = $469.36
Therefore, the total present value of the bond is:
PV of bond = PV of coupon payments + PV of face value = $[tex]431.06 + $469.36[/tex]= $900.42
So, you paid $[tex]900.42[/tex] for the bond.
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Best friends Elena and Sonia decide to move in together. They lease an apartment together in D.C., each agreeing to pay half of the rent, for a 2-year term. When Sonia signed the lease agreement, she was only 17. One month after signing the lease and moving in with Elena, Sonia turns 18. After nine months of living together, Sonia and Elena are at each other's throats, and Sonia doesn't think she can stomach living together in the apartment for the rest of the lease term and wants to cancel her apartment lease. All of the following are accurate statements, except: a. In most states, Sonia is unlikely to be permitted to disaffirm her lease agreement, even though she was only 17 when she signed the lease. b. Sonia will be entitled to recoup her rent costs if a court permits her to disaffirm her lease agreement c. Sonia could have disaffirmed the lease before turning 18. d. Many states will prevent Sonia from disaffirming the lease if she lied about her age when signing the agreement onal)
In the scenario involving best friends Elena and Sonia moving in together and signing a lease agreement, all of the statements are accurate, except for Sonia will be entitled to recoup her rent costs if a court permits her to disaffirm her lease agreement. Therefore, the correct option is B.
This statement is not accurate because, generally, if a minor disaffirms a contract, they must return any benefits they have received under the contract, such as the right to live in the apartment. Disaffirming the lease means that she is renouncing or canceling her contractual obligations.
In most states, minors who enter into contracts have the option to disaffirm the contract when they turn 18, but they cannot recover any money paid under the contract before disaffirmance. Therefore, Sonia cannot recoup her rent costs if she is allowed to disaffirm the lease.
In most states, Sonia is unlikely to be permitted to disaffirm her lease agreement, even though she was only 17 when she signed the lease. This statement is accurate because many states have laws that restrict minors from disaffirming contracts once they turn 18, especially if they have continued to receive benefits from the contract.
Sonia could have disaffirmed the lease before turning 18. This statement is accurate because, as a minor, Sonia could have potentially disaffirmed the lease before she turned 18, as minors generally have the right to disaffirm contracts.
Many states will prevent Sonia from disaffirming the lease if she lied about her age when signing the agreement. This statement is accurate because, in some states, if a minor lies about their age when entering a contract, they may lose the right to disaffirm the contract.
Hence, the correct option is B which is not true about the given case.
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assuming goodwill existed at the date of acquisition, why don't we see it on this consolidated worksheet?
As of the acquisition date, the acquirer records the assets acquired, liabilities taken, and any noncontrolling stake in the acquiree.
What time is the date of acquisition?The day the acquirer takes possession of the acquiree is known as the closure date, which is often the purchase date. However, if control of the acquiree is passed to the acquirer via a written agreement, the acquisition date may take place before or after the closing date.
Or perhaps an additional sum is required merely to persuade the owner to sell. Regardless of the circumstance, the additional sum is reported as goodwill, an intangible asset that is then reflected on the consolidated balance sheet.
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Assume the last dividend was $2.00 and investors require 9% to
invest in this company’s stock. What if g = 0% for 3 years before
long-run growth of 4%
please inlcude work
The current stock price of the company is $41.03, assuming the last dividend was $2.00
What is the current stock price of the company?To calculate the current stock price using the dividend discount model, we can use the following formula: P = D / (r - g)
In this case, the last dividend was $2.00, and the required rate of return is 9%. Since the expected long-run growth rate is 0% for the first three years, we can assume that the next three dividends will also be $2.00 each. After that, the long-run growth rate will be 4%.
So, the stock price can be calculated as follows:
For years 1-3:
P1-3 = D x (1 + g)^3 / (r - g)
P1-3 = $2.00 x (1 + 0%)^3 / (9% - 0%)
P1-3 = $2.00 x 1 / 0.09
P1-3 = $22.22
For year 4 onwards:
P4 = D x (1 + g)^4 / (r - g)
P4 = $2.00 x (1 + 4%)^4 / (9% - 4%)
P4 = $2.00 x 1.04^4 / 0.05
P4 = $33.97
The current stock price is the present value of the expected future cash flows, so we need to discount each year's stock price back to its present value. Using a discount rate of 9%, we get:
PV of P1-3:
= $22.22 / (1 + 9%)^3
= $17.02
PV of P4:
= $33.97 / (1 + 9%)^4
= $24.01
The current stock price is:
= PV of P1-3 + PV of P4
= $17.02 + $24.01
= $41.03.
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A newly issue CMO's mortgage pool has a balance of $108.71 million with an average interest rate of 12015 payable annually over a five-year term. There are two tranches. Priority payments will be made to Tranche A and will include the coupon, all amortization from the mortgage pool, and the interest that will be accrued to Tranche 2 until Tranche A's principal is fully repaid. Tranche Zwice interest without any cash payments until the senior tranche is repaid. It will recere current interest and principal payments at that time. Tranche A has a principal balance of $55.10 million with an annual coupon of 8.658 Tranche Zhas special balance of $46.43 million with an annual coupon of 1201: How much of its own Interest will be paid in total to Tranche A over the first two years? a. $7.57 millionb. $7.76 million c. $7.95 milion d. $8.24 million e. $8.33 milion
Interest payments made overall during the first two years. $8.33 million (option e) is the right response.
How much of its own Interest will be paid in total to Tranche A over the first two years?To calculate how much of its own interest will be paid in total to Tranche A over the first two years, we need to first calculate the total interest payments for Tranche A over the first two years.
Tranche A's annual coupon is 8.658%, so its monthly coupon rate is 8.658% / 12 = 0.7215%. The principal balance of Tranche A is $55.10 million, so the monthly coupon payment is $55.10 million * 0.7215% = $397,665.
Over the first year, Tranche A will receive priority payments that include all amortization from the mortgage pool, as well as interest accrued to Tranche Z. Tranche Z does not receive any cash payments during this time. Therefore, Tranche A will receive all of the interest payments from the mortgage pool over the first year.
The total interest payments from the mortgage pool over the first year can be calculated as follows:
$108.71 million * 12.015% = $13.05 million
Subtracting Tranche A's coupon payment from this amount gives us the interest payment that will be paid to Tranche A:
$13.05 million - $397,665 = $12.65 million
Over the second year, Tranche A will continue to receive priority payments until its principal is fully repaid. The total amount of interest payments from the mortgage pool over the second year can be calculated as follows:
($108.71 million - $55.10 million) * 12.015% = $3.24 million
Adding this to the remaining principal balance of Tranche A gives us the total amount of priority payments that will be made to Tranche A over the second year:
$55.10 million + $3.24 million = $58.34 million
Subtracting the remaining principal balance of Tranche A from this amount gives us the total amount of interest payments that will be paid to Tranche A over the second year:
$58.34 million - $55.10 million = $3.24 million
Therefore, the total amount of interest payments that will be paid to Tranche A over the first two years is:
$12.65 million + $3.24 million = $15.89 million
The closest answer choice is (c) $7.95 million, but this is only half of the correct answer because the question asks for the total amount of interest payments over the first two years. The correct answer is (e) $8.33 million.
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our company sells its product for $80 per unit and has a variable cost of $40 per unit. total fixed costs equal $18,000. the breakeven in units is 450, and we expect to sell 550 units. what is the margin of safety in dollars? group of answer choices ($8,000) $4,000 ($4,000) $8,000
The margin of safety in dollars is calculated to be $8,000. Therefore, the answer choices $8,000 is the correct.
To calculate the margin of safety, we need to first calculate the total sales revenue and the breakeven sales revenue.
Breakeven sales revenue = Breakeven units x Selling price per unit
Breakeven sales revenue = 450 x $80 = $36,000
Total sales revenue = Expected sales units x Selling price per unit
Total sales revenue = 550 x $80 = $44,000
Margin of safety = Total sales revenue - Breakeven sales revenue
Margin of safety = $44,000 - $36,000 = $8,000
Therefore, it can be concluded that the margin of safety in dollars is $8,000.
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How many Accountings system its available in the world,
and what are the different between them?
please avoid plagrism
There are several accounting systems available in the world. Some of the most popular ones include QuickBooks, Xero, Zoho Books, Wave, FreshBooks, and Sage 50. Each of these accounting systems has its own unique features and benefits.
QuickBooks, for example, is one of the most popular accounting systems used by small businesses. It offers features like invoicing, expense tracking, and inventory management. Xero, on the other hand, is a cloud-based accounting system that allows users to access their financial information from anywhere. It offers features like bank feeds, invoicing, and purchase orders.
Zoho Books is another cloud-based accounting system that offers features like online payments, project management, and purchase orders. Wave is a free accounting system that offers features like invoicing, accounting, and receipt scanning. FreshBooks is another popular accounting system that offers features like time tracking, project management, and invoicing.
Sage 50 is a desktop-based accounting system that offers features like invoicing, expense tracking, and inventory management. It is widely used by small and medium-sized businesses. These accounting systems have their own unique features, and businesses can choose the one that suits their needs the best.
In conclusion, there are many accounting systems available in the world, each with its own unique features and benefits. Businesses can choose the one that best suits their needs and budget.
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he process of deciding which specific market segment(s) to pursue is known as blank . multiple choice question. positioning targeting segmenting diversifying
The process of deciding which specific market segment(s) to pursue is known as b. targeting.
What is meant by targeting?
Targeting is the process of selecting one or more specific market segments to focus on with a company's marketing efforts. It involves evaluating and identifying the most attractive and profitable segments within a larger market and deciding which ones to pursue based on various criteria such as size, growth potential, profitability, and compatibility with the company's resources and capabilities.
Segmenting, on the other hand, is the process of dividing a market into distinct and identifiable groups or segments based on similar characteristics such as demographics, psychographics, behavior, or geographic location.
Positioning refers to the unique perception or image that a company wants to create in the minds of consumers relative to its competitors.
Diversifying is a strategy where a company expands its business into new markets or product lines that are distinct from its existing offerings.
After segmenting a market, a company evaluates and selects the specific segments it wants to target based on its marketing objectives and overall business strategy. This decision-making process is known as targeting. Once the target segments are identified, a company can then develop marketing strategies and tactics tailored to effectively reach and serve those segments, which can ultimately lead to more successful and targeted marketing efforts.
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raines realty, a property management firm, hired al agent to manage an office complex. one of al's duties was to collect the rents. raines fired al for negligence, but did not notify the tenants before the next rent payment was due. al collected the rents as usual and left town with the money. are the tenants required to pay that month's rent again to raines?
The tenants are not required to pay that month's rent again to Raines. Even though Al was fired for negligence, Raines did not notify the tenants before the next rent payment was due, which implies that Al was still authorized to collect the rent on behalf of Raines.
Therefore, the tenants fulfilled their obligation by paying the rent to Al, and Raines is still responsible for any actions or damages caused by Al, including the misappropriation of rent payments.
In other words, the tenants have paid the rent in good faith to the authorized agent of Raines, and it is Raines' responsibility to pursue legal action against Al to recover the misappropriated funds.
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Summerdahl Resort's common stock is currently trading at $40 a share. The stock is expected to pay a dividend of $2.25 a share at the end of the year (D1 = $2.25), and the dividend is expected to grow at a constant rate of 5% a year. What is the cost of common equity? Round your answer to two decimal places
Summerdahl Resort's common stock is currently trading at $40 a share. The stock is expected to pay a dividend of $2.25 a share at the end of the year (D1 = $2.25), and the dividend is expected to grow at a constant rate of 5% a year, the cost of common equity is 0.10625 or 10.63%
The cost of common equity for Summerdahl Resort can be calculated using the Dividend Discount Model (DDM), which considers the current stock price, expected dividend payment, and constant growth rate of the dividend. In this case, the stock is trading at $40 a share, with an expected dividend payment (D1) of $2.25 at the end of the year and a constant growth rate of 5%. Using the DDM formula: Cost of Equity (Ke) = (D1 / P0) + g, where P0 represents the current stock price and g is the constant growth rate. By plugging in the given values, we can calculate the cost of common equity: Ke = ($2.25 / $40) + 0.05 = 0.05625 + 0.05 = 0.10625.
Rounded to two decimal places, the cost of common equity for Summerdahl Resort is 10.63%. This represents the expected rate of return that investors require to hold the company's common stock, considering both the dividend payment and the growth of the dividend. Summerdahl Resort's common stock is currently trading at $40 a share. The stock is expected to pay a dividend of $2.25 a share at the end of the year (D1 = $2.25), and the dividend is expected to grow at a constant rate of 5% a year, the cost of common equity is 0.10625 or 10.63%
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2. There are two companies in the hospitality business. One company operates hotels and residential complexes. Rather than owning the hotels, this firm chooses to manage or franchise its hotels. The company receives its revenues each moth based on long term contracts with the hotels owners, who pay a percentage of the hotel revenues as a management fee or franchise fee. Much of this company's growth is inorganic-the company buys the rights to manager existing hotel chains and also the rights to use the hotel's brand name. This company has also pursued a strategy of repurchasing a significant percentage of the shares of its own common stock. The other company owns and operates several chains of upscale, full service hotels and resorts. The firm's strategy is to maintain market presence by owning all of its properties, which contributes to the high recognition of its industry-leading brands. By comparing the financial statements of these companies, what do you think about these following items? Company One Company Two Net PPE Goodwill and intangible assets Company One Company Two Net PPE Goodwill and intangible assets 1 Equity Asset turnover ROE B. Short answer question 1. What kind of moral hazard problems do banks worry about? 1 2. There are two companies in the hospitality business. One company operates hotels and in firm nhancer to manage or franchise
By comparing the financial statements of the two companies the following items are given below:
Financial statements are documents that describe a company's operations and financial performance. Government organisations, accounting companies, etc. frequently audit financial accounts to guarantee accuracy and for tax, financing, or investment purposes.
The balance sheet, income statement, statement of cash flow, and statement of changes in equity are the four basic financial statements for for-profit entities. A comparable but distinct set of financial statements is used by nonprofit organisations.
Net PPE:
Company 1: This comapny has only tangible assets. It manages or franchise its hotel.
Company 2: This company PPE are Hotels and Resorts.
Goodwill and Intangible assets:
Company 1: This company has patents and copyrights as goodwill.
Company 2: This company has proprietary and brand recognition.
Asset Turnover:
Company 1: This company does not involve in sales revenue or Income.
Company 2: This company is responsible in use of its assets in generating sales revenue or sales Income to the company/.
ROE:
Company 1: This company does not invest but receives its revenue each month on long term contract with the hotel owners as franchise or management fee.
Company 2: This company ROE depends on market fluctuations. As all the profits are enjoyable by them own.
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J.P. Morgan was one of the wealthiest Americans ever. How did he gain much of his early wealth? a. He was born poor but built an empire by running a successful steel business. b. He invented the type of electricity we use in our homes today. c. He bought and sold railroad stocks. d. He inherited most of his wealth from his father.
J.P. Morgan was indeed one of the wealthiest Americans ever. He gained much of his early wealth: buying and selling railroad stocks. The correct option is C.
Although he did inherit some wealth from his father, J.P. Morgan went on to build a financial empire by investing in railroads during a time when they were a crucial and rapidly growing industry.
He became an influential figure in the railroad business and used his financial expertise to consolidate and reorganize various railroad companies, making them more profitable. This success in the railroad industry enabled J.P. Morgan to accumulate a significant amount of wealth and establish himself as a prominent figure in American finance.
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Exchange rates are influenced by all of the following EXCEPT:
A. political risks
B. purchasing power of the foreign country
C. purchasing power of the home currency
D. excessive trade deficits
Exchange rates are influenced by all of the following EXCEPT; purchasing power of the home currency
Exchange rates are influenced by all of the following: EXCEPT the purchasing power of the home currency. Factors that influence exchange rates include:
A. Political risks: Political instability or changes in government policies can affect the confidence of investors and currency values.
B. Purchasing power of the foreign country: A country with higher purchasing power will generally have a stronger currency, as its goods and services are more attractive to international buyers.
D. Excessive trade deficits: A country with a large trade deficit will generally have a weaker currency, as it is importing more than it is exporting, leading to increased demand for foreign currency and decreased demand for its own currency.
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A levered firm has a debt-to-equity ratio of .38 and an equity beta of 1.42. If the firm switched to an all-equity financial structure, the beta would be 1.029. Please show work on how this answer was concluded.
The beta of an all-equity financial structure for a levered firm with a debt-to-equity ratio of .38 and an equity beta of 1.42 would be 1.029.
To calculate the beta of the all-equity financial structure, we first need to find the beta of the levered firm's assets using the formula:
βAsset = [tex]$\frac{1}{\frac{D}{E}+1}$[/tex] × βEquity
Plugging in the given values, we get:
βAsset = [tex]$\frac{1}{0.38+1}\times 1.42$[/tex]
βAsset = 1.029
Next, we can use the formula for the beta of an all-equity firm, which is simply the beta of the firm's assets, to find the beta of the all-equity financial structure:
βAll-Equity = βAsset
βAll-Equity = 1.029
Therefore, the beta of an all-equity financial structure for the given levered firm would be 1.029.
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A mortgage that is tied to an economic index and may have interest rate or payment caps isA) a renegotiable-rate mortgageB) a partially amortized mortgageC) an adjustable-rate mortgageD) a variable payment mortgage
An adjustable-rate mortgage (ARM) is a type of mortgage where the interest rate is tied to an economic index and may have interest rate or payment caps.
ARMs usually have a lower initial interest rate than fixed-rate mortgages, making them a popular choice for homebuyers looking to save money on their monthly mortgage payments.
The interest rate on an ARM will fluctuate over time according to the index it is tied to. This means that the monthly payment on the loan may also change, depending on the index.
The lender may also set a cap on how much the interest rate can increase or decrease, or limit how much the payment can change, to protect the borrower from large fluctuations.
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Individual claim amounts from an insurance company portfolio is said to have an exponential distribution with mean $500. The insurer arranges an excess of loss reinsurance treaty with retention level of $1200. (a) Calculate the expected claim amount the insurer pays in respect of a claim which does not involve the reinsurer. (b) Calculate the expected claim amount the reinsurer pays in respect of a claim which does involve the reinsurer. (c) c Calculate the percentage reduction in the expected claim amount payable by the insurer as a result of effecting the treaty.
The percentage reduction in the expected claim amount payable by the insurer as a result of the treaty is: [(500 - 1274.20) / 500] x 100% = -154.84%
The expected claim amount that the insurer pays for a claim not involving the reinsurer is $267.52.
(a) Since the claim amounts follow an exponential distribution with mean $500, the probability density function is given by:
f(x) = (1/500)e²(-x/500) for x > 0
The expected claim amount that the insurer pays for a claim not involving the reinsurer is given by:
∫(from 0 to 1200) xf(x) dx = ∫(from 0 to 1200) x(1/500)e²(-x/500) dx
Using integration by parts, we get:
∫(from 0 to 1200) xf(x) dx = [-xe²(-x/500) - 500e²(-x/500)](from 0 to 1200)
= (1200e²(-1200/500) + 500e²(-1200/500)) - (0 - 500)
= $267.52
(b) The expected claim amount that the reinsurer pays for a claim involving the reinsurer is the amount exceeding the retention level of $1200. Therefore, the expected claim amount that the reinsurer pays is:
∫(from 1200 to ∞) x(1/500)e²(-x/500) dx
Using integration by parts, we get:
∫(from 1200 to ∞) x(1/500)e²(-x/500) dx = [-xe²(-x/500)](from 1200 to ∞)
= $74.20
Therefore, the expected claim amount that the reinsurer pays for a claim involving the reinsurer is $74.20.
(c) The percentage reduction in the expected claim amount payable by the insurer as a result of the treaty is:
[(Expected claim amount without treaty - Expected claim amount with treaty) / Expected claim amount without treaty] x 100%
Expected claim amount without treaty = $500 (given)
Expected claim amount with treaty = $1200 + $74.20 = $1274.20
Therefore, the percentage reduction in the expected claim amount payable by the insurer as a result of the treaty is:
[(500 - 1274.20) / 500] x 100% = -154.84%
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a $1,000 bond carries a 7.0% coupon. the bond currently trades at $1,100. what would the annual interest payment be on this bond? group of answer choices $35.00 $70.00 $75.50 $77.00
The annual interest payment on this bond would be $70.00.
The annual interest payment on the bond is calculated as follows:
Coupon rate = 7.0%
Face value of bond = $1,000
Annual interest payment = Coupon rate x Face value of bond
= 7.0% x $1,000
= $70.00
Therefore, the correct answer is $70.00.Here's a step-by-step explanation:
1. The face value of the bond is $1,000. 2. The bond has a 7.0% coupon rate.
3. To calculate the annual interest payment, multiply the face value by the coupon rate: $1,000 * 7.0
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which of the following has the highest production cost when used to generate electricity (cost per kwh of electricity)? a. petroleum oil b. natural gas c. coal d. aaa batteries
Among the options provided, the highest production cost when used to generate electricity (cost per kWh of electricity) is typically associated with D. AAA batteries.
Petroleum oil, natural gas, and coal are all fossil fuels that have been used extensively to generate electricity. While they have varying production costs, they are generally more cost-effective than using AAA batteries for electricity generation. Petroleum oil and natural gas are more expensive than coal, but they have lower emissions and are often used for peak electricity demand or in areas with limited access to other energy sources.
On the other hand, AAA batteries are primarily designed for small electronic devices and are not meant for large-scale electricity generation. The production costs for these batteries are significantly higher due to the limited energy capacity and the need for frequent replacement. Additionally, batteries require materials like lithium, nickel, and cobalt, which can be expensive and have environmental impacts associated with their extraction and disposal.
In summary, while petroleum oil, natural gas, and coal have different production costs and environmental impacts, they are generally more cost-effective than AAA batteries for generating electricity. Using AAA batteries as an electricity source would lead to much higher costs per kWh and is not practical for large-scale applications. Therefore the correct option is D
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9. If the labor market is flexible, and people also have rational expectations ... Inflation and unemployment have a trade-off in the short run Inflation and unemployment have a trade-off in the long
A short-run trade-off between inflation and unemployment is produced by the labour market's flexibility and reasonable expectations, but this trade-off vanishes with time.
There is a short-term trade-off between inflation and unemployment, but not a long-term one if the labour market is flexible and individuals have reasonable expectations. Changes in aggregate demand can, in the short run, lead either unemployment or inflation to diverge from their normal rates.
For instance, if aggregate demand rises, inflation may rise but unemployment may fall, but if aggregate demand falls, inflation may fall but unemployment rise. On the other hand, if inflation expectations change and the unemployment rate returns to its normal level, this trade-off eventually vanishes.
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according to the text, the chosen form of real estate ownership is driven primarily by a desire for:
the chosen form of real estate ownership is driven by a combination of personal preferences and financial considerations. The decision-making process can be complex, and it is essential to consider all factors carefully before choosing a particular ownership structure.
According to the text, the chosen form of real estate ownership is driven primarily by a desire for financial benefits and personal preferences.Real estate ownership can take various forms, such as sole ownership, joint tenancy, tenancy in common, or condominium ownership, among others. The choice of ownership structure may depend on personal preferences, such as lifestyle, family needs, and future plans. For example, someone who wants more privacy and control over their property may prefer sole ownership, while a family with multiple heirs may opt for tenancy in common.Financial considerations can also play a significant role in determining the chosen form of real estate ownership. For instance, joint tenancy can be advantageous for married couples because it provides certain tax benefits and ensures that the surviving spouse inherits the property automatically. Condominium ownership can be an affordable option for those who want to own a property in a prime location without bearing the cost of maintaining the entire building or land.
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Personal tastes and financial concerns influence the type of real estate ownership selected. The decision-making process may be complicated, and it is critical to thoroughly analyze all considerations before settling on a certain ownership structure.
According to the text, the preferred type of real estate ownership is motivated mostly by financial incentives and personal preferences. Real estate ownership can take several forms, including solo ownership, joint tenancy, tenancy in common, and condominium ownership. Personal choices, such as lifestyle, family demands, and future aspirations, may influence the choice of ownership structure.
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roller mills shares are currently selling for $27.38 each. you bought 200 shares one year ago at $26.59 and received dividend payments of $1.27 per share. what was your percentage capital gain for the year?
The percentage capital gain for the year is approximately 2.97%.
How to calculate the percentage capital gainTo calculate the percentage capital gain for your investment in Roller Mills shares, we can use the following formula:
Percentage Capital Gain = ((Current Price - Purchase Price) / Purchase Price) * 100
Here, the current price of Roller Mills shares is $27.38, and the purchase price was $26.59.
Plugging these values into the formula, we get:
Percentage Capital Gain = (($27.38 - $26.59) / $26.59) * 100
Calculating the difference and dividing by the purchase price, we obtain:
Percentage Capital Gain = ($0.79 / $26.59) * 100
Now, multiplying by 100 to get the percentage:
Percentage Capital Gain ≈ 2.97%
So, your percentage capital gain for the year is approximately 2.97%.
Please note that this calculation doesn't include the dividend payments you received.
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Your broker charges $0.0020 per share per trade. The exchange charges $0.0119 per share per trade for removing liquidity and credits $0.0101 per share per trade for adding liquidity. The current best BID price for stock XYZ is $72.81 per share, while the current best ASK price is $72.82 per share. You post an order to buy XYZ at the current best BID price and wait. Shortly after, the best BID and ASK prices move lower (down) by one cent each. Your buy order is executed. Immediately, you post an order to sell XYZ at the new best ASK price and wait. Shortly after, the best BID and ASK prices move higher (up) by one cent each. Your sell order is executed. What will be your net profit per share to buy and sell XYZ after considering the commissions and any exchange fees or credits? $0.0150 $0.0154 $0.0158 $0.0162 $0.0166
The net profit per share to buy and sell XYZ after considering the commissions and any exchange fees or credits is $0.0140.None of the answer options is correct.
Let's first calculate the cost of buying and selling one share of XYZ.
Buying one share at the best BID price of $72.81 will cost:
Cost of one share = $72.81
Broker's commission = $0.0020 per share
Exchange fee for removing liquidity = $0.0119 per share
Total cost to buy = $72.81 + $0.0020 + $0.0119 = $72.8239
Selling one share at the new best ASK price of $72.81 will earn:
Revenue from selling one share = $72.83
Broker's commission = $0.0020 per share
Exchange fee for adding liquidity = $0.0101 per share
Total revenue from selling = $72.83 - $0.0020 + $0.0101 = $72.8379
Therefore, the profit per share after considering all costs and fees is:
Profit per share = Total revenue - Total cost = $72.8379 - $72.8239 = $0.0140
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summary of the article
Internet banking and ATMs applications; in the context of the
multi-currencies economy.
Nidal Rashid Sabri
The article discusses the importance of internet banking and ATM applications in a multi-currency economy. The author argues that these technologies provide convenience and cost-effectiveness for consumers and businesses dealing with different currencies. The article also highlights the challenges of implementing such systems, including security and regulatory concerns.
In summary, the article emphasizes the benefits and challenges of using internet banking and ATM applications in a multi-currency economy.
While these technologies can provide convenience and cost-effectiveness, they also require careful consideration of security and regulatory issues.
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Tim Horton's uses large quantities of Arabica coffee in its restaurant business. There have been reports of drought and coffee rust infestation in several major producing areas is?
Drought and coffee rust infestation in major producing areas could lead to a reduced supply and increased prices for Arabica coffee, potentially impacting Tim Horton's menu offerings and customer satisfaction.
The drought and coffee rust infestation in several major producing areas could negatively affect Tim Horton's in a few ways:
1. Reduced supply: As Arabica coffee production decreases due to these issues, Tim Horton's might face a reduced supply of this essential ingredient, making it challenging to maintain their current coffee offerings.
2. Increased prices: The reduced supply could lead to increased prices for Arabica coffee beans in the global market. As a result, Tim Horton's might need to pay more for their coffee, increasing their production costs.
3. Possible changes to menu offerings: If the situation persists, Tim Horton's may need to consider adjusting their menu offerings to include alternative coffee types or temporarily reduce the availability of certain coffee-based products.
4. Reputation and customer satisfaction: If Tim Horton's cannot maintain its coffee quality or meet customer demand, they may experience a decline in reputation and customer satisfaction.
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