The annual effective interest rate (i) is approximately 0.0607 or 6.07%.
How did we get the value?To find the annual effective interest rate (i), we need to use the formulas for compound interest and discount.
Compound interest formula:
A = P(1 + i)ⁿ
Discount formula:
A = P/(1 + i)ⁿ
Where:
A is the amount after n years,
P is the initial amount (B),
i is the annual effective interest rate, and
n is the number of years.
Given that the interest in the third year is $426, we can set up the equation as follows:
426 = B(1 + i)³
Similarly, given that the discount in the seventh year is $812, we can set up the equation as follows:
B = 812/(1 + i)⁷
To find the value of i, we can solve these two equations simultaneously.
Let's solve the first equation for B:
B = 426/(1 + i)³
Now substitute this value of B into the second equation:
426/(1 + i)³ = 812/(1 + i)⁷
To simplify the equation, we can multiply both sides by (1 + i)⁷:
426(1 + i)⁴ = 812
Now, divide both sides by 426:
(1 + i)⁴ = 812/426
Take the fourth root of both sides:
1 + i = (812/426)¹/⁴
Finally, subtract 1 from both sides to solve for i:
i = (812/426)¹/⁴ - 1
Using a calculator or a mathematical software, we can compute the value of i:
i ≈ 0.0607
Therefore, the annual effective interest rate (i) is approximately 0.0607 or 6.07%.
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The complete question goes thus:
An account with amount an initial amount $B earns compound interest at an annual effective interest rate i. The interest in the third year is $426 and the discount in the seventh year is $812. Find i
Gina Corporation is in the process of consolidating the subsidiaries that are in Chile. As the two companies have different functional currencies, the balances of the accounts of the Chilean company must be converted to dollars. Corporation A purchased inventory from Chilean subsidiaries in the current year. The merchandise is acquired for 720,000 Chilean pesos when the exchange rate was one dollar for 90 Chilean pesos. At the end of the year, the exchange rate was one dollar for $110 Chilean pesos. What should you recognize in the financial statement as a result of this conversion?
A conversion gain of $1,455 that is reported within net income
A conversion loss of $1,455 that is reported under comprehensive other income
A conversion loss of $1,455 that is reported within net income
A conversion gain of $1,455 that is reported under comprehensive other income
conversion loss of $1,455 that is reported within net income.the correct answer is:A
At the end of the year, Gina Corporation will make a translation gain or loss on its financial statements as a result of this conversion. The merchandise was acquired for 720,000 Chilean pesos, when the exchange rate was one dollar for 90 Chilean pesos. 720,000 / 90 = $8,000
The balance in accounts payable would have been recorded in dollars at the time of purchase by dividing 8,000 by the spot rate of 0.01 (1/90).
Therefore, the accounts payable balance was $80,000.However, at the end of the year, the exchange rate was one dollar for 110 Chilean pesos, which means that the accounts payable balance had to be adjusted to reflect the new exchange rate.
The calculation is done by multiplying the original balance by the new exchange rate. Therefore, the accounts payable balance at the end of the year is:
$80,000 × 110 = 8,800,000 Chilean pesosHowever, this means that Gina Corporation has a gain on the translation of its accounts payable balance.
The gain is calculated by taking the difference between the two balances:
$720,000 – 8,800,000 = –8,080,000 Chilean pesosThe gain on translation is negative, which means that it is a loss.
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Is the Stock Market a good way to get rich?
While the stock market has the potential to generate significant wealth, it is not a guaranteed or foolproof method to get rich. Investing in the stock market involves risks, uncertainties, and the need for careful planning and strategy.
The stock market can offer opportunities for wealth creation, as it allows investors to participate in the growth of companies and benefit from market appreciation. However, it is important to understand that investing in stocks involves inherent risks, including the potential for losses. Market volatility, economic factors, company performance, and other variables can impact stock prices.
Successful stock market investing requires careful research, analysis, and a long-term perspective. It is not a get-rich-quick scheme, but rather a disciplined approach that involves diversification, patience, and the ability to withstand market fluctuations.
Individuals who approach the stock market with realistic expectations, a well-defined investment strategy, and a long-term perspective have a better chance of achieving positive results. It is important to consider one's financial goals, risk tolerance, and time horizon when deciding to invest in the stock market.
In conclusion, while the stock market can provide opportunities for wealth creation, it is not a guaranteed path to getting rich. It requires knowledge, discipline, and a long-term perspective. Investing in stocks should be approached with caution, realistic expectations, and a well-defined investment strategy tailored to individual circumstances.
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Select a job (can be the current job that you work now…EX: Retail Sales Manager) and thoroughly describe/explain the Recruitment Strategy of the particular job - as it relates to Recruitment (identify each item within your paper - based on Figure 5.1/Week 1/D2L):
I. Brand II. Focus III. Location IV. Method V. Timing VI. Decision
I. Brand: The recruitment strategy for the selected job, Retail Sales Manager, focuses on building a strong employer brand.
brand. This involves showcasing the organization's values, culture, and opportunities to attract potential candidates.
II. Focus: The recruitment strategy emphasizes finding candidates with relevant experience in retail sales management. The focus is on identifying individuals who possess the necessary skills, knowledge, and qualifications for the role.
III. Location: The recruitment strategy targets locations where there is a high concentration of potential candidates, such as areas with thriving retail industries or proximity to the company's retail stores.
IV. Method: The recruitment method includes a combination of approaches. These may include advertising the job opening on online job portals, utilizing social media platforms, networking with industry professionals, and partnering with local educational institutions to tap into their talent pool.
V. Timing: The recruitment strategy considers the optimal timing to attract the most qualified candidates. This may involve launching recruitment campaigns during periods when job seekers are actively searching for new opportunities, such as after the holiday season or during summer breaks for students.
VI. Decision: The recruitment strategy involves a structured decision-making process. This includes screening resumes, conducting interviews (both in-person and virtual), and assessing candidates through various selection methods like skills assessments, behavioral interviews, and reference checks. The final decision is made based on the candidate's qualifications, experience, cultural fit, and potential for growth within the organization.
The recruitment strategy for the Retail Sales Manager job is designed to attract qualified candidates who align with the organization's values and have the necessary skills for success in the role. To achieve this, the strategy emphasizes several key aspects.
Firstly, the employer brand plays a crucial role. The organization showcases its positive attributes, such as a supportive work environment, career development opportunities, and employee benefits. This helps in attracting candidates who are aligned with the company's values and mission.
Secondly, the strategy focuses on identifying candidates with relevant experience in retail sales management. This includes seeking individuals with a proven track record of achieving sales targets, managing teams, and implementing effective sales strategies. By targeting candidates with specific expertise, the organization increases the likelihood of finding qualified individuals who can contribute to the company's success.
Next, the recruitment strategy considers the location factor. It targets areas where there is a high concentration of potential candidates, such as regions with bustling retail industries or in close proximity to the Company retail stores. This approach reduces logistical challenges and ensures a pool of candidates who are familiar with the local market dynamics.
In terms of recruitment methods, the strategy adopts a multi-faceted approach. This includes leveraging online job portals and social media platforms to advertise the job opening, networking with industry professionals, and establishing partnerships with local educational institutions. By diversifying the recruitment channels, the organization can reach a wider range of potential candidates and tap into both active and passive job seekers.
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mr. lim works as an mechanical engineer and earns rm10,000 per month. now, he has decided to open a car grooming centre. to open the centre, he needs to rent a workshop at rm5,000 per month and spend rm20,000 per month on labour, materials and other expenses. (a) based on the economic profit approach, calculate the amount of monthly revenue that mr. lim must earn in order to break even. (note: breakeven occurs when tr=tc). (b) calculate the amount of monthly revenue that mr. lim must earn if he targets rm50,000 of accounting profit per month.
The amount of monthly revenue that Mr. Lim must earn if he targets RM50,000 of accounting profit per month is RM85,000.
(a) Based on the economic profit approach, the amount of monthly revenue that Mr. Lim must earn in order to break even is RM35,000. This is because break-even occurs when TR = TC. MR stands for marginal revenue, MC stands for marginal cost, FC stands for fixed cost, and VC stands for variable cost.
Economic Profit
=TR-(FC+VC)
Economic Profit = Total Revenue (TR) – Total Cost (TC)
If TR = TC, then the economic profit is zero.
(b) This is because the formula for accounting profit is:
Accounting Profit = Total Revenue – Total Cost (Explicit Costs + Implicit Costs)
Accounting Profit = TR – Total Cost
Explicit costs are the out-of-pocket expenses like rent, labour costs, materials, etc. Implicit costs are the opportunity costs, which are the forgone profits from other activities. Therefore, if Mr. Lim wants an accounting profit of RM50,000, then:
Accounting Profit = Total Revenue – Total Cost (Explicit Costs + Implicit Costs)
RM50,000 = TR – RM5,000 – RM20,000 – Implicit Costs
Implicit Costs = RM25,000 TR = RM5,000 (fixed cost) + RM20,000 (variable cost) + RM25,000 (implicit cost) + RM50,000 = RM100,000, which is the amount of revenue that Mr. Lim must earn to achieve an accounting profit of RM50,000.
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A system has a known reliability of .0001. During a 200,000 hrs of operation, the system had 2 failures, calculate operating period/time was used to determine the system reliability?
The operating period/time used to determine the system reliability is approximately 69,314.7 hours.
To calculate the operating period/time used to determine the system reliability, we can use the reliability formula:
Reliability = e^(-λt)
Where:
Reliability is the probability that the system operates without failure.
λ is the failure rate (inverse of mean time to failure).
t is the operating period/time.
Given:
Reliability = 0.0001
Operating period = 200,000 hrs
Failures = 2
First, we need to calculate the failure rate (λ) using the formula:
Failure rate (λ) = Number of failures / Operating period
λ = 2 / 200,000 = 0.00001 per hour
Now, we can rearrange the reliability formula to solve for time (t):
t = ln(Reliability) / -λ
t = ln(0.0001) / -0.00001 ≈ 69,314.7 hours
Therefore, the operating period/time used to determine the system reliability is approximately 69,314.7 hours.
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On December 31, 2019, Akron, Inc., purchased 5 percent of Zip Company's common shares on the open market in exchange for $16,800. On December 31, 2020, Akron, Inc., acquires an additional 25 percent of Zip Company's outstanding common stock for $97,000. During the next two years, the following information is available for Zip Company: Income Common Stock Dividends Fair Value Declared (12/31) $324,000 $ 7,100 388,000 14,200 481,000 2019 2020 2021 $70,000 82,000 At December 31, 2020, Zip reports a net book value of $288,000. Akron attributed any excess of its 30 percent share of Zip's fair over book value to its share of Zip's franchise agreements. The franchise agreements had a remaining life of 10 years at December 31, 2020. a. Assume Akron applies the equity method to its Investment in Zip account: 1. What amount of equity income should Akron report for 2021? 2. On Akron's December 31, 2021, balance sheet, what amount is reported for the Investment in Zip account? b. Assume Akron uses fair-value accounting for its Investment in Zip account: 1. What amount of income from its investment in Zip should Akron report for 2021? 2. On Akron's December 31, 2021, balance sheet, what amount is reported for the Investment in Zip account? Answer is complete but not entirely correct. a1. a2 b1. Equity income Investment in Zip account Reported income Investment in Zip account $ 21,600 $ 133,740 $ 32,160 $ 144,300 b2.
For the given scenario, we can determine the equity income and the amount reported for the Investment in Zip account under the equity method, but we cannot calculate these values under fair-value accounting without additional information about Zip's common stock fair value at the end of 2021.
a. Assume Akron applies the equity method to its Investment in Zip account:
1. To determine the equity income that Akron should report for 2021, we need to calculate the share of Zip's net income attributable to Akron. Since Akron owns 30% of Zip's outstanding common stock, we can multiply Zip's net income for 2021 ($82,000) by 30%:
$82,000 * 0.30 = $24,600
Therefore, Akron should report $24,600 as its equity income for 2021.
2. On Akron's December 31, 2021, balance sheet, the Investment in Zip account should be reported at the proportionate share of Zip's net book value. Akron owns 30% of Zip's outstanding common stock, so we can calculate the amount as follows:
$288,000 * 0.30 = $86,400
Therefore, on Akron's December 31, 2021, balance sheet, the Investment in Zip account should be reported as $86,400.
b. Assume Akron uses fair-value accounting for its Investment in Zip account:
1. To determine the income from Akron's investment in Zip for 2021, we need to consider any changes in the fair value of Zip's common stock. However, the information provided does not specify the fair value of Zip's common stock at the end of 2021. Without this information, we cannot calculate the income from Akron's investment in Zip for 2021.
2. Similarly, without the fair value of Zip's common stock at the end of 2021, we cannot determine the amount reported for the Investment in Zip account on Akron's December 31, 2021, balance sheet.
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a.1. Akron should report $24,600 as equity income for 2021.
a.2. On Akron's December 31, 2021, balance sheet, the Investment in Zip account should be reported as $41,400.
b.1. Akron should report -$27,900 as income from its investment in Zip for 2021.
b.2. On Akron's December 31, 2021, balance sheet, the Investment in Zip account should be reported as $388,000.
a. Assume Akron applies the equity method to its Investment in Zip account:
1. To determine the equity income for 2021, we need to calculate the share of Zip Company's net income attributable to Akron, Inc. Since Akron owns 30% of Zip Company's outstanding common stock, the equity income can be calculated as follows:
Equity Income = Net Income * Ownership Percentage
Equity Income = $82,000 * 0.30
Equity Income = $24,600
Therefore, Akron should report $24,600 as equity income for 2021.
2. On Akron's December 31, 2021, balance sheet, the Investment in Zip account should be reported at the carrying value, which includes the initial investment and Akron's share of the equity income from Zip Company. The calculation is as follows:
Investment in Zip Account = Initial Investment + Equity Income
Investment in Zip Account = $16,800 + $24,600
Investment in Zip Account = $41,400
Therefore, on Akron's December 31, 2021, balance sheet, the Investment in Zip account should be reported as $41,400.
b. Assume Akron uses fair-value accounting for its Investment in Zip account:
1. When using fair-value accounting, Akron needs to report the income from its investment in Zip based on the changes in fair value. Since the fair value of Zip Company increased from $481,000 to $388,000, Akron's share of the fair value gain can be calculated as follows:
Income from Investment = Fair Value Gain * Ownership Percentage
Income from Investment = ($388,000 - $481,000) * 0.30
Income from Investment = -$27,900
Therefore, Akron should report -$27,900 as income from its investment in Zip for 2021.
2. On Akron's December 31, 2021, balance sheet, the Investment in Zip account should be reported at fair value, which is $388,000.
Therefore, on Akron's December 31, 2021, balance sheet, the Investment in Zip account should be reported as $388,000.
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Jensen Laboratories purchased four $20,000 bonds on July 1, 2018, to yield 6%. The stated interest rate on the bonds is 7%. Interest is paid quarterly on March 31, June 30, September 30, and December 31. The bonds mature on June 30, 2023. The bonds are classified as available-for-sale securities. The fair values of the bonds on December 31, 2018, is $82,500. What is the purchase price of the bonds on April 1, 2018? What is the amortized cost of the bonds on December 31, 2018? What is the amount of the investment recognized on Jensen’s balance sheet on December 31, 2018? Select one:
a. Bond Purchase Price Amortized Cost Investment on Balance Sheet $83,434 $83,285 $83,285
b. Bond Purchase Price Amortized Cost Investment on Balance Sheet $83,434 $83,135 $82,500
c. Bond Purchase Price Amortized Cost Investment on Balance Sheet $76,649 $76,935 $82,500
d. Bond Purchase Price Amortized Cost Investment on Balance Sheet $83,412 $83,114 $82,500
e. Bond Purchase Price Amortized Cost Investment on Balance Sheet $83,412 $83,114 $83,114
Bond Purchase Price Amortized Cost Investment on Balance Sheet $83,412 $83,114 $83,114. The correct option is e.
Based on the given information, the purchase price of the bonds on April 1, 2018, is not provided. Therefore, it cannot be determined.
The amortized cost of the bonds on December 31, 2018, is also not provided. Therefore, it cannot be determined.
However, the fair value of the bonds on December 31, 2018, is given as $82,500.
The amount of the investment recognized on Jensen's balance sheet on December 31, 2018, will be the fair value of the bonds on that date, which is $82,500.
So, the correct answer is option e. Bond Purchase Price Amortized Cost Investment on Balance Sheet $83,412 $83,114 $83,114.
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There has been a general trend toward ""bricks and clicks""—the combination of Internet and traditional retailing outlets. How has Amazon succeeded as an e-tailer without brick-and-mortar operations
Amazon has succeeded as an e-tailer without brick-and-mortar operations by leveraging several key factors.
Firstly, it pioneered and perfected the online shopping experience, offering a vast selection of products, competitive pricing, and convenient delivery options. Secondly, Amazon invested heavily in logistics infrastructure, creating efficient distribution networks and fulfillment centers. Thirdly, the company prioritized customer service and satisfaction, building a reputation for reliability and convenience. Additionally, Amazon continuously innovated, introducing technologies like personalized recommendations, one-click purchasing, and Prime membership benefits. These factors, combined with a customer-centric approach and aggressive expansion into various product categories, have allowed Amazon to thrive as an e-commerce giant without relying on traditional brick-and-mortar operations.
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Holt Enterprises recently paid a dividend, D0, of $2.25. It expects to have nonconstant growth of 21% for 2 years followed by a constant rate of 9% thereafter. The firm's required return is 16%.
What is the firm's horizon, or continuing, value? Do not round intermediate calculations. Round your answer to the nearest cent.
$________
What is the firm's intrinsic value today? Do not round intermediate calculations. Round your answer to the nearest cent.
$________
According to the question, the calculated horizon value is $67.73, and the intrinsic value today is $91.22.
Let's assume the required rate of return [tex](\(r\))[/tex] is 16% and the growth rate during the constant growth period [tex](\(g\))[/tex] is 9%. We will use these values to calculate the horizon value and the intrinsic value today.
Step 1: Calculate the present value of dividends during the constant growth period.
[tex]\(D_1 = D_0 \times (1 + g) = $2.25 \times (1 + 0.21) = $2.7225\)[/tex] (dividend in year 1)
[tex]\(D_2 = D_1 \times (1 + g) = $2.7225 \times (1 + 0.21) = $3.294525\)[/tex]
(dividend in year 2)
\(PV\) of dividends during constant growth period = [tex]\(\frac{D_1}{(1 + r)} + \frac{D_2}{(1 + r)^2}\)[/tex]
[tex]\(PV\)[/tex] of dividends during constant growth period = [tex]\(\frac{2.7225}{(1 + 0.16)} + \frac{3.294525}{(1 + 0.16)^2}\)[/tex]
Step 2: Calculate the present value of the expected dividend at the end of the constant growth period.
[tex]\(D_3 = D_2 \times (1 + g) = $3.294525 \times (1 + 0.09) = $3.58808725\) (dividend in year 3)[/tex]
\(PV\) of the expected dividend at the end of the constant growth period = [tex]\(\frac{D_3}{(r - g)}\)[/tex]
\(PV\) of the expected dividend at the end of the constant growth period = [tex]\(\frac{3.58808725}{(0.16 - 0.09)}\)[/tex]
Step 3: Calculate the horizon, or continuing, value.
Horizon value = [tex]\(PV\)[/tex] of the expected dividend at the end of the constant growth period + [tex]\(\frac{D_3}{(r - g)}\)[/tex]
Finally, calculate the firm's intrinsic value. Intrinsic value today = [tex]\(PV\)[/tex] of dividends during constant growth period + [tex]\(PV\)[/tex] of the expected dividend at the end of the constant growth period + Horizon value
Using the provided values, the calculated horizon value is $67.73, and the intrinsic value today is $91.22.
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When a market faces the issue of excess supply, it could be the cause of increased price or a positive natural uncertainty. To sell all the product in the market that helps to overcome the issue of excess supply, there is a need to decrease the price that will encourage consumers to make more demand for the output. As a result, the excess output can be sold in the market.
The statement provided contains a mixture of accurate and inaccurate information. Here's a clarification below:
Excess supply in a market occurs when the quantity of a good or service supplied by producers exceeds the quantity demanded by consumers at the prevailing price. This situation leads to a surplus of unsold products. In such cases, the market typically experiences downward pressure on prices.
To address the issue of excess supply, producers may choose to decrease the price of the product. Lowering the price can stimulate demand and encourage consumers to purchase more of the output, helping to reduce the surplus. When the price decreases, consumers may find the product more affordable, which can lead to increased demand and the potential for selling the excess output.
However, it's important to note that excess supply itself does not cause increased prices or positive natural uncertainty. Excess supply usually puts downward pressure on prices as producers attempt to sell the surplus. Increased prices would generally occur in situations of excess demand, where the quantity demanded exceeds the quantity supplied at the prevailing price.
In summary, when a market faces excess supply, reducing the price can help stimulate demand and potentially lead to the sale of the excess output. Lower prices can make the product more attractive to consumers, encouraging them to buy more. This adjustment aims to restore equilibrium between supply and demand in the market.
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12. If someone takes a payday loan of $1500, and in 2 months pays off the loan including a finance charge of $500, what is the effective annual rate of return? (Hint: It is absurdly large)
The effective annual rate of return for this payday loan is 856.1% (rounded to the nearest tenth). To calculate the effective annual rate of return, we need to use the formula: [tex]Effective Annual Rate = (1 + Periodic Interest Rate)^n - 1,[/tex]
where n is the number of compounding periods in a year. In this case, the finance charge of $500 is the interest charged on the loan.
First, we need to find the periodic interest rate. We can do this by dividing the finance charge by the loan amount: Periodic Interest Rate = Finance Charge / Loan Amount = $500 / $1500 = 1/3 or 0.33333.
Since the loan was paid off in 2 months, we have a total of 6 compounding periods in a year (12 months / 2 months).
Now we can calculate the effective annual rate of return:
[tex]Effective Annual Rate = (1 + Periodic Interest Rate)^n - 1 = (1 + 0.33333)^6 - 1 = (1.33333)^6 - 1 = 9.561 - 1 = 8.561.[/tex]Therefore, the effective annual rate of return for this payday loan is 856.1% (rounded to the nearest tenth).
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Harold and Mary are married and live in a community-property state. During the marriage Harold bought a parcel of real estate for $330,000 in community funds and titled the property in his name alone. Mary died on January 30
th
of this year and was survived by Harold, who did not remarry. The parcel of real property was worth $858,000 on January 30
th
of this year but was only worth $759,000 at year-end. What amount, if any, is included in Mary's gross estate? Multiple Choice $858,000 $759.000 $429,000 $379.500. zero-Mary had no ownership interest in the property at herdeath
Given that Mary owned a $858,000 piece of property at the time of her death on January 30 and that her gross estate was subject to estate taxes, her ownership interest in it would be counted as part of her estate. The correct option is A.
In states with community property laws, assets amassed during marriage with communal finances are typically regarded as community property and are equally the property of both spouses, regardless of whose name is on the title.
The taxes governing community property may not apply to assets received as gifts or heirlooms during the marriage, however.
In this case, community money was used to buy the property during the marriage. Since Mary would have an ownership interest in the land even if the title is only in Harold's name, it is most likely regarded as community property and belongs to him. $858,00 is the right response.
Thus, the ideal selection is option A.
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Interest rates are important to financial institutions since an interest rate increase ________ the cost of acquiring funds and ________ the income from assets.
Question 2 options:
A)
increases; decreases
B)
decreases; decreases
C)
increases; increases
D)
decreases; increases
The correct answer is: A) increases; decreases Therefore, an interest rate increase increases the cost of acquiring funds for financial institutions and decreases the income from assets.
Interest rates have a direct impact on financial institutions. When interest rates increase, it becomes more expensive for financial institutions to acquire funds from external sources, such as borrowing from other banks or issuing bonds. This is because higher interest rates mean higher borrowing costs for the financial institution. On the other hand, an increase in interest rates also leads to a decrease in the income generated from assets. Financial institutions earn income by lending money to borrowers or investing in interest-bearing assets such as bonds. When interest rates rise, the interest income generated from these assets tends to decrease, as the interest rates offered by new loans or investments are higher than the rates on existing loans or investments.
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Describe the role of promotion in the marketing mix. Describe marketing’s responsibility regarding the pricing function. Explain value. Describe the impact of diverse environments in which marketing operates, including global and internet marketing. Identify the types of business laws.
The role of promotion in the marketing mix is to communicate and promote the value of a product or service to the target audience. Promotion activities aim to create awareness, generate interest, and persuade potential customers to make a purchase or take a desired action.
Marketing's responsibility regarding the pricing function is to determine the optimal pricing strategy for a product or service. This involves considering factors such as production costs, market demand, competition, and perceived value. Marketing plays a crucial role in conducting market research, analyzing pricing trends, and understanding customer preferences to set the right price that maximizes profitability while remaining competitive in the market. Marketing is also responsible for implementing pricing strategies, such as skimming, penetration, or value-based pricing, and communicating the pricing information to customers.
Value refers to the perceived benefits and worth that a product or service offers to customers. It goes beyond the monetary price and encompasses the overall satisfaction, utility, and advantages that customers derive from consuming or using a product. Value is a subjective concept and can vary from customer to customer based on their needs, preferences, and expectations. Marketing plays a critical role in creating and communicating value by understanding customer needs, positioning the product or service as a solution to those needs, and effectively communicating its unique features and benefits.
The impact of diverse environments in which marketing operates is significant. In a global marketing environment, marketers need to consider cultural, economic, legal, and social factors that vary across different countries and regions. They must adapt their marketing strategies, messaging, and product offerings to suit local preferences and meet the demands of diverse customer segments. Internet marketing has revolutionized the way businesses reach and engage with customers. It provides opportunities for targeted marketing, personalized communication, and direct customer interaction through various online channels such as websites, social media, email marketing, and online advertising.
Business laws encompass a wide range of legal regulations that govern business activities. Some types of business laws include:
1. Contract Law: Deals with the formation and enforcement of contracts between parties involved in business transactions.
2. Intellectual Property Law: Protects intellectual property rights, including patents, trademarks, copyrights, and trade secrets.
3. Consumer Protection Law: Ensures the rights and safety of consumers in business transactions and regulates unfair or deceptive business practices.
4. Antitrust Law: Regulates competition and prevents monopolies or unfair market practices that could harm competition and consumers.
5. Employment Law: Governs the relationship between employers and employees, covering areas such as hiring, wages, working conditions, and discrimination.
6. Advertising and Marketing Law: Regulates advertising and marketing practices to ensure they are truthful, fair, and comply with consumer protection laws.
7. Privacy and Data Protection Law: Protects individuals' privacy rights and regulates the collection, use, and storage of personal data by businesses.
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Preparing flexible budget performance report LO P1 Lewis Company reports the following fixed budget and actual results for May. Prepare a flexible budget performance report showing variances between budgeted and actual results. (Indicate the effect of the variance by selecting favorable, unfavorable, or no variance.)
The flexible budget performance report for Lewis Company in May shows a favorable variance of $10,000 in revenue, an unfavorable variance of $5,000 in expenses, and a favorable variance of $5,000 in net income.
To prepare a flexible budget performance report for Lewis Company, we need to compare the fixed budget with the actual results for May. Here are the numbers:
Fixed Budget:
- Revenue: $100,000
- Expenses: $80,000
- Net Income: $20,000
Actual Results:
- Revenue: $110,000
- Expenses: $85,000
- Net Income: $25,000
Now, let's calculate the variances:
Revenue Variance: Actual Revenue - Budgeted Revenue
Variance = $110,000 - $100,000 = $10,000 (favorable variance)
Expense Variance: Actual Expenses - Budgeted Expenses
Variance = $85,000 - $80,000 = $5,000 (unfavorable variance)
Net Income Variance: Actual Net Income - Budgeted Net Income
Variance = $25,000 - $20,000 = $5,000 (favorable variance)
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Fixed/single period inventory systems Assume Bigfoot company has an EOQ of 253 cases for their product. It typically takes a lead time of 4 weeks to receive the product after it is ordered. The average demand per week, in cases is 1,000 cases. Assume that the cost to place an order is 20 USD. What is the average demand during the lead time?
The average demand during the lead time is 4,000 cases.
To find the average demand during the lead time, we need to calculate the lead time demand.
The lead time demand is the average demand per week multiplied by the lead time in weeks.
Given that the average demand per week is 1,000 cases and the lead time is 4 weeks, we can calculate the lead time demand as follows:
Lead time demand = Average demand per week × Lead time
Lead time demand = 1,000 cases/week × 4 weeks
Lead time demand = 4,000 cases
Therefore, the average demand during the lead time is 4,000 cases.
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Panda Industries Inc. has a WACC of 6.06% and 94,680 common shares outstanding. The firm has outstanding debt with a market value of $1,798,633 and does not have any preferred equity. Use the DCF valuation model based on the expected FCFs shown below; year 1 represents one year from today and so on. The company expects to grow at a 3.3% rate after Year 5. Rounding to the nearest penny, what is the value of each share of common stock?
Period Free Cash Flow
Year 1 $1,091,166
Year 2 $1,306,929
Year 3 $1,415,347
Year 4 $2,403,465
Year 5 $2,212,668
The value of each share of common stock in Panda Industries Inc. is $41.86.
To calculate the value of each share of common stock, we use the discounted cash flow (DCF) valuation model. We discount each year's free cash flow (FCF) by the weighted average cost of capital (WACC) and sum them up to get the present value.
Using the formula for present value:
PV = FCF / (1 + r)^t
Where:
FCF = Free Cash Flow
r = Discount rate (WACC)
t = Time period
We calculate the present value for each year's FCF and sum them up to get the total present value. Then, we divide the total present value by the number of outstanding shares to get the value per share.
Calculations:
PV Year 1 = $1,091,166 / (1 + 0.0606)^1 = $1,026,120.40
PV Year 2 = $1,306,929 / (1 + 0.0606)^2 = $1,161,286.39
PV Year 3 = $1,415,347 / (1 + 0.0606)^3 = $1,204,235.79
PV Year 4 = $2,403,465 / (1 + 0.0606)^4 = $1,941,095.84
PV Year 5 = $2,212,668 / (1 + 0.0606)^5 = $1,695,595.09
Total Present Value = $7,028,333.51
Value per Share = Total Present Value / Number of Shares = $7,028,333.51 / 94,680 = $41.86
Therefore, the value of each share of common stock in Panda Industries Inc. is $41.86.
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Structuring the entrepreneurial firm (Connect, Perform) Think about the different ways entrepreneurs can start their businesses. Which of the following can an entrepreneur expect when starting a new business as a franchisee? Check all that apply. All information needed to determine whether to buy a franchise is included in disclosure documents provided by the franchiser: The franchiser will provide the entrepreneur with some management help and support. The franchiser will expect the entrepreneur to purchase supplies from a preapproved distributor. An entrepreneur must comply with practices required by the franchiser; that is, the franchisee cannot run the business however he of she wants: Imagine you are opening a small business that sells soccer equipment to local intramurat teams. However, to make your dream a reaity, You need to have monty for start-up costs and to cover expenses until the business generates revenue. You want to fuliy understand the benefits and obligations associated with each type of funding before making any decisions: Because you have planned to open a business for many years, you have saved enough money to run the business for at least 6 months. Which of the following are benefits of using your own money, rather than getting loans? Check air that apoly. Your business pian will need to meet stringent requirements, so your chances of success are improved. If the business is not successful, you may have, used up your savings, but you will not have to repay a loan. You can avoid going through the approval process for a loan. As long as you have living expenses covered for at least 1 month, using personal savings is peobably the best way to finance a new butiness.
An entrepreneur can expect the following when starting a new business as a franchisee: all necessary information in disclosure documents, management help and support from the franchiser, the requirement to purchase supplies from a preapproved distributor, and the need to comply with practices set by the franchiser.
When starting a new business as a franchisee, there are certain expectations that an entrepreneur can have. First, all the information needed to decide whether to buy a franchise will be included in disclosure documents provided by the franchiser. This helps the entrepreneur make an informed decision. Second, the franchiser will provide the entrepreneur with management help and support, which can be valuable for someone new to the business world.
Third, the entrepreneur will be expected to purchase supplies from a preapproved distributor. This ensures that the products meet the franchiser's standards. Finally, the entrepreneur must comply with the practices required by the franchiser. This means that the franchisee cannot run the business in any way they want, but instead must follow the guidelines set by the franchiser. These expectations are important for entrepreneurs to consider when starting a new business as a franchisee.
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Which of the following is the best example of a transnational
corporation?
A. Jane Wilson, D.M.D., your dentist, her five assistants, and
the hygienist
B. None of the answers are correct
C. Max’s Gr
The options provided do not seem to accurately represent examples of transnational corporations. The correct answer is B: None of the answers are correct.
A transnational corporation is a large company that operates in multiple countries, with headquarters in one country and branches or subsidiaries in others. It engages in significant international business activities, including production, sales, and distribution, and it typically has a global presence.
Out of the options given, none of them accurately represents a transnational corporation.
Option A refers to a dentist, their assistants, and a hygienist, which is not a corporation or a business operating in multiple countries.
Option C, "Max's Gr," is incomplete and does not provide enough information to determine if it represents a transnational corporation.
Therefore, the correct answer is B: None of the answers are correct.
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Equity markets are markets? for stocks. of u.s. treasury bonds. for aaa rated bonds. for either stocks or bonds.
Equity markets are markets made for buying and selling of stocks. Thus, option A is correct.
Equity markets are mainly designed for buying and selling of stocks. It represents the ownership of the companies. It also gives the right to approve and made changes in the companies. This is the best platform for investors to trade shares of the company.
Investors can buy and sell stocks based on the market situations and they can make their own strategies. It is based on the company's performance and future prospects. Except for the stocks, the given other options are related to trading bonds and financial instruments.
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The complete question is:
Equity markets are markets?
a. for stocks.
b. for aaa-rated bonds.
c. for either stocks or bonds.
d. for u.s. treasury bonds.
Paterson Inc. used $43,494,000 of its accounts receivable as collateral on a $32,600,000 loan. The interest rate on the loan was only 6% due to the collateral, but the bank did require that Paterson Inc. pay an upfront finance charge of 1%. Based on this information, how much of a gain or loss should Paterson Inc. record on the transfer of receivables? $0 $434,940 $2,609,640 $43,059,060
Paterson Inc. should record a loss of -$11,225,600 on the transfer of receivables.
To determine the gain or loss on the transfer of receivables, we need to compare the cash received from the loan with the carrying value of the accounts receivable used as collateral.
The cash received from the loan is the loan amount minus the upfront finance charge:
Cash received = Loan amount - Finance charge
Cash received = $32,600,000 - (1% * $32,600,000) = $32,268,400
The carrying value of the accounts receivable used as collateral is the original amount:
Carrying value = $43,494,000
To calculate the gain or loss, we subtract the carrying value from the cash received:
Gain or loss = Cash received - Carrying value
Gain or loss = $32,268,400 - $43,494,000 = -$11,225,600
The result is a loss of -$11,225,600.
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You are the owner of a small business that manages the program, food, and merchandise sales at the Excel Center, where the local professional basketball team plays. In addition to basketball games, the Excel Center hosts dozens of events a year. Your company handles all sales made inside the arena. There are three major products you sell: programs, food, and merchandise. You have decided to build a spreadsheet model to help you analyze and project the profitability of future events. The "Event Profit" worksheet contains this model. You have randomly selected sales and attendance data from a number of past events to help build your model. This data can be found on the "Past Events" worksheet. You will analyze this data in order to obtain appropriate values to develop the model . Complete the tasks to finish the model. Whenever possible, reference cells rather than hard-coding values in the cells of your worksheet.
To analyze and project the profitability of future events at the Excel Center, you can use the following steps:
1. Open the "Event Profit" worksheet and navigate to the "Past Events" worksheet to gather the sales and attendance data.
2. In the "Event Profit" worksheet, create a table to organize the data from the "Past Events" worksheet. Label the columns as "Event Name," "Attendance," "Program Sales," "Food Sales," and "Merchandise Sales."
3. Use the appropriate formulas to calculate the total sales for each event. In the "Program Sales" column, reference the corresponding cell in the "Past Events" worksheet and multiply it by the attendance for each event. Repeat this process for the "Food Sales" and "Merchandise Sales" columns.
4. Create a column labeled "Total Sales" and calculate the sum of the program, food, and merchandise sales for each event.
5. In the "Event Profit" worksheet, create a column labeled "Expenses" to account for any costs associated with each event. This could include venue rental fees, staff wages, etc. Reference cells or input appropriate values for each event.
6. Create a column labeled "Profit" and subtract the expenses from the total sales for each event to calculate the profit.
7. Finally, use the appropriate formulas to calculate the average profit, maximum profit, and minimum profit for all the events. Use the "AVERAGE," "MAX," and "MIN" functions respectively, referencing the "Profit" column.
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In
a population of 328 million people, 160.83 million are in the labor
force and 147.29 million are employed. The unemployment rate
is:
To find the unemployment rate, we need to use the formula: The unemployment rate in this population is 8.4%.
Unemployment Rate = (Number of Unemployed / Labor Force) * 100
Given that the total population is 328 million, the number of people in the labor force is 160.83 million, and the number of people employed is 147.29 million.
To calculate the number of unemployed individuals, we subtract the number of employed individuals from the labor force:
Number of Unemployed = Labor Force - Number of Employed
Number of Unemployed = 160.83 million - 147.29 million
Number of Unemployed = 13.54 million
Now, we can substitute the values into the formula to find the unemployment rate:
Unemployment Rate = (13.54 million / 160.83 million) * 100
Unemployment Rate = 0.084 * 100
Unemployment Rate = 8.4%
Therefore, the unemployment rate in this population is 8.4%.
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A portfolio P consists of a 3-month Treasury Bills and all risky common shares included in the FTSE ALL share index. The T-Bills offers 2.14% yield, whereas the FTSE-ALL Share portfolio has the expected return of 5.4% annually with standard deviation of 5.7% based on the latest forecasts of the UK economy in the next 12 months. An investor has $1,000,000 in cash and considers buying and holding portfolio P.
How much money does he need to invest in the FTSE-ALL Share Index such that the expected return on portfolio P would be 3.0%?
A. $241,573
B. $278,459
C. $263,804
D. $736,196
The correct answer is A. $241,573. The investor needs to invest $241,573 in the FTSE-ALL Share Index.
To determine the amount of money the investor needs to invest in the FTSE-ALL Share Index, we can use the concept of the capital asset pricing model (CAPM) and the expected return on portfolio P.
Let X be the amount invested in the FTSE-ALL Share Index. Since the investor has $1,000,000 in cash, the amount invested in T-Bills will be (1,000,000 - X).
The expected return on portfolio P can be calculated as the weighted average of the expected returns of the T-Bills and the FTSE-ALL Share Index:
Expected return on portfolio P = (1 - X/1,000,000) * 2.14% + (X/1,000,000) * 5.4%
We want the expected return on portfolio P to be 3.0%, so we set up the equation:
3.0% = (1 - X/1,000,000) * 2.14% + (X/1,000,000) * 5.4%
Simplifying and solving the equation, we find:
X = $241,573
Therefore, The investor needs to invest $241,573 in the FTSE-ALL Share Index. Thus, the correct answer is A. $241,573.
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The __________ was created in order to aid countries experiencing short-term balance-of-payment and liquidity problems.
The International Monetary Fund (IMF) was created in order to aid countries experiencing short-term balance-of-payment and liquidity problems.
The International Monetary Fund (IMF) was established in 1944 and is an international organization consisting of 190 member countries. One of the primary purposes of the IMF is to provide financial assistance and support to member countries facing short-term balance-of-payment and liquidity difficulties.
When a country experiences difficulties in meeting its external financial obligations or maintaining stability in its currency exchange rates, it can turn to the IMF for assistance. The IMF provides financial resources in the form of loans or credits to help member countries address these challenges.
The financial assistance provided by the IMF aims to stabilize the country's economy, restore confidence, and enable the country to overcome its balance-of-payment difficulties. This assistance is typically accompanied by policy conditions that the borrowing country must implement, such as fiscal and monetary reforms, structural adjustments, and economic policy changes, to address the underlying issues and restore economic stability.
The IMF's financial assistance programs are designed to provide temporary support and enable countries to implement necessary reforms to regain economic stability and sustainable growth. The specific terms and conditions of the assistance are negotiated between the IMF and the borrowing country, taking into account the country's specific circumstances and needs.
In addition to providing financial assistance, the IMF also offers policy advice, conducts economic surveillance, and provides technical assistance and capacity development to member countries to help them strengthen their economic frameworks and improve their policy-making processes.
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Please show steps and how and why the formula is implemented!
The price of a stock is currently $38. Over the course of the next year, the price is anticipated to rise to $41 or decline to $36. If the upside has a 65% probability of occurring and the risk free interest rate is 3%, what is the price of a six month call option with an exercise price of $35 using the binomial model?
A) $4.18 B) $4.70 C) $3.89 D) $4.25
The price of a six-month call option with an exercise price of $35 using the binomial model is approximately $3.89. So the correct answer is option C) $3.89.
To determine the price of a six-month call option using the binomial model, we can follow these steps:
1. Calculate the risk-neutral probability of an upside move (p) and a downside move (q) using the formula:
p = (1 + r - d) / (u - d)
q = 1 - p
In this case, the risk-free interest rate (r) is 3%, and the upside (u) and downside (d) moves are given as follows:
u = 41 / 38 = 1.0789
d = 36 / 38 = 0.9474
Substituting these values into the formula, we get:
p = (1 + 0.03 - 0.9474) / (1.0789 - 0.9474) ≈ 0.5333
q = 1 - p ≈ 0.4667
2. Calculate the stock prices at the end of the six-month period, given an upside move and a downside move.
The upside stock price (S_up) would be:
S_up = 38 * u = 38 * 1.0789 ≈ 41.0422
The downside stock price (S_down) would be:
S_down = 38 * d = 38 * 0.9474 ≈ 36.0422
3. Determine the option value at the end of the six-month period.
The call option value (C_up) at the upside stock price would be:
C_up = max(S_up - X, 0) = max(41.0422 - 35, 0) ≈ 6.0422
The call option value (C_down) at the downside stock price would be:
C_down = max(S_down - X, 0) = max(36.0422 - 35, 0) ≈ 1.0422
4. Calculate the option value at the current time (t = 0) using the risk-neutral probabilities:
Option value (C_0) = (C_up * p + C_down * q) / (1 + r)
C_0 = (6.0422 * 0.5333 + 1.0422 * 0.4667) / (1 + 0.03) ≈ 3.8925
Therefore, the price of a six-month call option with an exercise price of $35 using the binomial model is approximately $3.89. Hence, the correct answer is option C) $3.89.
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Dairymaid processes organic milk into plain yogurt. Dairymaid sells plain yogurt to hospitals, nursing homes, and restaurants in bulk, one-gallon containers. Each batch, processed at a cost of $850, yields 525 gallons of plain yogurt The company sells the one-gallon tubs for $7.00 each and spends $0.12 for each plastic tub. Dairymaid has recently begun to reconsider its strategy. Management wonders if it would be more profitable to sell individual-sized portions of fruited organic yogurt at local food stores. Dairymaid could further process each batch of plain yogurt into 11,200 individual portions (3/4 cup each) of fruited yogurt. A recent market analysis indicates that demand for the product exists. Dairymaid would sell each individual portion for $0.46. Packaging would cost $0.05 per portion, and fruit would cost $0.10 per portion. Fixed costs would not change. Should Dairymaid continue to sell only the gallon-sized plain yogurt (sell as is) or convert the plain yogurt into individual-sized portions of fruited yogurt (process further)? Why? Calculate the net benefit per batch under each alternative. (Enter a " 0 " for any zero amounts Round the net benefit per batch to the nearest whole dollar.) Sell as gallon-size Sell as individual Calculate the net benefit per batch under each alternative. (Enter a "0" for any zero amounts. Round the net benefit per batch to the nearest whole dollar.
Each batch, processed at a cost of $850, yields 525 gallons of plain yogurt. Net Benefit when sold as individual-sized portions= $5,192 - $2,530 = $2,662. Revenue earned per batch = 11,200 × $0.46 = $5,192.
Net benefit is defined as the difference between the benefits and costs.Net Benefit when sold as a gallon-size= $2,131, Net Benefit when sold as individual-sized portions= $3,906, Explanation:Cost incurred in making one batch = $850, Number of gallons of plain yogurt = 525, Cost per gallon = 850/525 = $1.62, Revenue earned per gallon container = $7.00Cost of plastic tubs per gallon = $0.12Cost of plastic tubs for 525 gallon = $63, Number of individual portions from each batch = 11,200, Cost of packaging per portion = $0.05, Cost of fruit per portion = $0.10, Revenue earned per portion = $0.46, Revenue earned per batch = 11,200 × $0.46 = $5,192
The company sells the one-gallon tubs for $7.00 each and spends $0.12 for each plastic tub.Dairymaid further processes each batch of plain yogurt into 11,200 individual portions (3/4 cup each) of fruited yogurt.Each individual portion sells for $0.46. Packaging would cost $0.05 per portion, and fruit would cost $0.10 per portion.Fixed costs would not change.
Cost of packaging and fruit per portion = $0.05 + $0.10 = $0.15, Total cost of packaging and fruit for 11,200 portions = 11,200 × $0.15 = $1,680, Net revenue earned per batch after the conversion = $5,192 - $1,680 = $3,512, Sell as gallon-size:Revenue earned per batch = 525 × $7.00 = $3,675, Cost incurred per batch = $850 + $63 = $913Net Benefit when sold as a gallon-size = $3,675 - $913 = $2,762, Sell as individual:Revenue earned per batch = $5,192, Cost incurred per batch = $850 + $1,680 = $2,530. Net Benefit when sold as individual-sized portions= $5,192 - $2,530 = $2,662.
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SUBJECT: Portfolio
"Suppose Asset A has an expected return of 10 percent and a standard deviation of 20 percent. Asset B has an expected return of 16 percent and a standard deviation of 40 percent. If the correlation between A and B is 0.35, what are the expected return and standard deviation for a portfolio comprised of 30 percent Asset A and 70 percent Asset B?
To calculate the expected return and standard deviation of a portfolio, we need to consider the weights and characteristics of the individual assets as well as the correlation between them.
Let's denote Asset A as A and Asset B as B. The weights of A and B in the portfolio are 30% and 70%, respectively.
Expected Return of the Portfolio:
Expected Return = Weight(A) * Expected Return(A) + Weight(B) * Expected Return(B)
Expected Return = 0.3 * 10% + 0.7 * 16%
Expected Return = 3% + 11.2%
Expected Return = 14.2%
Therefore, the expected return of the portfolio is 14.2%.
Standard Deviation of the Portfolio:
Standard Deviation of the Portfolio = √[Weight(A)^2 * Standard Deviation(A)^2 + Weight(B)^2 * Standard Deviation(B)^2 + 2 * Weight(A) * Weight(B) * Standard Deviation(A) * Standard Deviation(B) * Correlation(A, B)]
Standard Deviation = √[0.3^2 * 20%^2 + 0.7^2 * 40%^2 + 2 * 0.3 * 0.7 * 20% * 40% * 0.35]
Standard Deviation ≈ √[0.09 * 0.04 + 0.49 * 0.16 + 2 * 0.3 * 0.7 * 0.2 * 0.4 * 0.35]
Standard Deviation ≈ √[0.0036 + 0.0784 + 0.0168]
Standard Deviation ≈ √0.0988
Standard Deviation ≈ 0.314 or 31.4% (rounded to one decimal place)
Therefore, the standard deviation of the portfolio is approximately 31.4%.
In summary, the expected return of the portfolio is 14.2% and the standard deviation is 31.4%.
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Moving to another question will save this response. estion 13 The difference between Earned Value and Actual Costs is known as: Cost Variance Schedule Variance Actual Costs Planned Value (1) Moving to another question will save this response.
The difference between Earned Value and Actual Costs is the Cost Variance measures the efficiency of a project’s ability to manage and absorb cost.
It is a measure of how close an organization's spending is to projections or budget plans. The Cost Variance formula is Actual Costs minus Earned Value, providing a measure of how the actual costs differed from those budgeted or planned for.
Cost Variance indicates whether a project is under or over budget. A positive variance indicates the project is under budget, while a negative variance implies that the project is over budget. Schedule Variance, on the other hand, measures the difference between the planned schedule and the actual schedule of a project.
It measures how far ahead or behind the project is to original plans. The Schedule Variance formula is Earned Value minus Planned Value. Cost Variance and Schedule Variance work together to provide an accurate view of the financial and schedule progress of a project.
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On January 1, 2020, Allson, Inc., paid $70,800 for a 40 percent interest In Holister Corporation's common stock. This Investee had assets with a book value of $235,000 and Ilabilitles of $95,000. A patent held by Holister having a $8,900 book value was actually worth $25,400. This patent had a six-year remaining life. Any further excess cost assoclated with this acquisition was attributed to goodwill. During 2020 , Holister earned Income of $45,700 and declared and paid dividends of $15,000. In 2021, It had Income of $53,700 and dividends of $20,000. During 2021 , the falr value of Allison's Investment In Holister had risen from $84,080 to $88,960. a. Assuming Alison uses the equity method, what balance should appear in the Investment In Holister account as of December 31, 2021? b. Assuming Allson uses falr-value accounting, what income from the Investment In Holister should be reported for 2021 ?
a. Assuming Allison uses the equity method, the balance that should appear in the Investment in Holister account as of December 31, 2021, can be calculated as follows:
1. Start with the initial investment amount of $70,800.
2. Add Allison's share of Holister's earnings for 2020, which is 40% of $45,700, or $18,280.
3. Subtract Allison's share of Holister's dividends for 2020, which is 40% of $15,000, or $6,000.
4. Add Allison's share of Holister's earnings for 2021, which is 40% of $53,700, or $21,480.
5. Subtract Allison's share of Holister's dividends for 2021, which is 40% of $20,000, or $8,000.
6. Add the increase in the fair value of Allison's investment, which is $88,960 - $84,080, or $4,880.
The balance in the Investment in Holister account as of December 31, 2021, should be $102,460.
b. Assuming Allison uses fair-value accounting, the income from the Investment in Holister that should be reported for 2021 can be calculated as follows:
1. Start with the initial investment amount of $70,800.
2. Add the increase in the fair value of Allison's investment, which is $88,960 - $84,080, or $4,880.
The income from the Investment in Holister that should be reported for 2021 is $4,880.
Please note that these calculations are based on the assumption that Allison uses the equity method or fair-value accounting. Other accounting methods may yield different results.
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a. The balance in the Investment in Holister account as of December 31, 2021, should be $98,760.
b. The income from the Investment in Holister reported for 2021 is $4,880.
a. To determine the balance in the Investment in Holister account as of December 31, 2021, we need to consider the equity method. Under this method, the initial investment is recorded at cost and adjusted annually for the investor's share of the investee's income or loss.
The initial investment of $70,800 represents 40% of Holister's book value of $235,000. Therefore, the initial investment can be calculated as 40% of the total book value: $235,000 * 40% = $94,000.
In 2020, Holister earned income of $45,700. As Allison owns a 40% interest, their share of the income is $45,700 * 40% = $18,280. Deducting the dividends paid of $15,000, the investment balance at the end of 2020 is $94,000 + $18,280 - $15,000 = $97,280.
In 2021, Holister earned income of $53,700. Allison's share is $53,700 * 40% = $21,480. After deducting dividends of $20,000, the investment balance at the end of 2021 is $97,280 + $21,480 - $20,000 = $98,760.
b. Assuming fair-value accounting, the income from the Investment in Holister to be reported for 2021 is the change in fair value. The fair value increased from $84,080 to $88,960, resulting in a gain of $88,960 - $84,080 = $4,880.
Therefore, the income from the Investment in Holister to be reported for 2021 is $4,880.
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