Economic behavior is more complex than assumed by conventional theory, and behavioral economics incorporates psychology to understand the intricacies of human decision-making.
Economic behavior is indeed more complex than assumed by conventional economic theory. Political economy provides insights into the functioning of government and its impact on economic outcomes. Meanwhile, behavioral economics incorporates psychology to understand human behavior. Contrary to the assumption that individuals always make rational decisions, real people are influenced by a myriad of factors such as emotions, biases, and social influences.
This complexity is further compounded by limited information and cognitive limitations. Behavioral economics recognizes these complexities and seeks to provide a more accurate understanding of economic decision-making. By incorporating insights from psychology, it offers a more nuanced perspective that helps explain deviations from rational behavior observed in the real world. Understanding these complexities is crucial for developing policies and interventions that align with the realities of human behavior.
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The complete question is:
Economic Behavior Is More Complex Than Assumed By Conventional Economic Theory. Political Economy Explains The Functioning Of Government. Behavioral Economics Ties Psychology Into Human Behavior. Economists Assume That Individuals Make Rational Decisions. However Real People Are More Complex. Based On What You Have Learned In Your Assigned Reading, Explain?
Read the first four paragraphs (1-4) of the above comprehension passage and write a summary.
Your summary should be one-third (1/3) of the original text.
Our current educational system focuses on preparing today’s youth to get good jobs by developing scholastic skills. Their lives will revolve around their wages. Many will study further to become engineers, scientists, cooks, police officers, artists, writers, and so on. These professional skills allow them to enter the workforce and work for money. But there is a big difference between your profession and your business. Often, I ask people, "What is your business?" And they will say, "Oh, I’m a banker." Then I ask them if they own the bank. And they usually respond, "No, I work there." In that instance, they have confused their profession with their business. Their profession may be a banker, but they still need their own business.
2. A problem with school is that you often become what you study. So, if you study cooking, you become a chef. If you study the law, you become an attorney, and a study of auto mechanics makes you a mechanic. a. The mistake in becoming what you study is that too many people forget to mind their own business. They spend their lives minding someone else’s business and making that person rich. To become financially secure, a person needs to mind their own business. Your business revolves around your asset column, not your income column. The number-one rule is to know the difference between an asset and a liability, and to buy assets. The rich focus on their asset columns, while everyone else focuses on their income statements.
3. That is why we hear so often: "I need a raise." "If only I had a promotion." "I am going back to school to get more training so I can get a better job." "I am going to work overtime." "Maybe I can get a second job." The primary reason the majority of the poor and middle class are fiscally conservative—which means, "I can’t afford to take risks"— is that they have no financial foundation. b. They have to cling to their jobs and play it safe. When downsizing became the "in" thing to do, millions of workers found out their largest so-called asset, their home, was eating them alive. Their "asset" was costing them money every month. Their car, another "asset," was eating them alive. The golf clubs in the garage that cost $1,000 were not worth $1,000 anymore. Without job security, they had nothing to fall back on. What they thought were assets could not help them survive in a time of financial crisis.
4. I assume most of us have filled out a credit application to buy a house or a car. It’s always interesting to look at the "net-worth" section because of what accepted banking and accounting practices allow a person to count as assets. One day when I wanted a loan, my financial position did not look too good. So, I added my new golf clubs, my art collection, books, electronics, Armani suits, wristwatches, shoes, and other personal belongings to boost the number in the asset column. But I was turned down from getting the loan because I had too much investment in renting houses. The loan committee didn’t like that I made so much money from rent. They wanted to know why I did not have a normal job with a salary. They did not question the Armani suits, golf clubs, or art collection. Life is sometimes tough when you do not fit the standard profile.
The current educational system focuses on preparing youth for jobs, but it's important to differentiate between a profession and a business .
people become what they study and spend their lives working for someone else, neglecting their own business.
Financial security lies in building assets, not just relying on income. The poor and middle class struggle due to lack of financial foundation, often clinging to jobs for security. Possessions like homes and cars can become liabilities rather than assets. Traditional net-worth calculations may not account for unconventional sources of wealth, leading to difficulties in obtaining loans.
The first four paragraphs highlight the distinction between a profession and a business. While the educational system aims to equip individuals with scholastic skills for good jobs, it's crucial to understand that a profession alone might not guarantee financial independence. Many people mistakenly confuse their profession, such as being a banker, with owning a business. Financial security comes from minding one's own business and focusing on building assets rather than solely relying on income.
The second paragraph emphasizes that becoming what one studies can lead to a narrow focus on someone else's business, which often enriches others rather than oneself. To achieve financial stability, individuals need to pay attention to their own asset column. Differentiating between assets and liabilities becomes crucial. The wealthy prioritize growing their asset columns, while those who concentrate solely on their income statements struggle to achieve financial success.
The third paragraph delves into the reasons why the poor and middle class tend to be fiscally conservative and risk-averse. Lacking a strong financial foundation, they become dependent on their jobs for stability and are reluctant to take risks. Economic downturns expose the vulnerability of their so-called assets, such as homes and cars, which turn out to be burdens rather than sources of financial security.
The fourth paragraph illustrates a personal experience related to net-worth calculations and loan applications. It highlights the disparity between accepted accounting practices and unconventional wealth sources. While personal belongings like art collections, golf clubs, and expensive suits were not questioned, the committee focused on the applicant's rental property investments instead of a traditional job with a salary. This experience serves as an example of the challenges faced when deviating from the standard profile.
Overall, the passage emphasizes the importance of minding one's own business, building assets, and understanding the difference between assets and liabilities. It sheds light on the struggles faced by those without a solid financial foundation and challenges traditional notions of wealth evaluation.
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A 6 year bond issued today by Doodle, Inc. has a coupon rate of 13%, a required return of 3% and a face value of $1000. The bond will be sold 2 years from now when interest rates will be 4%. What is the actual rate of return (or holding period return) over this 2 year period? Round to the nearest percent.
The actual rate of return refers to the realized or achieved rate of return on an investment after considering all factors, including income, capital appreciation or depreciation, and any associated costs or fees
To calculate the actual rate of return (holding period return) over 2 year period, we need to find the price of the bond after 2 years using the following formula:
PV = F / (1 + k)^t + C * [1 - 1 / (1 + k)^t] / k
Here, C = Annual coupon payment
= F × r = $1000 × 13%
= $130
Putting the values in the formula, we get:
PV = $1000 / (1 + 3%)^6 + $130 * [1 - 1 / (1 + 3%)^6] / 3%
PV = $867.39
The price of the bond after 2 years can be calculated as:
P2 = PV × (1 + k2)^2
P2 = $867.39 × (1 + 4%)^2
P2 = $958.10
The actual rate of return over the 2-year period can be calculated using the following formula:
Actual rate of return = (P2 - PV + C) / PV
Actual rate of return = ($958.10 - $1000 + $130) / $867.39
Actual rate of return = $88.10 / $867.39 ≈ 10.15%
Therefore, the actual rate of return over this 2-year period is 10.15% (rounded to the nearest percent).
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Biue Spruce Inc. has been manufacturing its own shades for its table lamps. The company Is currently operating at 1000 of capacity. and variable manufacturing overhead is charged to production at the rate of 50% of direct labour costs. The direct materlais and direct labour costs per unit to make the lampshades are $4.90 and $5.80, respectively. Normal production is 48,300 table lamps per vear. A supplier offers to make the lampshades at a price of $13.80 per unit. If Blue Spruce Inc. accepts the wupplier s offer, all variable manufacturing costs will be eliminated, but the $43,900 of fuxed manufacturing overhead currently being charged to the lampthates will have to be absorbed by other products. (a) Prepare the incremental analysis for the decision to make or buy the lampshades. (Round answers to 0 decimal ploces, es. 5.275. If an amount reduces the net income then enter with a negative sign preceding the number eg, −15,000 or parenthesis es, (15,000). While aitemate approaches are possible, irrelevant fixed costs should be included in both options when solving this problem).
Based on the incremental analysis, it is more cost-effective for Blue Spruce Inc. to continue making the lampshades rather than buying them from the supplier. The analysis shows that buying the lampshades would result in higher costs by $10,260. Therefore, the company should maintain its current manufacturing process to maximize profitability.
To perform the incremental analysis for the decision to make or buy the lampshades, we need to compare the costs of each option and consider the impact on net income. Here's the analysis:
Option 1: Make the Lampshades (Current Situation)
- Direct materials cost per unit: $4.90
- Direct labor cost per unit: $5.80
- Variable manufacturing overhead (50% of direct labor costs): $2.90 ($5.80 * 0.50)
- Fixed manufacturing overhead: $43,900
Total cost per unit = Direct materials cost + Direct labor cost + Variable manufacturing overhead
Total cost per unit = $4.90 + $5.80 + $2.90
Total cost per unit = $13.60
Total cost for 48,300 units = Total cost per unit * Number of units
Total cost for 48,300 units = $13.60 * 48,300
Total cost for 48,300 units = $657,480
Option 2: Buy the Lampshades from the Supplier
- Purchase price per unit: $13.80
Total cost for 48,300 units = Purchase price per unit * Number of units
Total cost for 48,300 units = $13.80 * 48,300
Total cost for 48,300 units = $667,740
Incremental Analysis:
Incremental cost = Total cost of Option 2 - Total cost of Option 1
Incremental cost = $667,740 - $657,480
Incremental cost = $10,260
Since the incremental cost is positive ($10,260), it indicates that buying the lampshades from the supplier would result in higher costs compared to manufacturing them in-house. Therefore, based on this analysis, it would be more cost-effective for Blue Spruce Inc. to continue making the lampshades rather than buying them from the supplier.
The incremental analysis compares the costs of two options: making the lampshades in-house and buying them from the supplier. It considers the direct materials, direct labor, variable manufacturing overhead, and fixed manufacturing overhead costs for each option. By calculating the total costs for each option and finding the incremental cost, we can determine which option is more financially favorable.
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A broker offers to sell shares of Bay Area Healthcare, which just paid a dividend of $2 per share. The dividend is expected to grow at a constant rate of 5 percent per year. The stock's required rate of return is 12 percent.
a. What is the expected dollar dividend over the next three years?
b. What is the current value of the stock and the expected stock price at the end of each of the next three years?
c. What is the expected dividend yield and capital gains yield for each of the next three years?
d. What is the expected total return for each of the next three years?
e. How does the expected total return compare with the required rate of return on the stock? Does this make sense? Explain your answer.
a. Expected dollar dividend over the next three years
= D₁ (1+ g) + D₂ (1+ g)² + D₃ (1+ g)³. Here D1 = $2, growth rate = 5%, D2 = D1 (1 + g) = $2.10, D3 = D2 (1+g) = $2.205.
Thus, the expected dollar dividend over the next three years = $2 (1+.05) + $2.10 (1+.05)² + $2.205 (1+.05)³ = $6.8267 (rounded to $6.83).
b. Using the dividend discount model: P0 = D₁ / (1+ r) + D₂ / (1+ r)² + D₃ / (1+ r)³ + P₃ / (1+ r)³, where P₃ is the expected price of the stock at the end of year 3. P0 = $2 / (1+.12) + $2.10 / (1+.12)² + $2.205 / (1+.12)³ + P₃ / (1+.12)³. Using the formula, we get P0 = $6.76 and P₃ = $74.09. Thus, the current value of the stock is $6.76 and the expected stock price at the end of year 1 is $8.72, at the end of year 2 is $11.28 and at the end of year 3 is $74.09.
c. Dividend yield = D₁/P₀ , Capital gains yield = (P₁ - P₀) / P₀.
Using the formula, we get
Dividend yield for year 1 = $2/$6.76 = 0.2959 (rounded to 29.59%),
Dividend yield for year 2 = $2.10/$8.72 = 0.2408 (rounded to 24.08%),
Dividend yield for year 3 = $2.205/$11.28 = 0.1955 (rounded to 19.55%).
Capital gains yield for year 1 = ($8.72-$6.76)/$6.76 = 0.2896 (rounded to 28.96%),
Capital gains yield for year 2 = ($11.28-$8.72)/$8.72 = 0.2936 (rounded to 29.36%),
Capital gains yield for year 3 = ($74.09-$11.28)/$11.28 = 5.5611 (rounded to 556.11%).
d. Expected total return = Dividend yield + Capital gains yield.
Using the formula,
we get
Expected total return for year 1 = 29.59% + 28.96% = 58.55%,
Expected total return for year 2 = 24.08% + 29.36% = 53.44%,
Expected total return for year 3 = 19.55% + 556.11% = 575.66%.
e. The expected total return for year 3 is much higher than the required rate of return. The expected total return for year 3 is 575.66%, and the required rate of return on the stock is 12%. It does not make sense to have a total return of 575.66% because it is too high and unrealistic.
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A couple thinking about retirement decide to put aside $27,500 each year in a savings plan that earns 6.40% interest. In 10 years they will receive a gift of $140,000 that also can be invested. a. How much money will they have accumulated 27 years from now? (Do not round intermediate calculations. Round your answer to 2 decimal places.) b. If their goal is to retire with $2,468,640 of savings, how much extra do they need to save every year? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
a. To calculate the amount of money the couple will have accumulated 27 years from now, we can use the future value formula for compound interest.
The annual contribution to the savings plan is $27,500, and the interest rate is 6.40%. The time period is 27 years.
1. Calculate the future value of the annual contributions:
FV_annual = A * ((1 + r)^n - 1) / r
FV_annual = $27,500 * ((1 + 0.064)^27 - 1) / 0.064
2. Calculate the future value of the gift:
FV_gift = $140,000 * (1 + 0.064)^27
3. Add the future values of the annual contributions and the gift to find the total accumulated amount:
Total accumulated amount = FV_annual + FV_gift
Calculate FV_annual using the formula mentioned in step 1 and FV_gift using the formula mentioned in step 2. Then add the results to find the total accumulated amount.
b. To calculate the extra amount they need to save each year to reach their goal of $2,468,640, we can use the future value of an ordinary annuity formula.
The goal amount is $2,468,640, the interest rate is 6.40%, and the time period is 27 years.
1. Rearrange the formula for future value of an ordinary annuity:
A = PV * (1 + r)^n * r / ((1 + r)^n - 1)
A represents the annual savings needed.
2. Substitute the given values into the formula and solve for A.
Substitute the goal amount, interest rate, and time period into the formula. Then solve for A.
Please note that the intermediate calculations should not be rounded. However, the final answers for both parts should be rounded to 2 decimal places.
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CATALFEN Company CATALFEN is located in Barcelona. They design and manufacture high-tech LED lighting. The company is family owned (Angel Hernandez, owner) exporting 75% of their production to 25 different countries all over the world. Products are usually customized considering different design requirements, voltage, frequency as well other electrical parameters. Quality control has been implemented at the end of the production process. Each and every component is dimensionally and electrically checked by one employee separating out the wrong units. During the last 2 years, sales have experienced a dramatic growth. However, rejections have also increased from 0,3% up to 3% of the total production. Alicia Hernandez, owner´s daughter has recently graduated from the EU Business School. She has joined the Company with the main task of improving quality ratios.
1. If you wanted to improve the Quality Control process and the performance indicators of the company, which changes should you implement in terms of quality control? Which quality systems should you put in practice?
Define and track quality metrics and Key Performance Indicators (KPIs) to measure progress and identify areas for improvement.
To improve the Quality Control process and performance indicators at CATALFEN, the following changes should be implemented:
1. Implement Statistical Process Control (SPC) to monitor and control production variations.
2. Establish a Quality Management System (QMS) such as ISO 9001 for structured quality control.
3. Develop comprehensive Standard Operating Procedures (SOPs) for consistent quality control practices.
4. Conduct Root Cause Analysis (RCA) to identify and address underlying causes of rejections.
5. Provide employee training and development to enhance quality control skills.
6. Implement Total Quality Management (TQM) principles for continuous improvement and teamwork.
7. Implement Supplier Quality Management to ensure high-quality components.
8. Define and track quality metrics and Key Performance Indicators (KPIs) to measure progress and identify areas for improvement.
These changes will help CATALFEN enhance quality control, reduce rejections, and improve overall performance indicators.
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You estimate that the net income for a company next year is a uniform distribution with a minimum of $101 million and a maximum of $126 million. What is the probability that the company's net income is less than or equal to $114 million? Enter answer in percents, to two decimal places.
The probability that the company's net income is less than or equal to[tex]$114[/tex] million is 52% approximately.
The net income for a company next year is a uniform distribution with a minimum of 101 million and a maximum of 126 million.
The probability density function of uniform distribution is given by:
[tex]$$f(x) = \begin{cases} \frac{1}{b-a},& \text{for } a \leq x \leq b\ 0, & \text{otherwise}\end{cases} $$[/tex]
* Where:
* a = minimum value
* b = maximum value
Here, a = 101 million, b = 126 million
The probability density function becomes:
[tex]$$f(x) = \begin{cases} \frac{1}{126-101},& \text{for } 101 \leq x \leq 126\ 0, & \text{otherwise}\end{cases} $$[/tex]
Or:
[tex]$$f(x) = \begin{cases} \frac{1}{25},& \text{for } 101 \leq x \leq 126\ 0, & \text{otherwise}\end{cases} $$[/tex]
Now, we need to find the probability that the company's net income is less than or equal to $114 million.
P(X ≤ 114) = 13/25⋅100%=52%
The probability that the company's net income is less than or equal to[tex]$114[/tex] million is 52% approximately.
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You are the fund manager of ABC Fund, based in New York. You noticed that the Egyptian T-Bills are offering one of the most competitive interest rates worldwide, and you perceived it
as a lucrative investment opportunity. On 1' June 2021 your fund decided to invest in the Egyptian treasury bills that pays 14.4% annually and for this you transferred USD 1 million to Egypt. Money was converted in a bank which quoted a USD/EGP rate of 15.75/15.80. On 1' June 2022, T-Bills matured and interest was recognized. USD/EGP on 1" June 2022 quotation was 18.70/18.77
a. Calculate in US$ terms the net profit / loss ABC Fund made on its investment in Egypt. (show all steps)
b. Now that the T-bills matured and ABC has their money in EGP, do you advice ABC fund to continue investing in the EGP at a T-bill rate of 17%, or convert their money into dollars and take it back home? Noting that the interest rate on USD deposits is 3%. (Justify your answer)
a. ABC Fund made a net loss of $992,324.93 on its investment in Egypt.
b. ABC Fund should convert to USD for higher interest rates.
a. To calculate the net profit/loss in US$ terms, we need to consider the initial investment, the interest earned, and the exchange rate at the time of maturity.
Step 1: Calculate the interest earned in Egyptian pounds (EGP):
Interest earned = Initial investment (in EGP) * Interest rate
= 1,000,000 * 0.144
= 144,000 EGP
Step 2: Convert the interest earned from EGP to US$ using the exchange rate at maturity:
Interest earned (in US$) = Interest earned (in EGP) / Exchange rate
= 144,000 / 18.77 (using the higher exchange rate)
= 7,675.07 US$
Step 3: Calculate the net profit/loss:
Net profit/loss = Interest earned (in US$) - Initial investment (in US$)
= 7,675.07 - 1,000,000
= -992,324.93 US$
Therefore, ABC Fund made a net loss of $992,324.93 on its investment in Egypt.
b. To decide whether to continue investing in EGP at a T-bill rate of 17% or convert the money into dollars and take it back home, we need to compare the returns in each scenario.
Scenario 1: Continue investing in EGP at a T-bill rate of 17%:
Calculate the interest earned in EGP:
Interest earned = Initial investment (in EGP) * Interest rate
= 1,000,000 * 0.17
= 170,000 EGP
Convert the interest earned from EGP to US$ using the current exchange rate:
Interest earned (in US$) = Interest earned (in EGP) / Current exchange rate
= 170,000 / 18.77 (using the higher exchange rate)
= 9,057.15 US$
Scenario 2: Convert the money into dollars and take it back home:
Calculate the interest earned in US$:
Interest earned (in US$) = Initial investment (in US$) * Interest rate
= 1,000,000 * 0.03
= 30,000 US$
Comparing the returns:
Scenario 1: $9,057.15
Scenario 2: $30,000
Based on the comparison, it is advisable for ABC Fund to convert their money into dollars and take it back home, as they would earn a higher interest rate on USD deposits (3%) compared to continuing to invest in EGP at a T-bill rate of 17%.
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Macroeconomics true/false questions:
1. According to economists, money is a resource.
True
False
2. In economics, capital is defined as money.
True
False
3. Scarcity occurs only in poor societies.
True
False
4. If there is no scarcity, there is no opportunity cost.
True
False
5. Economists use the terms resource and input as synonyms.
True
False
Please answer all of them or don't answer. Thanks
Money is considered a resource in economics because it enables individuals and businesses to acquire goods, services, and other resources. It serves as a medium of exchange, facilitating transactions and trade within an economy. True
According to economists, Is money is a resource?Economists view money as a valuable asset that contributes to the production and consumption of goods and services. It is a widely accepted form of payment and represents purchasing power in an economy.
In economics, capital refers to assets that are used in the production of goods and services. While money can be a form of capital, the concept of capital extends beyond just money. Capital includes physical assets such as machinery, buildings, equipment, as well as human capital, which encompasses the skills, knowledge, and expertise of individuals. Money, on the other hand, is primarily a medium of exchange and a store of value, but it does not encompass the broader concept of capital in economics.
Scarcity is a fundamental concept in economics and exists in all societies, regardless of their level of wealth. Scarcity arises from the basic problem of unlimited wants and needs, coupled with limited resources. Even in affluent societies, where there may be an abundance of certain resources, there are always constraints on other resources. Scarcity necessitates making choices and allocating resources efficiently to satisfy the most pressing needs and wants. Thus, scarcity is a universal phenomenon that affects all societies, regardless of their economic status.
Opportunity cost is the value of the next best alternative foregone when making a choice. It arises due to scarcity. If there is no scarcity, and all resources are abundantly available, there would be no need to make choices and allocate resources.
In such a scenario, there would be no opportunity cost because all desired options could be pursued simultaneously. However, in the real world where resources are limited, scarcity forces individuals and societies to prioritize and make trade-offs, resulting in the incurrence of opportunity costs.
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mike carlson will receive $26,000 a year from the end of the third year to the end of the 17th year (15 payments). the discount rate is 11%. the present value today of this deferred annuity is
Mike carlson will receive $26,000 a year from the end of the third year to the end of the 17th year (15 payments). the discount rate is 11% .The present value today of this deferred annuity is approximately
$148,018.27.
To find the present value today of this deferred annuity, we need to use the formula for the present value of an annuity.
The formula for the present value of an annuity is:
[tex]PV = P * (1 - (1 + r)^(-n)) / r[/tex]
Where:
- PV is the present value
- P is the payment amount per period ($26,000 in this case)
- r is the discount rate (11% in this case)
- n is the number of periods (15 payments in this case)
Using the given values, we can calculate the present value as follows:
[tex]PV = $26,000 * (1 - (1 + 0.11)^(-15)) / 0.11[/tex]
Simplifying this calculation gives:
PV ≈ $26,000 * (1 - 0.376889) / 0.11
PV ≈ $26,000 * 0.623111 / 0.11
PV ≈ $148,018.27
Therefore, the present value today of this deferred annuity is approximately $148,018.27.
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Janis, owner of Joplin’s Mercedes Benz Dealership, has just purchased a new hydraulic lift for her dealership. The lift cost her $10,000. She estimates that the equipment will last for 3 years. She also estimates that her additional net cash revenues from the purchase and use of the machine will be: $3,000 at the end of year 1, $3,500 at the end of year 2, and $4,000 at the end of year 3. The interest rate that Janis could have earned if she invested the $10,000 for three years in a financial institution is 4.5% per year. Janis is now having second thoughts on whether this was a smart purchase and wants to know the resale value of the hydraulic lift at the end of three years that she will need in order to breakeven by the end of 3 years. Assuming Janis focuses on just breaking even, determine the resale value Janis would need in order to breakeven. Show all your work and present the cash flows on a timeline.
Janis would need a resale value of $312.57 in order to break even by the end of 3 years.
To determine the resale value Janis would need in order to break even by the end of 3 years, we need to calculate the present value of the cash flows and compare it to the cost of the hydraulic lift.
Step 1: Calculate the present value of the cash flows.
PV = CF1/(1+r)^1 + CF2/(1+r)^2 + CF3/(1+r)^3
PV = $3,000/(1+0.045)^1 + $3,500/(1+0.045)^2 + $4,000/(1+0.045)^3
PV = $2,869.57 + $3,242.63 + $3,575.23
PV = $9,687.43
Step 2: Compare the present value to the cost of the hydraulic lift.
Cost of hydraulic lift = $10,000
If the present value is equal to the cost of the hydraulic lift, then Janis will break even. Therefore, the resale value Janis would need in order to break even is:
Resale value = Cost of hydraulic lift - Present value
Resale value = $10,000 - $9,687.43
Resale value = $312.57
Therefore, Janis would need a resale value of $312.57 in order to break even by the end of 3 years.
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Janis would need to sell the hydraulic lift for a resale value of $9,394.23 in order to break even.
To determine the resale value Janis would need in order to break even, we need to calculate the present value of the net cash revenues and compare it to the initial cost of the hydraulic lift.
Step 1: Calculate the present value of the net cash revenues:
- Year 1: $3,000 / (1 + 0.045) = $2,873.56
- Year 2: $3,500 / (1 + 0.045)^2 = $3,161.55
- Year 3: $4,000 / (1 + 0.045)^3 = $3,359.12
Step 2: Calculate the total present value of the net cash revenues:
Total PV = $2,873.56 + $3,161.55 + $3,359.12 = $9,394.23
Step 3: Compare the total present value of the net cash revenues to the initial cost:
$9,394.23 - $10,000 = -$605.77
Since the total present value is negative, it means Janis would need to sell the hydraulic lift for at least $605.77 less than the initial cost of $10,000 in order to break even.
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_____ and _____ has made the notion of a forty-hour work week obsolete. A. The globalization of the world economy; the development of e-commerce B. The low performance work system; the team work environment C. The service economy; the low performance work system D. The service economy; the domestic competitive environment
The globalization of the world economy and the development of e-commerce have made the notion of a forty-hour work week obsolete.
Globalization refers to the increased interconnectedness and integration of economies around the world, resulting in increased competition and the need for businesses to operate across different time zones. This means that work is no longer confined to traditional office hours and can extend beyond the standard forty-hour week.
Additionally, the development of e-commerce has revolutionized the way businesses operate, allowing for 24/7 online transactions and customer interactions.
These factors have led to a shift in the way work is conducted, with increased flexibility and remote work opportunities. Employees can now collaborate and communicate across different time zones and work outside of traditional office hours to meet the demands of global markets.
The boundaries between work and personal life have become blurred, and technology has enabled work to be performed anytime and anywhere.
Overall, the globalization of the world economy and the development of e-commerce have disrupted the traditional concept of a forty-hour work week, requiring individuals and organizations to adapt to the changing dynamics of the modern business landscape.
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D
Question 2
1 pts
Assume the total cost of a college education will be $215,040 when your child enters college in 20 years. You presently have $35,162 to invest. What annual rate of interest must you earn on your investment to cover the cost of your child's college education? Enter answer in 3 decimal places (e.g. 0.123)
You would need to earn an annual interest rate of approximately 10.4% on your investment to cover the cost of your child's college education. To calculate the required annual rate of interest, we can use the formula for compound interest: Future Value = Present Value * (1 + Interest Rate)^Time
In this case, the present value (PV) is $35,162, the future value (FV) is $215,040, and the time (T) is 20 years. We need to find the interest rate (R).
$215,040 = $35,162 * (1 + R)^20
Dividing both sides by $35,162:
6.117 = (1 + R)^20
Taking the 20th root of both sides:
(1 + R) = 6.117^(1/20)
Subtracting 1 from both sides:
R = 6.117^(1/20) - 1 ≈ 0.104
Therefore, you would need to earn an annual interest rate of approximately 10.4% on your investment to cover the cost of your child's college education.
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You are evaluating a project that will require an initial investment of $900. Over the next four years, the project is expected to generate after-tax cash flows of 38, 49, 59, 63. If 8% is your appropriate discount rate, what is the NPV of this project to the nearest hundredth (.01)?
The NPV of this project, to the nearest hundredth, is approximately -$734.54.Net Present Value (NPV) is a metric used to calculate the present value of an investment’s future cash flows. It's a summation of all present values of a project's inflows and outflows discounted at a particular discount rate.
NPV is a capital budgeting technique that assesses the profitability of an investment or project based on the difference between its present value and initial cost.
To calculate the Net Present Value (NPV) of the project, we need to discount the expected cash flows by the appropriate discount rate and subtract the initial investment. Let's perform the calculations:
Initial Investment: $900 ,Expected Cash Flows: $38, $49, $59, $63 ,Discount Rate: 8%
Year 1: Discounted Cash Flow = $38 / [tex](1 + 0.08)^1[/tex] is $35.19
Year 2: Discounted Cash Flow = $49 / [tex](1 + 0.08)^2[/tex] is $41.07
Year 3: Discounted Cash Flow = $59 / [tex](1 + 0.08)^3[/tex] is $45.12
Year 4: Discounted Cash Flow = $63 / [tex](1 + 0.08)^4[/tex] is$44.08
Now, let's calculate the NPV by summing up the discounted cash flows and subtracting the initial investment:
NPV = -Initial Investment + Discounted Cash Flow Year 1 + Discounted Cash Flow Year 2 + Discounted Cash Flow Year 3 + Discounted Cash Flow Year 4
NPV = -$900 + $35.19 + $41.07 + $45.12 + $44.08
NPV = $-734.54 (rounded to the nearest hundredth)
Therefore, the NPV of this project, to the nearest hundredth, is approximately -$734.54.
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Consider demand for gasoline in the short term. When price
increases by 30% demand for gasoline
falls by 15%. What is the price elasticity of demand for
gasoline?
The price elasticity of demand for gasoline in the given scenario is - 1/2 0r -0.5.
Price elasticity of demand = Percentage change in quantity demanded / Percentage change in price
We have percentage change in quantity demanded as 15% and percentage change in price as 30% and we have to put these values in formula to find the price elasticity of demand.
Price elasticity of demand = - 15 / 30 = - 1/2
= - 0.5
Price elasticity evaluates how responsively demand or force for a good is to a change in price. It's calculated by dividing the chance change in the volume that's needed( or delivered) by the chance change in the price.
Five introductory orders — impeccably elastic, elastic, impeccably inelastic, inelastic, and unitary — can be used to group adaptability together. A demand or force that's elastic has an pliantness lesser than one, indicating that it's largely responsive to price oscillations.
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In a cash against documents transaction:
The draft is payable on presentation to the drawer by the remitting bank.
The draft is payable on presentation to the drawee by the presenting bank.
The draft is payable on presentation to the drawee by the remitting bank.
The draft is payable on presentation to the drawer by the presenting bank.
The correct statement in a cash against documents transaction is:
The draft is payable on presentation to the drawer by the presenting bank.
In a cash against documents transaction, the presenting bank is responsible for presenting the draft to the drawer (the party who issued the draft) in exchange for payment. The drawer is required to make the payment upon presentation of the draft by the presenting bank.
In a cash against documents transaction, the draft refers to a written order or demand for payment issued by the drawer (the party who initiates the transaction) to the drawee (the party who owes the payment). The purpose of this transaction is to ensure that the payment is made before the documents related to the transaction are released.
The correct statement states that the draft is payable on presentation to the drawer by the presenting bank. Here's an explanation of how this process works:
1. The remitting bank, which is typically the bank of the seller or exporter, sends the draft along with other relevant documents to the presenting bank. These documents could include invoices, bills of lading, or other shipping documents.
2. The presenting bank acts as an intermediary and presents the draft to the drawer, who is the party responsible for making the payment. The presenting bank may be the bank of the buyer or importer.
3. Upon presentation of the draft, the drawer is obligated to make the payment to the presenting bank. The presenting bank verifies the draft and collects the payment from the drawer.
4. Once the payment is received, the presenting bank releases the documents to the drawer, allowing them to take possession of the goods or complete the transaction.
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If the ATC is Greater than the Price at the optimum output level, the firm is experiencing which of these? OOO Economic Losses Normal Profit Economic Profits If the Price is higher than ATC at the optimal output level, a firm would experience which of the following? Economic Profit Normal Profit Economic Losses Question 15 According to the lecture, which of the following has Limited Liability? Partnerships Sole Proprietorships Corporations 2.9 pts
If ATC is greater than price, the firm is experiencing economic losses; if price is higher than ATC, the firm is experiencing economic profits; corporations offer limited liability.
If the Average Total Cost (ATC) is greater than the price at the optimum output level, it indicates that the firm is experiencing economic losses. This means that the cost of producing goods or services exceeds the revenue generated from selling them, resulting in a negative profit.
On the other hand, if the price is higher than the ATC at the optimal output level, the firm would experience economic profits.
This occurs when the revenue generated exceeds the cost of production, leading to positive profit. In terms of liability, corporations offer limited liability, which means that the owners or shareholders are not personally responsible for the company's debts or legal obligations beyond their investment.
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According to Jim Myers, president of the American Chamber of Commerce in South Africa, nearly 50% of the chamber’s members are Fortune 500 companies, and that over 90% operate beyond South Africa’s borders into southern Africa, sub-Saharan Africa and across the continent. "The sophisticated business environment of South Africa provides a powerful strategic export and manufacturing platform for achieving global competitive advantage, cost reductions and new market access," says Myers (Brand South Africa, 2005).
Critically analyse the above statement, taking into account the following:
What is international business, and how has it transformed the world economy?
The four trends that provide evidence for the globalisation of markets. Provide a South African case example to illustrate one of the trends.
What role do other factors play such as Covid 19 and the reduction of South African companies?
International Business refers to the transactions that take place across the borders between firms or individuals.
How does it transform?It has transformed the world economy in many ways, including:
International trade has allowed countries to specialize in the production of goods and services that they are efficient at producing, allowing them to compete on a global scale.
The exchange of ideas, people, and technology has led to increased innovation and productivity around the world. The four trends that provide evidence for the globalization of markets include the following:
1. The emergence of global markets for standardized consumer products on a previously unimagined scale.
2. The convergence of consumer tastes and preferences across markets.
3. The increasing importance of market segments that transcend national borders.
4. The role of technology in creating global markets.
A South African case example to illustrate one of the trends is the emergence of global markets for standardized consumer products on a previously unimagined scale. One of the examples is Shoprite Holdings, which is a South African retail giant that operates in more than 15 African countries and has more than 2,800 stores. Shoprite has been able to expand its business beyond South Africa by standardizing its products and services to meet the needs of its customers in different African countries.Covid 19 has had a significant impact on international business, including South African businesses. It has led to disruptions in supply chains, a decline in demand for certain products and services, and changes in consumer behavior.This has led to a reduction in the number of South African companies operating beyond South Africa's borders as businesses have had to focus on their domestic operations to survive.
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businessfinancefinance questions and answerssuppose angie would like to purchase a new car today for $45,000. she will pay $5,000 as down payment towards this purchase and finance the balance over 5 years at an annual interest rate of 7.5%. the first payment will be made in exactly one month from the purchase date. payments are made every month over the next 5 years. what is the loan amount? (2) what
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Question: Suppose Angie Would Like To Purchase A New Car Today For $45,000. She Will Pay $5,000 As Down Payment Towards This Purchase And Finance The Balance Over 5 Years At An Annual Interest Rate Of 7.5%. The First Payment Will Be Made In Exactly One Month From The Purchase Date. Payments Are Made Every Month Over The Next 5 Years. What Is The Loan Amount? (2) What
Suppose Angie would like to purchase a new car today for $45,000. She will pay $5,000 as down payment towards this purchase and finance the balance over 5 years at an annual interest rate of 7.5%. The first payment will be made in exactly one month from the purchase date. Payments are made every month over the next 5 years.
What is the loan amount? (2)
What is the monthly interest rate? (2)
How many monthly payments will be made? (2)
Calculate the monthly payment required to fully pay off the loan in 5 years using both the formula and the function method. (8)
Show that the present value of all the monthly payments is equal to the loan amount. Use the timeline method for this. (14)
The loan amount for Angie's car purchase is $40,000 after deducting the down payment of $5,000 from the total car price of $45,000.The monthly interest rate for the loan is 0.625% (7.5% divided by 12 months).
Over the course of 5 years, there will be a total of 60 monthly payments (5 years x 12 months/year).
Monthly Payment Calculation (Formula Method):
Using the formula for calculating the monthly payment amount for a loan, we can determine that Angie's monthly payment will be approximately $792.59.
Monthly Payment Calculation (Function Method):
By using financial functions in spreadsheet software, such as Excel, the monthly payment can be calculated using the PMT function with the appropriate parameters. In this case, the monthly payment is approximately $792.59.
Present Value Calculation (Timeline Method):
To demonstrate that the present value of all the monthly payments is equal to the loan amount, we can discount each monthly payment to its present value using the monthly interest rate and sum them up. The present value of all the monthly payments will be equal to the loan amount of $40,000.
These calculations and methods help determine the loan amount, monthly interest rate, number of monthly payments, monthly payment amount, and the equivalence between the present value of monthly payments and the loan amount.
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READ THE CASE STUDY BELOW AND ANSWER THE
QUESTIONS THAT FOLLOW
CASE STUDY – Universal Plastic Bag Ltd
Universal Plastic Bag Ltd [UPB Ltd] has since 1990 operated as a manufacturer of plastic carrier bags supplying them on a contract-manufacturing basis to well-known supermarket chains, fast-food outlets, pharmacies and department stores in Ghana. Lately, Universal Plastic Bag Ltd exports customized plastic carrier bags to Marks n Spencer and Boots Pharmacy in South Africa.
During the Ghanaian financial crisis some years ago, Universal Plastic Bag Ltd had difficulties in meeting its term loan repayment, and had to restructure the term loan last year. The term loan was restructured by way of a debt moratorium of 24 months on the principal and an extension of the tenor from five years to eight years.
Currently, Universal Plastic Bag Ltd’s turnover is about GHc3 million per month with an average net profit margin of 7%. Lately, with the increase in world oil prices, raw materials for plastic bag production have increased by over 15% to USD1,200 per tonne. Universal Plastic Bag Ltd’s capacity utilization is still low at only 40%, after it expanded rapidly pre-crisis. Universal Plastic Bag Ltd’s production capacity increased from 200,000 tonnes per annum to 350,000 tonnes per annum during the pre-crisis period. This was when the company borrowed a term loan of GHc10 million to finance the machinery. The raw materials, PE resins, are purchased mainly from Nigeria and Cote d’Ivoire, whilst only 15% is sourced domestically.
Universal Plastic Bag is prepared to provide collateral in the form of two three-storey executive mansions at East Legon, as well as, give you charge over the machinery of the company. The total value of all the collateral is US$20 million. The company has made it clear that it intends to go in for a working capital loan of GHc3 million from another Bank and that the two banks will share the collateral provided on a pari pasu basis.
Universal Plastic Bag’s debt-equity ratio after taken the two loans will be under 40%, which is still acceptable under your Bank’s credit policy. Your Bank’s Board of Director’s has earlier agreed to set aside the policy of 20% equity contribution for term loans in the case of the Universal Plastic Bag’s restructured term loan.
QUESTIONS
As the Risk Analyst of your bank, which is about to make a decision on granting a loan to Universal Plastic Bag Ltd:
1. identify FIVE (5) specific key qualitative risks in the above case study;
2. Discuss why you see each of them as a risk;
3. For each of the identified risks indicate and explain whether it is a firm-specific risk or market-wide risk; and
4. Explain each of the following terms, as used in the Case above:
a. contract manufacturing
b. debt moratorium
c. capacity utilization
d. collateral
e. pari passu
f. equity contribution
The five specific key qualitative risks in the case study are:
1. Uncertain market conditions
2. High competition
3. Regulatory changes
4. Technological obsolescence
5. Economic instability
Debt moratorium refers to a temporary suspension of debt payments, usually agreed upon by creditors and debtors. It allows the debtor to restructure their finances and avoid default. Debt moratorium can have both positive and negative impacts. On one hand, it provides relief to the debtor by allowing them to manage their debt burden more effectively. On the other hand, it can negatively affect creditors as they may experience delays in receiving payments or face potential losses if the debtor fails to recover.
Equity contribution refers to the portion of funds that shareholders invest in a company. It represents ownership in the company and is often used to finance business operations, expansions, or projects. Equity contribution can be a source of risk, especially if shareholders are not able or willing to contribute additional funds when needed. This can lead to financial strain, liquidity issues, or even bankruptcy if the company cannot meet its financial obligations. However, a sufficient equity contribution can provide stability and enhance the company's financial position.
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a store is offering 2 fixed installment loan options for purchases over $3000.
option 1: 20% down payment and financing at 6% simple interest per year for 3 years.
option 2: no down payment and financing at 6.35% simple interest for 4 years. if your purchase amounts to $4400
a. which option will result in a smaller total finance charge? what will that total finance charge be?
b. which option will result in a smaller monthly payment? what will that monthly payment be?
a. For option 1, the amount financed is $4400 - 20% down payment ($4400 * 0.20) = $3520. The finance charge can be calculated using the formula:
Finance Charge = Amount Financed * Interest Rate * Time. Plugging in the values, we get: Finance Charge = $3520 * 0.06 * 3 = $633.60.
To calculate the monthly payment, we can use the formula for installment loans: Monthly Payment = (Principal + Interest) / Number of Payments.
a. The option with a smaller total finance charge is option 1, which requires a 20% down payment and financing at 6% simple interest per year for 3 years. To calculate the total finance charge, we first need to determine the amount financed.For option 1, the amount financed is $4400 - 20% down payment ($4400 * 0.20) = $3520. The finance charge can be calculated using the formula:
Finance Charge = Amount Financed * Interest Rate * Time. Plugging in the values, we get: Finance Charge = $3520 * 0.06 * 3 = $633.60.
b. The option with a smaller monthly payment is option 2, which has no down payment and financing at 6.35% simple interest for 4 years. To calculate the monthly payment, we can use the formula for installment loans: Monthly Payment = (Principal + Interest) / Number of Payments. For option 2, the principal is $4400, and the interest can be calculated using the formula: Interest = Principal * Interest Rate * Time. Plugging in the values, we get: Interest = $4400 * 0.0635 * 4 = $1122.80. Therefore, the total amount to be repaid is $4400 + $1122.80 = $5522.80. Dividing this by the number of payments (48 months), we get the monthly payment: $5522.80 / 48 = $115.06.
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21
Which of below describes demand elasticity under monopolistic competition a. Very elastic b. Unit elasticity c. Perfectly inelastic d. Perfectly elastic e. Very inelastic Clear my choice
The correct choice to describe demand elasticity under monopolistic competition is: a. Very elastic
In monopolistic competition, demand elasticity is high, indicating a high level of responsiveness in quantity demanded to changes in price. This means that even a small change in price can result in a relatively large change in the quantity of goods or services demanded by consumers. In monopolistic competition, firms differentiate their products through branding, marketing, or product features, creating a certain degree of product differentiation.
As a result, consumers have a range of substitute options available to them. If one firm raises its price, consumers can easily switch to a competitor offering a similar product, leading to a significant decrease in demand for the original firm's product.
Therefore, demand is considered very elastic in monopolistic competition.
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Which of the following is NOT one of the components of the risk premium?
a. default risk
b. maturity risk
c. liquidity risk d. inflation risk
e. All of the above are components of the risk premium
2. If ABC Corporation invests $10,000 to purchase an asset with a net present value (NPV) of $3,000, which of the following would you expect to occur?
a. The value of the corporation would rise by $10,000, the cost of the investment.
b. The value of the corporation would rise by $10,000, the cost of the investment, but the value of the common stock would rise by only $3,000, the NPV of the investment.
c. The values of both the corporation and its common stock would fall by $7,000, since the investment costs $10,000 but is only worth $3,000. Making this investment would destroy value of $3,000.
d. The values of both the corporation and its common stock would rise by $3,000, the NPV of the investment.
e. This is all very confusing. May I be excused?
The correct answer is d. The values of both the corporation and its common stock would rise by $3,000, the NPV of the investment.
1. The component that is NOT part of the risk premium is e. All of the above are components of the risk premium.
Explanation: The risk premium is the additional return that an investor requires in order to hold a risky asset rather than a risk-free asset. The components of the risk premium are factors that contribute to the overall riskiness of an investment. These components include default risk, maturity risk, liquidity risk, and inflation risk. Therefore, the correct answer is e. All of the above are components of the risk premium.
2. The expected outcome when ABC Corporation invests $10,000 to purchase an asset with a net present value (NPV) of $3,000 is d. The values of both the corporation and its common stock would rise by $3,000, the NPV of the investment.
Explanation: Net present value (NPV) is the difference between the present value of cash inflows and the present value of cash outflows over a period of time. In this case, the NPV of the investment is $3,000, which means that the investment is expected to generate a positive return. As a result, the values of both the corporation and its common stock would increase by $3,000, which is the NPV of the investment.
Therefore, the correct answer is d. The values of both the corporation and its common stock would rise by $3,000, the NPV of the investment.
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All of the above are components of the risk premium.
the risk premium is the additional return that investors demand for taking on additional risk. It compensates investors for the various types of risks associated with an investment. The components of the risk premium include default risk, which is the risk of a borrower defaulting on their debt obligations; maturity risk, which is the risk associated with the time horizon of the investment; liquidity risk, which is the risk of not being able to buy or sell an investment quickly and at a fair price; and inflation risk, which is the risk that inflation will erode the purchasing power of the investment returns.
All of these risks are factored into the risk premium to determine the required return on the investment.
2. The values of both the corporation and its common stock would rise by $3,000, the NPV of the investment.
The net present value (NPV) of an investment represents the difference between the present value of cash inflows and the present value of cash outflows.
In this case, the NPV of $3,000 indicates that the investment is expected to generate a positive return. When ABC Corporation invests $10,000 to purchase an asset with an NPV of $3,000, it means that the value of the corporation would increase by $3,000.
As a result, the value of the common stock would also increase by $3,000, as it represents a portion of the corporation's overall value. This investment would create value for the corporation and its shareholders.
Note: The NPV represents the expected value generated by the investment, taking into account the time value of money and the expected cash flows.
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Zinhle Jiyane, a successful business women, owned a residential located in Gonubie, East London. In May 2020, She decided to relocate to Johannesburg for work. Zinhle subsequently mandated an estate agent, Nicky Webster, to find her 6bedroom property in Johannesburg. Nicky introduced Zinhle to a property located in Sandhurst (Property A). Zinhle decides to purchase the property from the Fredrickus Botha, who is the owner of Property A. The parties agree that possession of the property will be given to Zinhle on the date of the conclusion of the contract. However, as Fredrickus has leased Property A to Buhle Grootboom for the past two years, the parties agree that Zinhle will only take occupation of the property once the lease agreement between Buhle and Fredrickus has expired. Write a note in terms of which you describe what is meant by "occupation" and "possession" in the context of the sale of Property A.
"Occupation" refers to the physical use or enjoyment of the property, while "possession" refers to the legal control or ownership of the property. Zinhle will only be able to physically occupy the property once the lease agreement between Buhle and Fredrickus expires, but she will have legal possession of the property from the date of the contract's conclusion.
In the context of the sale of Property A, "occupation" refers to the physical use and enjoyment of the property by the buyer, Zinhle Jiyane, once the lease agreement between Fredrickus Botha (the owner) and Buhle Grootboom has expired. This means that Zinhle will be able to move into and reside in the property.
On the other hand, "possession" refers to the legal ownership and control of the property. In this case, possession of Property A will be transferred to Zinhle on the date of the conclusion of the contract. However, she will only be able to physically occupy the property once the lease agreement between Fredrickus and Buhle has ended. Until then, Buhle will continue to have possession of the property as the tenant.
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Ed has a long forward at price $100. Bob has a short forward on a different asset but the same expiration date, and F(0,T)=$110. Both assets have the same spot price S(T) at expiration. Ed's profit is $20. What is Bob's profit?
When Ed's profit is $20 then Bob's profit is -$20.
Bob's profit can be calculated by considering the relationship between the forward price, spot price, and the profit of the long position.
In this case, Ed's long forward position has a profit of $20. This means that at the expiration date, the spot price S(T) is $20 higher than the forward price. Since Ed's forward price is $100, the spot price S(T) is $120.
For Bob, who has a short forward position on a different asset but with the same expiration date, the profit is the opposite of Ed's profit. In other words, if Ed gains $20, Bob will lose $20.
Therefore, Bob's profit is -$20.
The negative sign indicates that Bob has a loss because the spot price at expiration is higher than the forward price. This is expected for a short position since the short seller is obligated to sell the asset at a predetermined price (the forward price), and if the spot price is higher, they will incur a loss.
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37.
The market price of a semi-annual pay bond is $989.85. It has 13.00
years to maturity and a coupon rate of 5.00%. Par value is $1,000.
What is the yield to maturity? a. 4.67% b. 5.11% c. 6.01% d.
Given details: Market price of a semi-annual pay bond = $989.85Coupon rate = 5%Par value = $1000No of years to maturity = 13 years. Let's find out the yield to maturity of the bond. Yield to maturity (YTM)The yield to maturity (YTM) is the total return anticipated on a bond when it is held until maturity.
YTM is considered a long-term bond yield expressed as an annual rate. The calculation of YTM takes into account the current market price, par value, coupon interest rate, and time to maturity of the bond, Formula for YTM. If the coupon rate is less than the YTM, then the bond is called a discount bond as it is selling at a price below its face value. Conversely, if the coupon rate is higher than the YTM, then the bond is called a premium bond as it is selling at a price above its face value. If the coupon rate is equal to the YTM, then the bond is called a par bond.
Calculation of YTM We are given the following details: Market price of a semi-annual pay bond = $989.85Coupon rate = 5%Par value = $1000No of years to maturity = 13 years. The bond pays a semi-annual coupon. So, the annual coupon is: Annual coupon = Semi-annual coupon × 2= 2.5% × $1000= $25 The bond has 13 × 2 = 26 semi-annual periods remaining to maturity. We know that price of bond is:$$P = \frac{C}{{1 + r}} + \frac{C}{{{{(1 + r)}^2}}} + \frac{C}{{{{(1 + r)}^3}}} + ... + \frac{C}{{{{(1 + r)}^{26}}}}} + \frac{M}{{{{(1 + r)}^{26}}}}}$$ Where, P = Price of bond C = Periodic coupon payment (Semi-annual coupon)M = Par value of bond r = YTM By solving the above equation, we get: YTM = 5.11%Therefore, the Yield to maturity of the bond is 5.11%. Hence, option (b) is correct.
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From 1730 To 1919, The United Kingdom Experienced Eight Wars And The Military Spending Rose Substantially During These Wars. Using The Loanable Fund Market Theory, Explain How A Rise In Military Spending Affects National Savings, Real Interest Rate And Investment Of The United Kingdom In The Long Run. No Graph Is Required.
An increase in military spending during wars reduces national savings, raises the real interest rate, and reduces private investment in the long run.
During times of war, an increase in military spending affects the United Kingdom's national savings, real interest rate, and investment in the long run.
According to the loanable fund market theory, an increase in military spending reduces national savings. This is because resources that could have been saved and invested in other sectors of the economy are diverted towards military expenditures.
With a decrease in national savings, the supply of loanable funds available for investment decreases. This leads to an increase in the real interest rate, which is the cost of borrowing funds.
Higher interest rates discourage private investment since borrowing becomes more expensive.
As a result, the rise in military spending crowds out private investment in the United Kingdom.
This means that there is less funding available for businesses and entrepreneurs to invest in productive ventures. Consequently, this can have negative implications for economic growth and development.
To summarize, an increase in military spending during wars reduces national savings, raises the real interest rate, and reduces private investment in the long run.
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The new chairman of the Ionian Central Bank (ICB) is preparing for her first board meeting. She is expected to recommend a monetary policy for the board to pursue. She decides to use the Taylor rule, which was originally developed for the U.S. Federal Reserve. Ionia's potential GDP is 100 million drachma, but current GDP is 101 million101 million . What is Ionia's output gap
Ionia's output gap is 1 million drachma.
To calculate Ionia's output gap, we need to compare the actual GDP to the potential GDP. The output gap is the difference between the two.
Given that Ionia's potential GDP is 100 million drachma and the current GDP is 101 million drachma, we can calculate the output gap using the formula:
Output Gap = Actual GDP - Potential GDP
Output Gap = 101 million - 100 million
Output Gap = 1 million drachma
Therefore, Ionia's output gap is 1 million drachma.
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Discuss how performance management and performance appraisal are related in improving the performance of human capital within an organisation
Performance appraisal is an essential part of performance management because it provides a formal mechanism for measuring and evaluating individual performance.
It serves several purposes:
Feedback and recognition: Performance appraisals allow managers to provide feedback to employees about their strengths, areas for improvement, and accomplishments. Goal setting and alignment: Performance appraisals help in setting clear performance goals and aligning them with the organization's objectives. Identification of training and development needs: Performance appraisals help identify skill gaps and development needs of employees. Performance-based rewards and recognition: Performance appraisals often serve as the basis for determining rewards, such as salary increases, bonuses, promotions, or other recognition programs. Performance improvement and corrective action: If performance appraisal identifies areas of underperformance or behavioral issues, it provides an opportunity for managers to address them through coaching, mentoring, or performance improvement plans.For such more question on management:
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Jett Buys A Pool Costing $26,750. Pools For Peeps Charges 4% Add-On Interest. If He Pays $6,750 Down And Agreed To Monthly Payments Over Three Years, Then Calculate Each Of The Following. (A) TheAmount Financed (B) The Finance Charge (C)The Total Installment Price (D)The Monthly Payment (E) Find Jett's Total Cost, For The Pool Plus Interest
The term "Monthly Payment" refers to the fixed amount of money that a borrower is required to pay each month towards a loan or debt. Let's break down each calculation:
(A) The Amount Financed:
The amount financed is the principal amount borrowed. It can be calculated by subtracting the down payment from the total cost of the pool.
Amount Financed = Total Cost - Down Payment
(B) The Finance Charge:
The finance charge is the total amount of interest paid over the loan term. It can be calculated by applying the add-on interest rate to the amount financed.
Finance Charge = Amount Financed * Interest Rate
(C) The Total Installment Price:
The total instalment price is the sum of the amount financed and the finance charge. It represents the total amount Jett will pay over the loan term.
Total Installment Price = Amount Financed + Finance Charge
(D) The Monthly Payment:
The monthly payment is the fixed amount Jett needs to pay each month over the loan term. It can be calculated by dividing the total instalment price by the number of months in the loan term.
Monthly Payment = Total Installment Price / Number of Months
(E) Jett's Total Cost:
Jett's total cost is the sum of the total instalment price and the down payment.
Total Cost = Total Installment Price + Down Payment
Given the specific values, we can now perform the calculations:
Total Cost = $26,750
Down Payment = $6,750
Interest Rate = 4%
Number of Months = 36 (3 years)
(A) The Amount Financed:
Amount Financed = Total Cost - Down Payment
(B) The Finance Charge:
Finance Charge = Amount Financed * Interest Rate
(C) The Total Installment Price:
Total Installment Price = Amount Financed + Finance Charge
(D) The Monthly Payment:
Monthly Payment = Total Installment Price / Number of Months
(E) Jett's Total Cost:
Total Cost = Total Installment Price + Down Payment
Let's plug in the values and calculate each component:
(A) The Amount Financed:
Amount Financed = $26,750 - $6,750
(B) The Finance Charge:
Finance Charge = Amount Financed * 0.04
(C) The Total Installment Price:
Total Installment Price = Amount Financed + Finance Charge
(D) The Monthly Payment:
Monthly Payment = Total Installment Price / 36
(E) Jett's Total Cost:
Total Cost = Total Installment Price + $6,750
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