Implementing Lean can have several drawbacks or dangers these include resistance to change, employee morale issues, potential disruptions to operations, and the need for significant time and resources.
Resistance to change is a common challenge when implementing Lean. Employees may be resistant to new processes and ways of working, especially if they perceive them as threatening their job security or disrupting established routines. This resistance can hinder the successful adoption and implementation of Lean principles.
Another drawback is the potential impact on employee morale. Lean initiatives often involve streamlining processes, which may lead to job redundancies or changes in roles and responsibilities. If not managed properly, these changes can create anxiety and lower morale among employees, affecting their motivation and productivity.
Implementing Lean can also result in temporary disruptions to operations. As businesses reconfigure their processes and workflows, there may be initial inefficiencies or delays before the new system becomes fully optimized. These disruptions can impact productivity and customer satisfaction in the short term.
Lastly, implementing Lean requires a significant investment of time and resources. Businesses need to allocate resources for training employees, implementing new technologies or systems, and continuously monitoring and improving processes. This commitment can be a barrier for some organizations, particularly those with limited resources or competing priorities.
Overall, while Lean offers numerous benefits, businesses need to carefully consider and address these potential drawbacks to ensure successful implementation and maximize the advantages of Lean principles.
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Nonconstant Dividend Growth Valuation A company currenty pays a dividend of $3 pec share (00=53). th is estimated that the compary's dividend will grow at a rate of 25% per year for the next 2 years and then at a constant rate of 0% theceafter. The company's stock has a beta of 1.3, the risk-free rate is 6.5%, and the market risk, premium is 1.5%. What is your estimate of the stock's current price? De not round intermediate calculations. Round your answor to the neacest cent.
The estimated current price of the stock is $45.76.
To estimate the stock's current price, we can use the dividend discount model (DDM) with non-constant dividend growth. Here's how we can calculate it:
Step 1: Calculate the dividends for the first two years.
Year 1 dividend = $3 * (1 + 25%) = $3 * 1.25 = $3.75
Year 2 dividend = $3.75 * (1 + 25%) = $3.75 * 1.25 = $4.69
Step 2: Calculate the dividend in Year 3 and onwards using the constant growth rate.
Dividend in Year 3 = $4.69 * (1 + 0%) = $4.69
Step 3: Calculate the present value of the dividends using the required rate of return.
PV = Dividend / (1 + r)^n, where r is the required rate of return and n is the number of years.
PV of Year 1 dividend = $3.75 / (1 + 0.065)^1 = $3.52
PV of Year 2 dividend = $4.69 / (1 + 0.065)^2 = $4.18
Step 4: Calculate the terminal value of the stock using the constant growth model.
Terminal value = Dividend in Year 3 / (r - g), where g is the constant growth rate.
Terminal value = $4.69 / (0.065 - 0) = $72.15
Step 5: Calculate the present value of the terminal value.
PV of terminal value = Terminal value / (1 + r)^n, where n is the number of years from Year 3 onwards.
Assuming a long-term horizon, let's use n = 10 (you can adjust this based on your specific assumptions).
PV of terminal value = $72.15 / (1 + 0.065)^10 = $38.06
Step 6: Calculate the stock's current price by summing the present values of dividends and the present value of the terminal value.
Current price = PV of Year 1 dividend + PV of Year 2 dividend + PV of terminal value
Current price = $3.52 + $4.18 + $38.06 = $45.76
Therefore, the estimated current price of the stock is $45.76.
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Assume that the corporate tax rate is 26%, personal tax rate is 28% and that dividends paid by corporations are taxed at 15% for the shareholders.
The founders of a newly formed business are debating between setting-up the firm as a partnership versus a corporation. The firm will not need to retain any earnings, so all of its after-tax income will be paid out to its investors, who will have to pay personal taxes on whatever they receive.
Assume the business is forecast to earn $300,000 on a pre-tax basis (all cash) and that it will distribute 100% of after-tax cash flows to the owners of the business.
If the firm is organized as a C-Corp, how much cash will the owners retain on an after-tax basis (account for all taxes)? Shareholders only pay the dividend tax rate on the distribution. Account for double taxation.
Selected Answer: 135864
In order to find out how much cash will the owners retain on an after-tax basis if the firm is organized as a C-Corp, we must use the following steps:Step 1: Find out the amount of pre-tax income earned by the company, which is $300,000.
Step 2: Calculate the corporate tax rate by multiplying the pre-tax income by the corporate tax rate. Therefore, the amount of corporate tax payable is 26% of $300,000, which is $78,000.Step 3: Deduct the corporate tax payable from the pre-tax income to find the after-tax income, which is $222,000 ($300,000 - $78,000).Step 4: Calculate the amount of dividend paid to shareholders by multiplying the after-tax income by the dividend tax rate of 15%. Therefore, the amount of dividend is $33,300 ($222,000 x 15%).Step 5: Deduct the amount of dividend paid to shareholders from the after-tax income to find the amount of cash retained by the owners. Therefore, the amount of cash retained by the owners is $188,700 ($222,000 - $33,300).Step 6: Calculate the personal tax payable by multiplying the amount of cash retained by the personal tax rate. Therefore, the amount of personal tax payable is 28% of $188,700, which is $52,836.Step 7: Deduct the personal tax payable from the amount of cash retained by the owners to find the final amount of cash retained by the owners. Therefore, the final amount of cash retained by the owners is $135,864 ($188,700 - $52,836). Hence, the selected answer 135864 is correct.
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Р Question 11 The starting point (i.e., starting values for the decision variables) does not affect the solution found by Solver in a nonlinear optimization problem. True False 0 words DECISION TREES 2 pts
False. The starting point can affect the solution found by Solver in a nonlinear optimization problem as it determines the initial search direction and can lead to different local optima.
False. The starting point can have an impact on the solution found by Solver in a nonlinear optimization problem. Nonlinear optimization problems involve complex mathematical equations and multiple variables, making it challenging to find the optimal solution. The starting point serves as an initial guess or approximation for the solver to begin the optimization process. Different starting points can lead to different paths and potentially different local optimal solutions.
Since nonlinear optimization problems may have multiple local optima, the choice of starting point can influence which local optimum is reached. If the starting point is close to the global optimum, the solver is more likely to find the best solution. However, if the starting point is far from the global optimum, the solver may converge to a local optimum instead.
Therefore, selecting an appropriate starting point is important in nonlinear optimization to increase the likelihood of finding the desired solution.
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All Bonds Are Semi-Annual. All Yield Measures Are Stated As Annual Percentage Rates. 1. Suppose You Buy A 2 Year 5% Bond That Has A Yield To Maturity (YTM) Of 6%. What Is The Price Of The Bond? 2. Suppose You Buy A 3 Year 6% Bond That Has A YTM Of 5%. What Is The Price Of The Bond? 3. Suppose You Buy A 10 Year 9% Bond That Has A YTM Of 11%. What Is The Price
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The underwriting process for surety bonding involves assessing the principal's creditworthiness and ability to fulfill contractual obligations, while fire insurance focuses on evaluating property risks and determining appropriate coverage levels.
Surety bonding underwriting involves evaluating the principal's financial stability, credit history, and industry experience to determine the likelihood of fulfilling contractual obligations. This process helps protect the obligee (the party receiving the bond) from potential financial losses. On the other hand, fire insurance underwriting focuses on assessing property risks, such as the building's condition, fire protection measures, and location. The underwriter calculates the appropriate coverage amount based on the property's value and potential risks. The primary goal of fire insurance underwriting is to ensure that the policy adequately covers potential fire-related damages or losses. While both surety bonding and fire insurance involve the underwriting process, they differ in their focus.
Surety bonding assesses the principal's creditworthiness and ability to fulfill contracts, while fire insurance evaluates property risks to determine appropriate coverage levels.
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Which of the following would NOT be a way to implement comparative advantage? IBM exports computers to Egypt. Computer hardware is designed in the United States but manufactured and assembled in Korea. Water of the greatest purity is obtained from wells in Oregon, bottled, and exported worldwide. All of the above are examples of ways to implement comparative advantage.
All of the above are examples of ways to implement comparative advantage.
In economics, comparative advantage refers to the ability of an individual or firm to produce goods and services at a lower opportunity cost than another individual or firm. It enables a country to produce goods and services more efficiently than its trading partners. IBM exports computers to Egypt, computer hardware is designed in the United States but manufactured and assembled in Korea, and water of the greatest purity is obtained from wells in Oregon, bottled, and exported worldwide are all examples of ways to implement comparative advantage.
Comparative advantage is a principle that explains why trade happens between countries. It says that countries should produce and export those goods and services that they can produce more efficiently, that is, at lower opportunity cost, than other countries. The concept of comparative advantage implies that countries can benefit from trading with one another, even if one country is more efficient in producing all goods and services.
This is because countries can specialize in producing those gse and services in which they have a comparative advantage, and trade with other countries to obtain the goods and services that they cannot produce efficiently.
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A wholesaler of pastries serving many independent cafes in an area is revaluating the "Vegan croissant" reorder point, i.e., the stock level in its warehouse that would trigger a replenishment order. The daily demand faced by the retailer for that specific croissant is normally distributed with an average of 8,000 items and a standard deviation of 1,100 items. After the manager places his order, he knows that he will receive it with an exact lead-time of 5 days. (Assume that orders are made immediately after the reorder point is reached and that the demand on each day is independent of the other)
What should the reorder point be set to in order to ensure that the chance of a stock out during the replenishment cycle is limited to a probability of 2%?
The manager of the pastry shop is worried he may have underestimated the variability of demand. Assuming he implements the re-order point from the previous part, what will be the stock out probability if the standard deviation of demand is, in fact, 1,400 items?
. The service level represents the desired probability of not experiencing a stockout during the lead time.
Given:
- Average daily demand (μ) = 8,000 items
- Standard deviation of daily demand (σ) = 1,100 items
- Lead time = 5 days
- Desired probability of not experiencing a stockout (service level) = 1 - 0.02 = 0.98
To calculate the reorder point, we need to find the demand during the lead time (LT). Since the demand is normally distributed, we can use the z-score formula to find the corresponding value from the standard normal distribution table.
Step 1: Calculate the z-score corresponding to the desired service level:
z = invNorm(service level) = invNorm(0.98)
Step 2: Calculate the demand during the lead time (LT):
Demand during LT = μ * LT
Step 3: Calculate the standard deviation during the lead time:
Standard deviation during LT = σ * sqrt(LT)
Step 4: Calculate the reorder point:
Reorder point = Demand during LT + (z * Standard deviation during LT)
Now let's calculate the reorder point:
Step 1: Calculate the z-score:
z = invNorm(0.98) ≈ 2.05
Step 2: Calculate the demand during the lead time:
Demand during LT = 8,000 * 5 = 40,000 items
Step 3: Calculate the standard deviation during the lead time:
Standard deviation during LT = 1,100 * sqrt(5) ≈ 2,460.57 items
Step 4: Calculate the reorder point:
Reorder point = 40,000 + (2.05 * 2,460.57) ≈ 45,035 items
Therefore, the reorder point should be set to approximately 45,035 items to ensure a probability of stockout during the replenishment cycle limited to 2%.
Now, let's calculate the stockout probability if the standard deviation of demand is 1,400 items:
Step 1: Calculate the z-score:
z = invNorm(0.98) ≈ 2.05
Step 2: Calculate the demand during the lead time:
Demand during LT = 8,000 * 5 = 40,000 items
Step 3: Calculate the standard deviation during the lead time (with increased variability):
Standard deviation during LT = 1,400 * sqrt(5) ≈ 3,130.5 items
Step 4: Calculate the reorder point:
Reorder point = 40,000 + (2.05 * 3,130.5) ≈ 46,408.25 items
With a standard deviation of 1,400 items, the reorder point would be approximately 46,408.25 items. However, the stockout probability cannot be determined without knowing the distribution of demand.
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1. Industry Convergence M&As
A. are the type that usually produce the most gains for the companies involved.
B. typically occur early in the industry life cycle of the companies involved.
C. typically occur between companies in mature industries.
D. are highly risky because they involve the trying to blend companies operating in different industries.
E. typically involve mid-sized companies in high tech industries.
The correct answer to the given question is option D) are highly risky because they involve trying to blend companies operating in different industries. Industry Convergence M&As (mergers and acquisitions) refer to the mergers or acquisitions of companies that operate in different but related industries.
They are also called conglomerate mergers. These mergers are highly risky as they involve blending companies operating in different industries. Hence, option D is correct.
Other options given are not correct. Let's discuss them:
Option A: This is an incorrect option because industry convergence M&As are not necessarily the type that produces the most gains for the companies involved. It may result in more gains for the companies involved, but there is no guarantee that it will be the type that produces the most gains.
Option B: This is an incorrect option because industry convergence M&As do not typically occur early in the industry life cycle of the companies involved.
Industry convergence M&As typically occur when companies in unrelated industries are seeking new sources of revenue or diversification.
Option C: This is an incorrect option because industry convergence M&As do not typically occur between companies in mature industries.
Industry convergence M&As occur when companies in unrelated industries are seeking new sources of revenue or diversification.
Option E: This is an incorrect option because industry convergence M&As do not typically involve mid-sized companies in high-tech industries.
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Consider the following two statements on MRP. Which statement is true? 1. The MRP scheme has a 'Planned order release' of 10 units in period T. The lead time is 2 weeks. After closing off period T the 'Scheduled receipts' in period T increases with 10 units. 2. Product X consists of 1 units of component Z. Product Y consists of 2 units of component Z. Product X is manufactured in lot sizes of 10,Y in lot sizes of 5 , and Z in lot sizes of 15 . The Gross requirements of Z is in multiples of 10. Statement 1 is true, statement 2 is not true Statement 1 is true, statement 2 is true Statement 1 is not true, statement 2 is not true Statement 1 is not true, statement 2 is true
Statement 1 is not true, statement 2 is true.The true statement among the given two is statement 2. Statement 1 is not true.Explanation:MRP (Material Requirements Planning) is a computerized production planning and inventory control system used to manage manufacturing processes.
It calculates the exact quantities, and when to order them, required to manufacture final products.Components and sub-assemblies are included in the materials requirement plan, as are materials and other resources needed for the manufacturing process. These are then used to calculate the order needs.The following are the given two statements on MRP:1. The MRP scheme has a 'Planned order release' of 10 units in period T.
The lead time is 2 weeks. After closing off period T the 'Scheduled receipts' in period T increases with 10 units. This statement is not true.2. Product X consists of 1 units of component Z. Product Y consists of 2 units of component Z. Product X is manufactured in lot sizes of 10,Y in lot sizes of 5, and Z in lot sizes of 15. The Gross requirements of Z is in multiples of 10. This statement is true. So, the correct option is Statement 1 is not true, statement 2 is true.
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Current Attempt in Progress Oriole Company's record of transactions concerning part X for the month of April was as follows. Compute the inventory at April 30 on each of the following bases. Assume that perpetual inventory records are kept in units only. (1) First-in, first-out (FIFO). (2) Last-in, first-out (LIFO). (3) Average-cost. (Round final answers to 0 decimal places, eg. 6,548.)
Based on the given information, we need to compute the inventory at April 30 using three different methods: FIFO, LIFO, and average-cost.
For FIFO, we assume that the earliest acquired units are sold first. So, we calculate the inventory by adding up the cost of the remaining units at April 30.
For LIFO, we assume that the most recently acquired units are sold first. Therefore, we calculate the inventory by adding up the cost of the remaining units at April 30.
For average-cost, we take the average cost per unit by dividing the total cost of all units by the total number of units. Then, we multiply the average cost per unit by the remaining units at April 30 to calculate the inventory.
In conclusion, we can compute the inventory at April 30 using the FIFO, LIFO, and average-cost methods.
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Problem 1 (12marks) Sally Sims just turned 20 and received a gift of $50,000 from her rich aunt. Sally would like to retire on her 55 th birthday and thinks she'll need to have about $2,000,000 saved by that time to maintain her lavish lifestyle. She plans to make a deposit at the end of each month until she is 50 into an account that she'll open with her aunt's gift. After age 50, she plans to stop making deposits and let the money grow until it reaches $2,000,000 when she turns 55 . Assume she can earn 7% compounded semi-annually. How much will Sally have to deposit into her account each month to achieve her objective?
Sally needs to deposit about $4,525.30 at the end of each month into an account that earns 7% compounded semi-annually for 35 years to accumulate $2,000,000.
Given, Sally just turned 20 and received a gift of $50,000 from her rich aunt. She would like to retire on her 55th birthday and thinks she'll need to have about $2,000,000 saved by that time to maintain her lavish lifestyle.She plans to make a deposit at the end of each month until she is 50 into an account that she'll open with her aunt's gift. After age 50, she plans to stop making deposits and let the money grow until it reaches $2,000,000 when she turns 55.Assuming she can earn 7% compounded semi-annually.
To find out how much Sally has to deposit into her account each month to achieve her objective.
Semi-annual interest rate = r = 7% / 2 is 3.5%
Time period of investment = n = 55 - 20 is 35 years
Compounding frequency per year = m = 2, PMT = ?, FV = $2,000,000, PV = $50,000.
Using the formula for future value of an annuity: FV = PMT × [[tex]{(1 + r/m)^(m *n)[/tex]} - 1] ÷ (r/m)
Here, we have PMT, FV, r, m, and n. We will solve this equation for PMT to get the monthly deposit required for Sally.
PMT = [FV × (r/m)] ÷ [{[tex](1 + r/m)^(m *n)}[/tex] - 1]
PMT = [2,000,000 × (0.035/2)] ÷ [[tex]{(1 + 0.035/2)^(2 *35)[/tex]} - 1]
Therefore, PMT ≈ $4,525.30.
Sally needs to deposit about $4,525.30 at the end of each month into an account that earns 7% compounded semi-annually for 35 years to accumulate $2,000,000.
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Financial plan and Financial Management for a
new start up vegetable business in Bahrain country,
city Manama
Financial Management is the process of managing all financial activities of an organization, including budgeting, forecasting, and financial reporting. A financial plan is a comprehensive evaluation of an organization's current and future financial state, taking into account various variables and assumptions.
Therefore, Financial Management and Financial Plan for a new start-up vegetable business in Bahrain city, Manama are as follows:
Financial Management for a new start-up vegetable business in Bahrain city, Manama
Financial management will be critical in ensuring the survival and growth of the start-up vegetable business in Bahrain city, Manama.
The following are some of the financial management practices that the business should implement:
Establish financial goals and objectives: The start-up vegetable business should identify its financial goals and objectives, such as revenue, profit margin, and cash flow. These goals should be specific, measurable, and attainable, and they should align with the overall business objectives.
Develop a budget: A budget is an essential tool for financial management. The start-up vegetable business should develop a budget that outlines all the anticipated revenue and expenses over a specific period.
Monitor financial performance: The start-up vegetable business should regularly monitor its financial performance against its budget and financial goals. This monitoring will help to identify any variances, and corrective action can be taken accordingly.
Manage cash flow: Cash flow management is crucial for any start-up business. The start-up vegetable business should manage its cash flow effectively to ensure that there is enough cash to meet its obligations, such as paying salaries and suppliers.
Financial Plan for a new start-up vegetable business in Bahrain city, Manama
The following are some of the components of a financial plan for a new start-up vegetable business in Bahrain city, Manama:
Projected Income Statement: This statement is an estimate of the revenue, expenses, and profit or loss for a specific period.
Cash Flow Statement: This statement is an estimate of the inflows and outflows of cash for a specific period.
Balance Sheet: This statement shows the financial position of the business, including assets, liabilities, and equity.
Break-Even Analysis: This analysis shows the level of sales required to cover all expenses and make a profit.
Financial Ratios: These ratios provide insight into the financial performance of the business, such as liquidity, profitability, and efficiency.
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A nurse notices that Dr. Icamause spends more time with his light-skinned hispanic patients than his darker skinned hispanic patients. When the nurse inquired, the doctor explained that he does this only when he finds discolored mole(s) on the patient's chest. Several studies show that light-skinned hispanics are more prone to skin cancer appearing on this part of the body. It turns out that other dermatologists do the same and they have saved the lives of several light-skinned hispanics this way. Dr. Icamause is engaged in: Otaste discrimination O efficient statistical discrimination O inefficient statistical discrimination O none of the choices
The correct answer is: o efficient statistical discrimination. based on the given information, dr. icamause's behavior can be classified as efficient statistical discrimination.
efficient statistical discrimination occurs when individuals or groups are treated differently based on observable characteristics that are statistically associated with certain outcomes. in this case, dr. icamause is spending more time with light-skinned hispanic patients when he finds discolored mole(s) on their chest. this behavior is based on the statistically higher risk of skin cancer appearing in that specific area for light-skinned hispanics.
the doctor's actions can be considered efficient because they are based on relevant and statistically significant information that has been observed in studies. by allocating more time to light-skinned hispanic patients with discolored moles on their chest, dr. icamause is potentially saving lives by detecting and treating skin cancer in its early stages.
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Let M=PxX+ PyY represent the consumer's budget constraint, where M represents income, Px the price of Good x, and Py the price of Good Y. Initially Px is $2 and Py is $4., and M is $400
Assume that income (M) and the price of Good x (Px) remain unchanged, while the price of Good Y (Py) increases by 100%
Under this new scenario, the slope of the budget constraint remains unchanged.
True
|False
False..The slope of the budget constraint will not remain unchanged when the price of Good Y (Py) increases by 100%.
The slope of the budget constraint represents the rate at which the consumer can trade one good for another while keeping the same level of utility. It is calculated as the ratio of the price of Good X (Px) to the price of Good Y (Py).
Initially, when Px is $2 and Py is $4, the slope of the budget constraint is 2/4 = 0.5. This means that for every unit of Good X the consumer purchases, they must give up 0.5 units of Good Y to remain on the budget constraint.
However, when the price of Good Y increases by 100%, the new price becomes $8. The new slope of the budget constraint will be 2/8 = 0.25. This indicates that for every unit of Good X the consumer purchases, they now have to give up 0.25 units of Good Y.
Therefore, the slope of the budget constraint changes from 0.5 to 0.25 when the price of Good Y increases by 100%.
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15. You are the business manager for a dermatological practice. The dermatologist has asked you to estimate customer lifetime value for your firm's typical customer. Calculate customer lifetime value for a new customer:
Average visit:
$1,550
Frequency of visits: Markup on retail:
Retention rate:
2.4/year
40%
70%
Discount Rate:
Promotional Costs/yr.
12%
$50
Acquisition Cost
$250
16. Continuing with the previous question, how much money can the practice afford to spend to increase customer retention from 70 to 75%?
valus,
Average visit= $1,550
Frequency of visits=2.4/year
Markup on retail= 40%
Retention rate=70%
Discount rate=12%
Promotional costs/year= $50
Acquisition cost= $250Customer
lifetime value= (Average sale per customer)*(number of repeat transactions)*(average retention time per customer)
Customer lifetime value=(1550*2.4*[(1-0.7)/1+0.12-0.7])/(1+0.12-0.7)Customer lifetime value = $13,788.46
Practice can spend the amount equals to the present value of the customer lifetime value to acquire new customers.
Present value of customer lifetime value is calculated asPV = CLV/(1+r)n Where, CLV is the customer lifetime value, r is the discount rate, and n is the period under consideration.
PV=13788.46/(1+0.12-0.7)PV = $13,370.97To increase customer retention from 70% to 75%, the increase in retention is 7.14%.
Let's assume that the current retention rate is based on the promotional cost of $50. So, the increase in retention rate by 7.14% would require how much increase in the promotional cost?
We can calculate this using the following formula:Increase in promotional costs = (increase in retention rate/ % retention rate) × Promotional costs/yearIncrease in promotional costs= (7.14/70) × 50Increase in promotional costs= $5.10
Thus, the practice can afford to spend $5.10 to increase customer retention from 70% to 75%.
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please answer my questions
2. Discuss the contribution of securitisation to the global financial crisis of ( 2007 / 8 ).
Securitization contributed to the global financial crisis of 2007/8 by enabling the bundling of risky mortgages into complex financial products, which were then sold to investors.
These products had hidden risks and were overrated, leading to widespread financial bility and market collapse.
Securitization is the process of pooling and repackaging financial assets, such as mortgages, into securities that can be sold to investors. It was widely used in the lead-up to the global financial crisis of 2007/8. Here's a more detailed explanation of how securitization contributed to the crisis:
1. Mortgage-backed securities (MBS): Banks and financial institutions bundled large numbers of mortgages together and created MBS, which were then sold to investors. The idea was that the risk of individual mortgages would be spread out among many investors, making them less vulnerable to default. However, the underlying mortgages were often subprime or risky loans.
2. Collateralized Debt Obligations (CDOs): Investment banks further repackaged MBS into complex products called CDOs. These CDOs were divided into different tranches, each with a varying level of risk and return. The highest-rated tranches were considered safe investment , even though they contained underlying risky mortgages.
3. Misleading credit ratings: Credit rating agencies assigned high ratings to many of these complex financial products, primarily based on historical data that didn't account for the possibility of widespread defaults. These inflated ratings created a false sense of security among investors.
4. Lack of transparency: The complexity of these financial products made it difficult for investors and regulators to assess their underlying risks accurately. The true quality of the underlying mortgages and the potential for widespread defaults were not adequately understood.
5. Systemic risk: The widespread sale and trading of these complex securities created a web of interconnectedness among financial institutions globally. When the subprime mortgage market began to collapse, it triggered a chain reaction of defaults and losses across the financial system, leading to a full-blown global financial crisis.
In summary, securitization played a significant role in the 2007/8 global financial crisis by masking the risks associated with subprime mortgages, inflating credit ratings, and creating systemic vulnerabilities within the financial system. The resulting collapse of these complex financial products had far-reaching consequences, exposing the fragility of the global financial system.
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he quantity supplied of a good, service, or resource equals the quantity demanded at the quantity. (enter one word as your answer.)
The term is "equilibrium." The quantity supplied of a good, service, or resource equals the quantity demanded at the equilibrium.
The term that describes the situation when the quantity supplied of a good, service, or resource equals the quantity demanded is called "equilibrium." In equilibrium, the market is in balance, with no excess supply or demand. At this point, the price and quantity are at a stable state, and there is no inherent tendency for the market to move away from this point.
Equilibrium is achieved when the forces of supply and demand are in sync, resulting in a situation where buyers are willing to purchase exactly what sellers are willing to sell. It represents a state of balance where market forces determine the optimal allocation of resources.
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9. (Duration) How much will a bond with a duration of 4 and worth $900 change in price if the YTM increases by 2%? 10. (Bond valuation) Thumb Juice Corp.'s 15-year, $1,000 par value bonds pay 12% inte
1.The bond's price will decrease by $72. 2 a. The bond's market expected rate of return is approximately 11.29%. b. The value of the bond to you, given your required rate of return, is approximately $1,062.43. c. Whether you should purchase this bond or not depends on your personal investment strategy and preferences, considering factors such as the bond's value, market conditions, and your overall investment portfolio.
To calculate the price change of a bond with a duration of 4 when the yield to maturity (YTM) increases by 2%, we can use the formula:
Price Change = -Duration * Yield Change * Bond Price
Given:
Duration = 4
Yield Change = 2% (0.02)
Bond Price = $900
Price Change = -4 * 0.02 * $900
Price Change = -$72
The bond's price will decrease by $72.
a. The bond's market expected rate of return can be calculated by comparing the bond's coupon payment and its market price. It is given that the bond pays 12% interest annually and its market price is $1,062.20. The formula to calculate the expected rate of return is:
Market Expected Rate of Return = (Annual Coupon Payment / Market Price) + Annual Capital Gain Rate
Annual Coupon Payment = 12% of $1,000 = $120
Market Expected Rate of Return = ($120 / $1,062.20) + 0
Market Expected Rate of Return ≈ 0.1129 or 11.29%
b. The value of the bond to you, given your required rate of return, can be calculated using the bond valuation formula. The required rate of return is 10%.
Bond Value = (Annual Coupon Payment / Required Rate of Return) * [1 - (1 / (1 + Required Rate of Return)^n)] + (Par Value / (1 + Required Rate of Return)^n)
Where:
n = number of periods (15 years)
Par Value = $1,000
Bond Value = ($120 / 0.10) * [1 - (1 / (1 + 0.10)^15)] + ($1,000 / (1 + 0.10)^15)
Bond Value ≈ $1,062.43
The value of the bond to you is approximately $1,062.43.
c. Whether you should purchase this bond or not depends on your personal investment strategy and preferences. In this case, the market price of the bond is $1,062.20, and its value to you is $1,062.43. If you believe that the bond's value justifies the price and it aligns with your investment goals, you may consider purchasing it. However, it's important to conduct further analysis and consider factors such as the bond's credit rating, market conditions, and your overall investment portfolio before making a decision.
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Complete Question :
9. (Duration) How much will a bond with a duration of 4 and worth $900 change in price if the YTM increases by 2%? 10. (Bond valuation) Thumb Juice Corp.'s 15-year, $1,000 par value bonds pay 12% interest annually. The market price of the bonds is $1,062.20 and your required rate of return is 10%. a. Compute the bond's market expected rate of return. b. Determine the value of the bond to you, given your required rate of return. C. Should you purchase this bond? Why or why not?
1. Answer the following questions and explain your work. 2. Do not attach any other pages. 3. Download, write your answers on this same Question sheet; next, to each question. 4. Don't write your name 5. Upload in the same drop box for the purpose of making comments 6. Don't change the questions or use different values? Question 1. In competitive markets, there are many small firms with each firm unable to influence the market price. Suppose company XYZ operates in the wheat market. The company produces and markets wheats at a Price =$40 per container. The firm's total costs are given as: TC=100+4Q+3Q 2
a) Find the Firm's marginal cost? Show your steps, including graphs. Review additional resources? Hint: See the rules for differentiation b) What is the firm's demand curve? Show it on a graph and label the axes showing P and Q c) What level of output should the firm produce? Hint: Set P=MC and solve for Q. Use a graph to show your answers as well
The firm's marginal cost is MC = 4 + 6Q.
What is the firm's marginal cost?The firm's demand curve represents the relationship between the price of the wheat (P) and the quantity of wheat demanded (Q).
Since the company operates in a competitive market, it faces a horizontal demand curve at the market price of $40 per container.
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3. Three investments are provided as follow: Investment X : Risky asset; 15% return, 1600% 2 variance Investment Y: Risky asset; 10% return, 225% 2 variance Investment Z: Risk-free asset; 6% return The correlation of the return for X and Y is exactly −1. (a) ( 2 points) State the volatility of X and Y. (b) Write the volatility of a portfolio P1, with x invested in investment X and (1−x) invested in investment Y. (0⩽x⩽1) (c) Find the value of x such that a portfolio P2 formed is risk-free. What is the risk-free rate from P2 ? (d) ( 2 points) The risk-free rate you obtained from P2 is higher than that from Investment Z. Will anyone actually invest in investment Z then, why? Assume that everyone thinks that higher return is always better. Because of such an action, what do you think for the future price of the portfolio P2; will it increase or decrease?
(a) The volatility of an investment is measured by its variance. For Investment X, the variance is 1600% or 16.00 (in decimal form) squared. For Investment Y, the variance is 225% or 2.25 (in decimal form) squared.
(b) To find the volatility of portfolio P1, we use the formula: volatility(P1) = sqrt(x^2 * variance(X) + (1-x)^2 * variance(Y)). Here, x represents the proportion of investment X in the portfolio.
(c) To form a risk-free portfolio P2, the correlation between X and Y needs to be -1. The volatility of P2 is given by the formula: volatility(P2) = sqrt(x^2 * variance(X) + (1-x)^2 * variance(Y) + 2 * x * (1-x) * sqrt(variance(X) * variance(Y))). Solving for x, we find the value that makes the portfolio risk-free.
(d) If the risk-free rate from P2 is higher than that from Investment Z, investors may prefer to invest in P2. However, if everyone thinks that higher return is always better, they may still choose Investment Z despite the lower risk-free rate.
As for the future price of portfolio P2, it is difficult to determine whether it will increase or decrease based solely on the information provided. Several factors can influence the future price, such as market conditions, investor sentiment, and economic factors.
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Explain how an understanding in financial planning would be important knowledge for a manager. Consider different types of managers (sales managers, production managers, general managers, etc), not only financial managers.
An understanding of financial planning is important knowledge for all types of managers, including sales managers, production managers, general managers, and others.
Financial planning involves the process of setting goals, creating a budget, and making strategic decisions to allocate resources effectively. Regardless of their specific role, managers need to make informed decisions that consider the financial implications and align with the organization's financial objectives.
By understanding financial planning principles, managers can better evaluate the financial feasibility of their plans, assess the financial health of their departments, and contribute to the overall financial success of the organization.
Sales managers, for example, need to understand financial planning to set realistic sales targets, analyze sales trends, and assess the profitability of different sales initiatives. Production managers need to consider financial planning to optimize production costs, budget for materials and labor, and identify opportunities for cost savings. General managers need a comprehensive understanding of financial planning to oversee the financial performance of the entire organization, make investment decisions, and allocate resources efficiently.
Having knowledge of financial planning allows managers to make data-driven decisions, understand the financial impact of their actions, and communicate effectively with financial stakeholders such as CFOs, investors, and board members. It enables managers to align their operational goals with the financial objectives of the organization, ensuring long-term sustainability and growth.
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You have a long position in December put option on the shares of Heartless Enterprises Inc. with a strike price of $40. It is a European option. Today (in November), Heartless shares are trading for $30 and you want to close your position. What do you do?I. Sell a December call option II. Exercise your option III. Sell a December put option a. I only b. II only c. III only d. II or III
You can either sell a December put option or exercise your option. Option (d) II or III is correct.
As a long position holder in December put option on the shares of Heartless Enterprises Inc with a strike price of $40, today, in November, Heartless shares are trading for $30 and you want to close your position.
close your position - To close a long position on a put option, you can either sell a put option or exercise the option. This would depend on the situation. If the time value of the option is more significant than the intrinsic value of the option, it would be best to sell the option rather than exercising it.
But if the intrinsic value is more than the time value, you can exercise the option to gain a profit. Therefore, in this case, you can either sell a December put option or exercise your option to close your position.
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A company just paid $10 million for a feasibility study. If the company goes ahead with the project, it must immediately spend another $94,214,155 now, and then spend $20 million in one year. In two years it will receive $80 million, and in three years it will receive $90 million. If the cost of capital for the project is 11 percent, what is the project’s NPV?
The project's NPV is $20,839,602.40. Given that A company just paid $10 million for a feasibility study. If the company goes ahead with the project, it must immediately spend another $94,214,155 now, and then spend $20 million in one year. In two years, it will receive $80 million, and in three years it will receive $90 million. The cost of capital for the project is 11 percent.
The formula for NPV is: NPV = -Initial Investment + (Cash flow / (1 + r)^t)
Where, r = Discount rate of the project
t = time elapsed when the cash flow is recorded
Let's calculate the net present value (NPV) of the project.
Initial Investment = 10,000,000 + 94,214,155 + 20,000,000
= $124,214,155
Cash flow in Year 0 = -$124,214,155
Cash flow in Year 1 = $80,000,000
Cash flow in Year 2 = $90,000,000
Cash flow in Year 3 = $0
Now, calculate NPV using the above formula: NPV = -124,214,155 + (80,000,000 / (1 + 0.11)^1) + (90,000,000 / (1 + 0.11)^2)
NPV = -124,214,155 + (80,000,000 / 1.11) + (90,000,000 / 1.2321)
NPV = -124,214,155 + 72,072,072.07 + 72,981,685.33
= $20,839,602.40
Hence, the project's NPV is $20,839,602.40.
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Directions on how and when to use a product and information about the source and composition of a product that appear on packaging labels provide ________ benefits.
Directions on how and when to use a product and information about the source and composition of a product that appear on packaging labels provide communication benefits.
These benefits allow producers to communicate important information about their products to consumers. For instance, directions on how to use a product safely and effectively help consumers avoid potential harm or misuse of the product. Information about the source and composition of a product helps consumers understand its quality, origin, and potential environmental impact. By providing this information, packaging labels also help producers differentiate their products from competitors and build trust with consumers by being transparent about their products.
Furthermore, packaging labels help producers comply with regulatory requirements and standards, such as ingredient lists, allergen warnings, and nutritional information. This ensures that consumers are informed about the products they purchase and use, which contributes to greater transparency and accountability in the marketplace.
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What is a risk premium? How is it defined? Over the last approximately 108 years, relative to U.S. Treasury bills, what is the average risk premium for stocks? For bonds?
What is a normal distribution curve? What is being distributed? What is it being distributed over?
How does one calculate an expected value?
A risk premium is the additional return an investor expects to receive for taking on extra risk compared to a risk-free investment. Over the last 108 years, the average risk premium for stocks, relative to U.S. Treasury bills, would require historical data on stock returns and Treasury bill returns to calculate. Without specific data, an exact average risk premium cannot be provided. A normal distribution curve is a bell-shaped probability distribution that represents the distribution of a continuous random variable. It is characterized by its mean and standard deviation. The normal distribution curve is used to model various natural and financial phenomena, assuming data follows a normal distribution. The expected value is calculated by taking the weighted average of possible outcomes based on their respective probabilities.
A risk premium is the excess return or compensation that an investor expects to receive for taking on additional risk compared to a risk-free investment. It represents the additional return required for investing in an asset with higher uncertainty or volatility.
To calculate the average risk premium for stocks and bonds relative to U.S. Treasury bills over the last 108 years, historical data would be needed, including the returns of stocks, bonds, and Treasury bills over that period. Without specific data, I cannot provide an exact average risk premium.
A normal distribution curve, also known as a Gaussian distribution or bell curve, is a statistical concept representing a symmetric probability distribution. It is characterized by its bell-shaped curve, where the data is symmetrically distributed around the mean. The curve is determined by two parameters, the mean (average) and the standard deviation, which determine the central tendency and dispersion of the data, respectively.
A normal distribution curve represents the distribution of a continuous random variable. It is used to model various natural phenomena and financial data, assuming that the data follows a normal distribution.
The expected value, also known as the mean or average, is calculated by summing the products of each possible outcome of a random variable and its corresponding probability. In other words, it is the weighted average of all possible outcomes, where the weights are the probabilities assigned to each outcome. Mathematically, it is represented as:
Expected Value = Σ (Outcome * Probability)
By calculating the expected value, one can estimate the average outcome or value that is expected to occur based on the probabilities assigned to different outcomes.
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Which of the following is true about competencies? they focus of average performance rather than optimal performance they discourage employees from assuming leadership roles they fail to provide a common basis for working together they create risks that need to be managed due to inferred proficiencies they make people lose their focus
Competencies carry risks that need to be managed due to assumed proficiencies, necessitating alignment between stated competencies and actual performance through ongoing assessment and development. Option D.
Competencies refer to the knowledge, skills, abilities, and behaviors that individuals possess and can effectively apply in their roles. They play a crucial role in defining performance expectations and providing a framework for assessing and developing employees.
A.) Competencies do not focus on average performance but rather on the desired level of performance. They outline the skills and abilities required to excel in a specific role, emphasizing optimal performance rather than mediocrity.
B.) Competencies do not discourage employees from assuming leadership roles. In fact, competencies often include leadership skills and behaviors, encouraging employees to develop their leadership capabilities.
C.) Competencies provide a common basis for working together. They establish a shared language and understanding of the skills and behaviors necessary for effective collaboration and teamwork.
D.) This is the correct answer. Competencies create risks that need to be managed because they imply proficiencies that may not always align with actual performance. It is important to ensure that individuals possess the necessary skills and can demonstrate competence in real-world situations, not just in theory.
E.) Competencies do not make people lose their focus. On the contrary, they help individuals and organizations focus on the specific skills and behaviors required to succeed in their roles and achieve organizational objectives.
In summary, competencies are essential in defining performance expectations and guiding employee development. While they create risks related to inferred proficiencies, effective competency management involves ensuring alignment between stated competencies and actual performance through ongoing assessment and development efforts. So Option D is correct.
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businessfinancefinance questions and answerscalculate the annual net premium and the monthly premium ! endowment insurance for a period of 35 years is issued to a person aged 25 years with the following condition : 1. annual premium payment for 10 years 2. if he dies within the insurance period, the compensation is 100,000,000,- 3.if he lives to a period of 35 years then every beginning of the
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Question: Calculate The Annual Net Premium And The Monthly Premium ! Endowment Insurance For A Period Of 35 Years Is Issued To A Person Aged 25 Years With The Following Condition : 1. Annual Premium Payment For 10 Years 2. If He Dies Within The Insurance Period, The Compensation Is 100,000,000,- 3.If He Lives To A Period Of 35 Years Then Every Beginning Of The
Calculate the annual net premium and the monthly premium !
Endowment Insurance for a period of 35 years is issued to a person aged 25 years with the following condition :
1. Annual premium payment for 10 years
2. If he dies within the insurance period, the compensation is 100,000,000,-
3.If he lives to a period of 35 years then every beginning of the beginning of the year gets payment of 2.500.000,- in the first year, 2.000.000,- in the second year,
1,500,000,- in the third year, 1,000,000,- from the 4th year onwards.
PLEASE EXPLAIN STEP BY STEP !!
COPY PASTING FROM ANOTHER ANSWER WILL BE REPORTED AND DOWNVOTED
The payment amounts are as follows: 2,500,000 in the first year, 2,000,000 in the second year, 1,500,000 in the third year, and 1,000,000 from the fourth year onwards.
To calculate the annual net premium and the monthly premium for the endowment insurance, we need to consider the premium payment period, the compensation in case of death, and the annual payments if the person lives to the end of the insurance period.
The annual net premium can be determined by dividing the total premium payment over the premium payment period. In this case, since the annual premium payment is made for 10 years, the annual net premium is the total premium payment divided by 10.
The monthly premium can be calculated by dividing the annual net premium by 12, as there are 12 months in a year.
For the compensation in case of death, the amount is fixed at 100,000,000.
If the insured person lives to the end of the 35-year insurance period, they will receive annual payments starting from the beginning of the first year.
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What is the future value of $400 saved at i-7.86%, compounded annually in 1 year? 2. what is the future value of $400 saved at 1-786%, compounded annually in 2 years? 3, what is the future value of $400 saved at i 7.86%, cormpounded semi-annually in 2 years? 4. What is the future value of $400 saved at i: 7.86%, compounded quarterly in 2 years? 5. Suppose you save $18,000 per year at an interest rate of i much will you have after 35 years? 5.21% compounded once per year. How 6. A risk-free bond will pay you $1000 in 1 year. The annual discount rate is i-3.69% cormpounded annually. What is the bond's present value? 7. A risk-free bond will pay you $1000 in 2 years and nothing in between. The annual discount rate is i 9596 cormpounded annually, what is the bond's present value? 8. You buy a 30 year zero coupon bond which will pay you $1000 in 30 years at an annual yield ofi 6% compounded once per year. A few minutes later the annual yield rises to i 7% compounded once per year. What is the percent change in the value of the bond? (Hint: the answer should be negative.) 9. You buy a 30 year zero coupon bond which will pay you $1000 in 30 years at an annual yield of 14% compounded once per year, 25 years later it will be a 5 year zero coupon bond. Suppose the interest rate on this bond will be 14%, what will the price of this bond be in 25 years? 10. You are offered an annuity that will pay you $200,000 once per year, at the end of the year, for 25 years. The first payment will arrive one year from now. The last payment will arrive twenty five yeans from now. Suppose your annual discount rate is i-5.25%, how much are you willing to pay for this annuity? (hint: this is the same as the present value of an annuity.) 11. You would like to develop an office building. Your analysts forecast that it will cost you $1,000,000 immediately (time 0), and it will cost you $500,000 in one year (time 1). They forecast you can sell the building for $2.400,000 in two years (time 2). If your discount rate is 25%, what is the net present value of this investment?
1. The future value of $400 saved at an interest rate of 7.86%, compounded annually for 1 year is approximately $431.44.
2. The future value of $400 saved at an interest rate of 7.86%, compounded annually for 2 years is approximately $466.62.
3. The future value of $400 saved at an interest rate of 7.86%, compounded semi-annually for 2 years is approximately $468.68.
4. The future value of $400 saved at an interest rate of 7.86%, compounded quarterly for 2 years is approximately $469.64.
5. Saving $18,000 per year for 35 years at an interest rate of 5.21%, compounded once per year would result in a future value of approximately $1,306,577.46.
1. To calculate the future value of $400 saved at an interest rate of 7.86%, compounded annually for 1 year, we use the formula:
Future Value = Present Value * (1 + Interest Rate)^Time
Future Value = $400 * (1 + 0.0786)^1
Future Value ≈ $431.44
2. Using the same formula, for 2 years of compounding annually:
Future Value = $400 * (1 + 0.0786)^2
Future Value ≈ $466.62
3. For semi-annual compounding over 2 years:
Future Value = $400 * (1 + (0.0786 / 2))^ (2 * 2)
Future Value ≈ $468.68
4. For quarterly compounding over 2 years:
Future Value = $400 * (1 + (0.0786 / 4))^ (4 * 2)
Future Value ≈ $469.64
5. To calculate the future value of saving $18,000 per year for 35 years at an interest rate of 5.21%, compounded annually:
Future Value = $18,000 * ((1 + 0.0521)^35 - 1) / 0.0521
Future Value ≈ $1,306,577.46
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135 5404 Tightening Credit Terms Jean Nowak, the new credit manager of Farpoint Communications, was alarmed to find that Farpoint sells on credit terms of net 70 days while industry-wide credit terms have recently been lowered to net 30 days. On annual credit sales of $10 million, Farpoint currently averages 78 days of sales in accounts receivable. Nowak estimates that tightening the credit terms to 30 days would reduce annual sales to $9.6 million, but accounts receivable would drop to 35 days of sales and the savings on investment in them should more than overcome any loss in profit.
Farpoint's variable cost ratio is 80%, and taxes are 26%. If the interest rate on funds invested in receivables is 12%, should the change in credit terms be made?
Yes, the change in credit terms should be made.
By tightening the credit terms from net 70 days to net 30 days, Farpoint Communications can improve its cash flow and reduce the average number of days of sales in accounts receivable from 78 to 35. This means that the company will receive payment for its sales more quickly and will have a lower investment in accounts receivable. Although the change in credit terms is estimated to reduce annual sales from $10 million to $9.6 million, the savings on investment in accounts receivable should more than compensate for any loss in profit.
The variable cost ratio of Farpoint is given as 80%, which means that 80% of the sales revenue goes towards covering the variable costs. With the change in credit terms, the reduction in sales will also lead to a reduction in variable costs. Additionally, the interest rate on funds invested in receivables is 12%. By reducing the average number of days in accounts receivable, Farpoint can lower its investment in receivables and save on interest expenses.
Considering these factors, the change in credit terms is a financially beneficial decision for Farpoint Communications. It will improve cash flow, reduce investment in accounts receivable, and result in savings on interest expenses.
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Min has decided that she would like to spend $57,600 per year in retirement. If she expects to be retired for 24 years, and her investments will continue to earn 5% in retirement, how much does she have to have accumulated before she can retire?
The Min needs to have accumulated approximately $890,640 before she can retire in order to meet her retirement income goal.
To calculate the amount Min needs to have accumulated before retiring, we can use the formula for the present value of an annuity:
PV = PMT × (1 - (1 + r)⁻ⁿ) / r
Where:
PV = Present Value (accumulated amount)
PMT = Payment per year in retirement ($57,600)
r = Interest rate per year (5% or 0.05)
n = Number of years in retirement (24)
Substituting the given values into the formula, we can calculate the present value:
PV = $57,600 × (1 - (1 + 0.05)⁻²⁴) / 0.05
PV = $57,600 × (1 - 0.223) / 0.05
PV = $57,600 × 0.777 / 0.05
PV = $890,640
Therefore, Min needs to have accumulated approximately $890,640 before she can retire in order to meet her retirement income goal.
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Use the funding liquidity and market liquidity to explain how
the liquidity spiral was created in the financial market which
caused the financial crisis in 2008-2009.
The liquidity spiral in the 2008-2009 financial crisis was caused by a combination of funding and market liquidity problems, leading to a vicious cycle of declining prices and increasing losses.
The liquidity spiral that caused the financial crisis in 2008-2009 was created due to a combination of funding liquidity and market liquidity problems. Funding liquidity refers to the ability of financial institutions to obtain short-term funding to meet their obligations, while market liquidity refers to the ability to buy or sell assets quickly without significantly affecting their prices.
During the housing boom, banks and financial institutions were providing mortgages to borrowers who were not creditworthy and were unable to repay their loans. These mortgages were then packaged into securities and sold to investors around the world. However, as the number of defaults on these mortgages increased, the value of these securities began to decline, leading to a decrease in market liquidity.
As the market liquidity decreased, the value of these securities fell further, and financial institutions that had invested heavily in them began to experience significant losses. This led to a decline in funding liquidity, as these institutions were unable to obtain short-term funding to meet their obligations. As a result, they were forced to sell their assets to meet their obligations, which further reduced the market liquidity and caused the prices of these securities to fall even further.
This created a vicious cycle, where declining market liquidity led to a decline in funding liquidity, which further reduced market liquidity, and so on. This liquidity spiral ultimately led to the collapse of several large financial institutions and a global financial crisis.
In summary, the liquidity spiral was created due to a combination of funding liquidity and market liquidity problems, where declining market liquidity led to a decline in funding liquidity, which further reduced market liquidity and caused a vicious cycle of declining prices and increasing losses.
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