No, the assumption that the US Treasury has less risk than banks is generally true.
The US Treasury is considered to have lower risk compared to banks for several reasons:
1. Government Backing: The US Treasury is backed by the full faith and credit of the US government. It is highly unlikely that the US government would default on its obligations, making Treasury securities a relatively safe investment.
2. Sovereign Risk: Banks, on the other hand, are subject to various risks such as credit risk, liquidity risk, and operational risk. These risks arise from the nature of banking activities, including lending, investment, and management of assets and liabilities.
3. Regulatory Oversight: Banks are heavily regulated and supervised by regulatory authorities to ensure their safety and soundness. However, even with regulation in place, there is still a certain level of risk associated with banking operations.
4. Market Perception: Due to the perceived lower risk of US Treasury securities, they are often considered a benchmark for risk-free investments. This perception is reflected in the interest rates offered on T-bills, which are typically lower than rates such as LIBOR.
While it is important to note that no investment is entirely risk-free, the US Treasury is generally considered to have lower risk compared to banks. This is due to the government backing, lower likelihood of default, and the perception of US Treasury securities as relatively safe investments.
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A restaurant manager tracks complaints from the diner satisfaction cards that are turned in at each table. The data collected from the past week's diners appear in the following table.
Complaint
Frequency
Food taste
47
Food
49
temperature
Order mistake
විය. 13
Slow service
5
Table/utensils dirty
10 10
Too expensive
22
Using a classic Pareto analysis, what are the vital few complaints?
Food taste
Food temperature
Order mistake
Slow service
Table/utensils dirty
Too expensive
The vital few complaints using a classic Pareto analysis are as follows: Food taste Food temperature Too expensive Explanation: Using Pareto analysis, the 80/20 principle, we can identify the complaints that need to be addressed by the restaurant manager.
The 80/20 rule, also known as the Pareto principle, suggests that 80% of the outcomes result from 20% of the causes. In other words, the vital few are responsible for the vast majority of the results. As a result, this rule may be useful in identifying the causes of a problem and prioritizing efforts to resolve it. A Pareto chart can be created using the information provided in the question in order to identify the vital few complaints. In a Pareto chart, the vertical axis represents the frequency or number of occurrences, and the horizontal axis represents the complaints.
The complaints are ordered in descending order of frequency from left to right. Frequency Cumulative %Food taste 47 47 23.2% Food temperature49 96 47.1% Too expensive22 118 57.8% Order mistake13 131 64.2%Table/utensils dirty10 141 69.1%Slow service5 146 71.6%. From the table, it is clear that food taste, food temperature, and too expensive are the most frequent complaints from the diners. These are the vital few complaints that need to be addressed by the restaurant manager.
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1. An analyst has collected the following information regarding Christopher Co .: The company's capital structure is 70 percent equity, 30 percent debt. The yield to maturity on the company's bonds is 5 percent. The company's year-end dividend (D_{1}) is forecasted to be $ 1.0 a share. The company expects that its dividend will grow at a constant rate of 7 percent a year . The company's stock price is $25. The company's tax rate is 40 percent . The company anticipates that it will need to raise new common stock this year. Its investment bankers anticipate that the total flotation cost will equal 10 percent of the amount issued. Assume the company accounts for flotation costs by adjusting the cost of capital Given this information, calculate the company's WACC
2. Rollins Corporation is estimating its WACC. Its target capital structure is 20 percent debt, 20 percent preferred stock, and 60 percent common equity. Rollins' beta is 1.7 the risk-free rate is 5 percent, and the market risk premium is 4 percent. Rollins is a constant-growth firm which just paid a dividend of $2.00, sells for $ 34 per share, and has a growth rate of 7 percent. The firm's policy is to use a risk premium of 4 percentage points when using the bond- yield-plus-risk-premium method to find r_{s} The firm's marginal tax rate is 38 percent. What is Rollins cost of equity when using the CAPM approach (aka SML equation)? Express your answer in percentage (without the % sign ) and round it to two decimal places.
1. Calculating the company's WACC Given, Equity = 70%Debt = 30%Yield to maturity on the company's bonds = 5%Dividend (D1) = $1.0Dividend growth rate = 7%Stock price = $25Tax rate = 40%Flotation cost = 10%Flotation cost will be adjusted So, Total Cost of New Common Stock = (1 + 10%) × Cost of New Common StockNew Common Stock = $25
I. Cost of Equity Equity will be the part where flotation cost adjustment is not necessary.So,Re = [D1 / P0] + gRe = [$1.0 / $25] + 7%Re = 11%
II. Cost of DebtPre-tax Cost of DebtKd = Yield to maturity on the company's bonds(1 - Tax rate)Kd = 5%(1 - 40%)Kd = 3%After-tax Cost of DebtKd (1 - Tax rate) = 3%(1 - 40%)Kd = 1.8%
III. Weighted Average Cost of CapitalWACC = [(%E / 100) × Re] + [(%D / 100) × Kd]WACC = [70/100 × 11%] + [30/100 × 1.8%]WACC = 8.56%
2. Calculating Rollins Corporation's cost of equity using the CAPM approachGiven,Debt = 20%Preferred stock = 20%Common equity = 60%Beta = 1.7Risk-free rate (rf) = 5%Market risk premium (RPM) = 4%Dividend = $2.00Price per share (Po) = $34Growth rate (g) = 7%Marginal tax rate = 38%
I. Cost of EquityUsing CAPM,re = rf + [β × RPM]re = 5% + [1.7 × 4%]re = 11.8%
II. Flotation Cost of Preferred Stock and New Common StockAs per the question, no flotation cost is associated with preferred stock.However, there is a flotation cost with common stock. So,To adjust flotation costTotal cost of New Common Stock = (1 + Flotation cost) × Cost of New Common StockCost of New Common Stock = Po = $34Flotation cost = 0.04 = 4%Total cost of New Common Stock = (1 + 4%) × $34Total cost of New Common Stock = $35.36
III. Weighted Average Cost of CapitalWACC = [(%D / 100) × Kd × (1 - T)] + [(%P / 100) × Kp] + [(%E / 100) × Re]Kd = Cost of DebtKp = Cost of Preferred StockRe = Cost of EquityD = 20%P = 20%E = 60%Kd (1 - T) = [5% × (1 - 38%)] = 3.1%Kp = $0 / $0 = 0%WACC = [(20/100) × 3.1%] + [(20/100) × 0%] + [(60/100) × 11.8%]WACC = 8.54%
Therefore, the company's WACC in the first question is 8.56% and Rollins Corporation's cost of equity using the CAPM approach (aka SML equation) in the second question is 11.8% (rounded to two decimal places).
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Projected Operating Assets Berman & Jaccor Corporation's current sales and partial balance sheet are shown below. Sales are expected to grow by 8% next year. Assuming no change in operations from this year to next year, what are the projected total operating assets? Do not round intermediate calculations. Round your answer to the nearest dollar.
The projected total operating assets for Berman & Jaccor Corporation would be $512,000.
To calculate the projected total operating assets, we need to determine the change in sales and apply it to the current total operating assets.
First, let's calculate the change in sales. We can do this by multiplying the current sales by the expected growth rate of 8%:
Change in Sales = Current Sales * Growth Rate
Change in Sales = $150,000 * 0.08 = $12,000
Next, we need to add the change in sales to the current total operating assets to get the projected total operating assets:
Projected Total Operating Assets = Current Total Operating Assets + Change in Sales
Projected Total Operating Assets = $500,000 + $12,000 = $512,000
Therefore, assuming no change in operations from this year to next year, the projected total operating assets for Berman & Jaccor Corporation would be $512,000.
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1. What are 3 ways to be an excellent Presenter / Communicator? Please Explain and give examples (6marks)
2. Name a time you (personal) had OR saw ( others) a great innovation, invention, transformation idea (ITT) explain ((4marks)?
•Personal Idea- What was it? Why haven’t you started, what blocking you, or what was the outcome
•Others - If it's something that you saw – what made it remarkable?
Answer for Question 1:Being an excellent presenter or communicator takes a lot of practice and dedication. There are three ways in which one can become an excellent presenter or communicator which are:1. Prepare wellBefore presenting, make sure that you are thoroughly prepared.
This will help you to feel more confident, which will in turn help you to be more effective in your communication. Good preparation includes research, planning, and rehearsal. For example, if you are giving a presentation on a new product, you might need to research the product, its features,
and its benefits. You might also need to plan the structure of your presentation, and rehearse it several times.2. Engage with your audienceThe key to being an excellent presenter or communicator is to engage with your audience. This means making eye contact, using appropriate body language, and speaking clearly and confidently. It also means being aware of your audience's needs and interests.
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The following information pertains to an interest in possession trust that has two life tenants, for the tax year 2021-2022:
Income
£ Dividends received - £9,650
Income from rented property - £21,300
Interest income from bank deposits - £2,020
Interest income from long-term bonds - £970
Additional information:
• A sum of £3,170 was incurred in carrying out necessary repairs to the rental properties.
• The administration and general expenses for the year were £2,000.
a) Calculate the income tax liability payable by the trust for the year 2021-2022.
b) Calculate each life tenant’s income from the trust in 2021-22, assuming that the trust income is shared equally among them
a) The trust's income tax liability for 2021-2022 is £5,754. b) Assuming equal sharing, each life tenant's income from the trust in 2021-22 is £15,385.
a) To calculate the income tax liability payable by the trust, we need to determine the taxable income first. Taxable Income:
Dividends received: £9,650
Income from rented property: £21,300 - £3,170 (repairs) = £18,130
Interest income from bank deposits: £2,020
Interest income from long-term bonds: £970
Total taxable income = £9,650 + £18,130 + £2,020 + £970 = £30,770
Deducting administration and general expenses of £2,000, we get the net taxable income as £28,770.
Income Tax Liability:For the tax year 2021-2022, the trust will be subject to income tax at the prevailing rates. Assuming a basic rate of 20%, the income tax liability would be:
£28,770 * 20% = £5,754
b) Assuming the trust income is shared equally among the two life tenants, each life tenant's income from the trust would be half of the total income. Therefore, each life tenant would have an income of:
£30,770 / 2 = £15,385.
Therefore, The trust's income tax liability for 2021-2022 is £5,754.
Assuming equal sharing, each life tenant's income from the trust in 2021-22 is £15,385.
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Suppose an environmental policy maker estimated the damage and abatement costs for a pollution reduction project as follows: MD = 0.8E and MAC = 144 – E.
What would be the Total Benefits and Total Costs and Net Benefits of the project? Show your calculations.
Therefore, the total benefit of the project is (144 - 0.2E), the total cost is (154 - E), and the net benefits are (-10 + 0.8E).
Given:
MD = 0.8EMAC
= 144 - E
The total benefit is the sum of the reduction in damages (MD) and the reduction in abatement costs (MAC).
The total cost is the sum of the abatement cost (MAC) and the direct cost (DC).
The equation for net benefits is
NB = TB - TC; where TB is the total benefits and TC is the total costs.
Calculation of Total Benefit TB = MD + MAC
= 0.8E + 144 - E
= 144 - 0.2E
The equation for the total cost of the project is:
TC = MAC + DCTC
= 144 - E + 10TC
= 154 - E
Calculation of Net Benefits NB = TB - TC
= (144 - 0.2E) - (154 - E)
= 144 - 0.2E - 154 + E
= -10 + 0.8E
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Queen Markisha is evaluating a new 6-year project that will have annual sales of $415,000 and costs of $287,000. The project will require fixed assets of $515,000, which will be depreciated on a 5-year MACRS schedule. The annual depreciation percentages are 20.00 percent, 32.00 percent, 19.20 percent, 11.52 percent, 11.52 percent, and 5.76 percent, respectively. The company has a tax rate of 40 percent. What is the operating cash flow for Year 3?
-----Multiple Choice
A) $90,752
B) $116,352
C) $136,128
D) $111,133
E) $100,531
The operating cash flow for Year 3 is $116,352. Hence the correct answer is option B).
Annual depreciation expense using the MACRS schedule of Year 3: $515,000 × 19.20% = $98,800
Calculating the earnings before interest and taxes (EBIT):
EBIT = Sales - Costs
EBIT = $415,000 - $287,000
EBIT = $128,000
Next, calculating the earnings before taxes (EBT):
EBT = EBIT - Depreciation
EBT = $128,000 - $98,800
EBT = $29,200
Now, let's calculate the taxes:
Taxes = Tax Rate × EBT
Taxes = 0.40 × $29,200
Taxes = $11,680
Finally, let's calculate the operating cash flow for Year 3:
Operating Cash Flow = EBT - Taxes + Depreciation
Operating Cash Flow = $29,200 - $11,680 + $98,800
Operating Cash Flow = $116,320
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Briefly comment on this statement: "as explained in section 7.3 of the book, the main welfare impact of a rise in firm market power in a sector of the economy is the creation of a sub-optimal economic outcome in autarky because of the deviation between the marginal rate of transformation (MRT) and the marginal rate of substitution (MRS) in equilibrium." Hint: carefully look at equation 7-2.
The statement suggests that an increase in firm market power in a sector of the economy leads to a sub-optimal economic outcome in autarky due to the deviation between the marginal rate of transformation (MRT) and the marginal rate of substitution (MRS) in equilibrium.
The statement refers to section 7.3 of a book where it explains the main welfare impact of rising firm market power in an economy. According to equation 7-2.l, which is likely discussed in the mentioned section, there is a deviation between the marginal rate of transformation (MRT) and the marginal rate of substitution (MRS) in equilibrium. The MRT represents the rate at which one good can be transformed into another, while the MRS represents the rate at which a consumer is willing to substitute one good for another while maintaining the same level of satisfaction.
When a firm has increased market power, it can exercise greater control over prices and output, leading to an inefficient allocation of resources. This can result in a situation where the MRT, which reflects the cost of producing goods, differs from the MRS, which represents consumers' preferences and willingness to trade goods. As a consequence, the economy operates at a sub-optimal level, characterized by a mismatch between production and consumption decisions.
In autarky, where the economy is closed and not engaged in international trade, this deviation between MRT and MRS can have a more pronounced effect. Without the ability to access goods from other markets, the economy may struggle to efficiently allocate resources and satisfy consumer preferences. The sub-optimal outcome in autarky is a result of the market power exerted by firms and the resulting distortion in the equilibrium relationship between MRT and MRS.
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Suppose that an economy has the per-worker production function given as yt=5(kt)0.5, where y is output per worker and k is capital per worker. National savings is given as St=0.3Yt, where S is national savings and Y is total output. The depreciation rate is d=0.10 and population growth rate is n=0.05. What is the steady-state value of consumption per worker, c?
Select one:
a.
35
b.
50
c.
80
d.
100
The correct answer is (a) 35. To find the steady-state value of consumption per worker (c), we need to set the investment equal to the depreciation rate and population growth rate.
Given that the savings rate (s) is 0.3 and output per worker (Y) is equal to y (output per worker), we can express investment per worker as I = 0.3y.
In the steady state, investment per worker (I) is equal to the capital depreciation rate (d) plus the population growth rate (n) times capital per worker (k): I = (d + n)k.
Setting these two equations equal to each other, we have:
0.3y = (d + n)k
0.3(5(k^0.5)) = (0.10 + 0.05)k
1.5(k^0.5) = 0.15k
k^0.5 = 0.1k
k^0.5 / k = 0.1
k^(-0.5) = 0.1
1 / k^0.5 = 0.1^(-1)
k^0.5 = 10
k = 100
Now that we have the steady-state value of capital per worker (k), we can calculate the steady-state value of output per worker (y) and consumption per worker (c).
y = 5(k^0.5) = 5(100^0.5) = 5(10) = 50
c = y - I = 50 - 0.3y = 50 - 0.3(50) = 50 - 15 = 35
Therefore, the steady-state value of consumption per worker (c) is 35.
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1. For Brent, the income effect of a wage increase is stronger than the substitution effect. In
response to a wage increase, will Brent work more hours or will he work fewer hours?
2. For Antonio, the income effect of an interest-rate increase is stronger than the substitution
effect. In response to a higher interest rate, will Antonio save more or will he save less?
3. For normal goods, the income effect and the substitution effect work in the same direction; so
when the price of a good falls, both the income effect and substitution effects lead to a higher
quantity demanded. How would this change if the good is an inferior good?
1. Brent will work fewer hours.
2. Antonio will save less.
3. Quantity demanded of an inferior good will decrease when its price falls.
1. Brent will work fewer hours in response to a wage increase because the income effect dominates the substitution effect. The income effect refers to the change in a person's consumption or work behavior due to an increase in income. In this case, with a higher wage, Brent's income increases, which gives him the option to work fewer hours while still maintaining his desired level of consumption. As a result, he may choose to work fewer hours and enjoy more leisure time.
2. Antonio will save less in response to a higher interest rate because the income effect of an interest-rate increase is stronger than the substitution effect. The income effect refers to the change in a person's consumption or saving behavior due to a change in income. With a higher interest rate, Antonio's savings earn more interest, resulting in an increase in his income from savings. This increase in income may lead Antonio to feel wealthier, thereby reducing his motivation to save more. Consequently, he may choose to save less in response to a higher interest rate.
3. When the price of a normal good falls, both the income effect and substitution effect work together to increase the quantity demanded. The substitution effect occurs when consumers switch to a cheaper good when its price falls relative to other goods. Simultaneously, the income effect reflects the change in consumption due to changes in purchasing power resulting from a change in income. In the case of a normal good, both effects reinforce each other, leading to a higher quantity demanded when the price falls.
The income effect and substitution effect are concepts used in microeconomics to explain the change in consumer behavior in response to changes in prices or income. The income effect arises from the change in purchasing power, while the substitution effect refers to the shift in consumption patterns between goods. These effects are crucial in understanding how individuals make choices and allocate their resources based on changes in prices and income.
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analyse 6 external forces shaping the environment with
appropriate examples
1. Technological advancements: Rapid advancements in technology, such as artificial intelligence and automation, are shaping the business landscape and disrupting traditional industries.
For example, the rise of e-commerce platforms like Amazon has transformed the retail sector.
2. Globalization: Increasing interconnectedness and free movement of goods, services, and capital across borders have opened up new markets and created intense competition. For nce, multinational companies expand their operations globally to access larger consumer bases.
3. Regulatory changes: Governments implement new laws and regulations that impact business operations. An example is the General Data Protection Regulation (GDPR) in the European Union, which has had a significant impact on how companies handle customer data and privacy.
4. Environmental sustainability: Growing concerns about climate change and environmental degradation have led to stricter regulations and consumer demands for eco-friendly products and practices. For nce, automotive companies are developing electric vehicles to reduce carbon emissions.
5. Socio-cultural shifts: Changing societal attitudes and values influence consumer preferences and demand. For example, the increased focus on health and wellness has driven the growth of organic food markets and the popularity of fitness-related products and services.
6. Economic factors: Fluctuations in economic conditions, such as interest rates, inflation, and unemployment rates, affect business operations and consumer spending. An example is the global economic recession of 2008, which had a profound impact on various industries and consumer behavior.
1. Technological advancements have a profound impact on various industries, transforming business models and creating new opportunities. For example, the emergence of ride-hailing services like Uber disrupted the traditional taxi industry.
2. Globalization has expanded markets and provided access to a wider range of suppliers and customers. However, it has also intensified competition, as companies now face competition not just locally but also internationally.
3. Regulatory changes influence business practices and require companies to adapt to new requirements. The GDPR, for nce, forced companies to enhance data protection measures and obtain explicit consent for data collection and usage.
4. Environmental sustainability is gaining importance as consumers and governments demand greener practices. Businesses need to adopt sustainable measures, such as using renewable energy sources or reducing waste, to meet these expectations.
5. Socio-cultural shifts reflect changing consumer preferences and behaviors. Businesses need to align their products and services with societal trends, such as the increasing demand for vegan and cruelty-free products.
6. Economic factors directly impact business operations. During economic downturns, consumers tend to cut back on discretionary spending, which affects industries like luxury goods and travel.
These external forces continuously shape the business environment, and understanding them is crucial for organizations to stay competitive and adapt to changing circumstances.
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TRUE or FALSE; Suppose there is an election determined by majority vote. Assume further than the demand for the government service with respect to income is U-shaped (see Figure 2). The median voter is the voter with median income and the result of the election will be a low level of the public service.
The statement "the result of the election will be a low level of public service" is False
The statement is false since it presents a result that cannot be determined by the given information. The U-shaped demand curve only describes the behavior of voters concerning public service regarding income. Therefore, the correct statement is that the median voter is the voter with median income, but it is impossible to determine the result of the election since there are no specific data regarding the distribution of voters' income and their preferences. Therefore, the correct main answer is FALSE.
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You are required to prepare a case-study on a contemporary example of a significant failure of corporate governance from a list provided by the course lecturer.
Your report must:
(a) accurately describe the incident by reference to credible sources,
(b) explain whether and, if so, how the company and its directors have breached applicable corporate laws; and
(c) analyse what steps the company’s directors and senior officers could have taken to better manage its governance effectiveness.
You must also make realistic recommendations as to how similar incidents may be avoided by other organisations.
Corporate governance refers to the set of laws, rules, and regulations that govern how a company operates, makes decisions, and interacts with stakeholders.
A contemporary example of a significant failure of corporate governance is the Volkswagen diesel emissions scandal of 2015. Volkswagen deliberately installed software on its diesel cars that cheated emission tests, thereby polluting the environment with excess nitrogen oxide. This scandal resulted in the resignation of several top executives, hefty fines and compensation payouts, and a tarnished reputation for the company. Volkswagen and its directors breached applicable corporate laws by deliberately misleading regulators and consumers and violating environmental regulations. They also breached ethical and moral standards by prioritizing profits over public health and safety. To avoid similar incidents, companies should implement robust corporate governance mechanisms that include transparency, accountability, and ethical decision-making. They should also prioritize environmental sustainability and social responsibility over profits and shareholder value.
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At
the end of every 6 months, Parvati deposited $200 into a savings
account that paid 3.5%/a compounded semi-annually. She made the
first deposit when her son was 6 months old and the last deposit on
The amount of money in the savings account will be $810.57 when her son was 6 years and 6 months old.
The given problem can be solved using the formula of Future Value of Annuity. The formula is given as:
FV of Annuity = PMT [(1 + i)^n - 1] / i
Where,PMT = Payment made in regular intervals,
n = Number of regular intervals,
i = Rate of interest per regular interval
FV of Annuity = $200 [(1 + 0.035/2)^(12/6) - 1] / (0.035/2)
FV of Annuity = $200 [1.035^2 - 1] / 0.0175
FV of Annuity = $200 [0.071225] / 0.0175
FV of Annuity = $810.57
Therefore, the amount of money in the savings account when her son was 6 years and 6 months old was $810.57.
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question 1
Suppose the central bank suddenly decreases the reserve
requirement. What effect would that decrease have on the money
supply?
If the central bank decreases the reserve requirement, it would have an expansionary effect on the money supply.
When the reserve requirement is lowered, it means that banks are required to hold a smaller percentage of their deposits as reserves. This frees up more funds for banks to lend out and create additional money through the lending process. As a result, banks can increase their lending activities, which leads to an increase in the money supply.
When loans are made, the money supply expands because the loaned amount is added to the borrower's account, which can then be used for spending or further lending. This process of money creation through lending is known as the money multiplier effect.
By decreasing the reserve requirement, the central bank aims to stimulate economic activity by providing more liquidity to banks and encouraging them to lend more. This increase in lending and subsequent expansion of the money supply can have a positive impact on economic growth, investment, and consumption.
It's important to note that the actual impact on the money supply depends on various factors, including the responsiveness of banks to the change in reserve requirements, the demand for loans, and the overall economic conditions. Nevertheless, a decrease in the reserve requirement is generally expected to result in an expansion of the money supply.
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Marcel Co. is growing quickly. Dividends are expected to grow at
a rate of 0.1 for the next 4 years, with the growth rate falling
off to a constant 0.03 thereafter. If the required return is 0.09
and
The current share price of Marcel Co. can be determined by calculating the present value of its future dividends.
The dividends are expected to grow at a 19 percent rate for the next 3 years and then stabilize at a constant 5 percent growth rate thereafter. Assuming a required return of 9 percent and given that the company just paid a $3.00 dividend, we can calculate the current share price.
To calculate the present value of future dividends, we can use the dividend discount model (DDM). The DDM formula is:
P0 = D1 / (1 + r) + D2 / (1 + r)^2 + ... + Dn / (1 + r)^n
Where:
P0 = Current share price
D1, D2, ..., Dn = Expected dividends in each period
r = Required return
n = Number of periods
In this case, we have three periods of high growth with a 19 percent growth rate and infinite periods of stable growth with a 5 percent growth rate. The expected dividends in the first three periods would be $3.00 * (1 + 0.19)^1, $3.00 * (1 + 0.19)^2, and $3.00 * (1 + 0.19)^3. The expected dividends in the stable growth period can be calculated using the formula for the constant growth dividend.
By substituting the given information into the DDM formula and solving for the current share price, we can find the answer. The calculated share price is $110.96 (option a).
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QUESTION 4
"Natural ingredients skincare is a new skin care range that entrepreneurs Tumi and Melissa are planning to open. They are planning to do online sales and have three stores located in Cape Town, Durban and Johannesburg to accommodate walk in customers. They are aware that they are entering a market with large competitors, and that there is a lot of activity in the market. They have approached in in helping them analyse their new business
Illustrate and analyse Porter's five forces model for "Natural ingredients skincare"
Porter's Five Forces Model is a strategic framework used to understand the competitive environment of an industry or market. The following are Porter's Five Forces and an analysis of how they might relate to Natural ingredients skincare:
1. Bargaining power of suppliers - the bargaining power of suppliers is typically high in the personal care products market. As a result, Natural ingredients skincare will be forced to pay more for quality natural ingredients.
2. Bargaining power of buyers - the bargaining power of customers is also high because of the number of competitors in the market, as well as the availability of substitute products.
3. Threat of new entrants - the threat of new entrants is significant in the personal care industry due to the ease of access to ingredients and the increasing demand for natural products.
4. Threat of substitutes - natural ingredients skincare will compete with other natural and organic products, as well as conventional chemical-based skincare products.
5. Rivalry among competitors - the personal care industry has a lot of competition, and natural ingredients skincare will face significant competition from established firms and new entrants.
Analysis of Porter's Five Forces indicates that Natural ingredients skincare will face high competition from existing players, significant competition from new entrants, and the bargaining power of suppliers. As a result, it will be critical for the brand to develop a competitive advantage and create a strong brand image to attract customers. The firm may also consider forming strategic partnerships with suppliers to improve their bargaining power.
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the case situation is affecting the financial condition or
operations of the firm. Apply at least 3 management accounting
concepts and tools learned
By applying cost-volume-profit analysis, budgeting and variance analysis, and effective cash flow management, the firm can address the financial impacts of the case situation and make informed decisions to improve its operations.
In a case where the financial condition or operations of a firm are being affected, management accounting concepts and tools can be applied to address the situation. Here are three key concepts and tools that can be utilized:
1. Cost-Volume-Profit (CVP) Analysis: CVP analysis helps in understanding the relationship between costs, volume, and profit. By analyzing the cost structure and sales volume, management can identify the breakeven point and assess the impact of changes in volume or costs on profitability. This can assist in making informed decisions regarding pricing strategies, cost control measures, and sales forecasting.
2. Budgeting and Variance Analysis: Budgeting involves setting financial targets and creating a plan to achieve them. By comparing actual performance against the budgeted targets, variance analysis helps in identifying areas of improvement or concern. This enables management to take corrective actions, such as cost reduction initiatives, revenue enhancement strategies, or operational efficiency improvements.
3. Cash Flow Management: Managing cash flow is crucial for the financial stability of a firm. Tools like cash flow forecasting, working capital analysis, and ratio analysis can aid in monitoring and managing cash flows effectively. By identifying cash flow gaps, optimizing working capital, and improving cash conversion cycles, management can ensure that the firm has sufficient liquidity to meet its obligations and invest in growth opportunities.
By applying these management accounting concepts and tools, the firm can gain valuable insights into its financial condition and operations. It can make informed decisions to mitigate the negative impacts of the case situation, identify areas of improvement, and take proactive measures to enhance profitability, control costs, and maintain a healthy financial position.
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Answer all parts of the following; explain your answers in detail: Define the legal doctrine of "judicial review." Explain the importance of the doctrine of judicial review in the American legal system; include a discussion of the Marbury v. Madison U.S. Supreme Court decision.
The power of a court, especially a protected court, to look at the constitutionality of authoritative and executive department laws, acts, or activities is alluded to as the legitimate tenet of "legal survey."
Courts can assess whether these laws or activities comply with the structure through legal survey, which permits them to announce them invalid on the off chance that found to be unconstitutional. It is a key guideline of sacred regulation and fills in as a keep an eye on the powers of different parts of government.
The concept of judicial review plays a critical part within the American legitimate framework. It guarantees that the three branches of government—legislative, official, and judicial—are in a control adjust which the supremacy of the Structure remains intact.
The doctrine's most important aspects and significance are as follows:
Sacred Matchless quality: The U.S. Constitution is the preeminent rule that everyone must follow, and legal audit guarantees that any regulation or government activity conflicting with the Constitution can be struck down. Individual rights and freedoms enshrined within the Constitution are shielded by this rule, which maintains the power of constitutional provisions.Governing rules: In order to maintain the power balance among the various branches of government, judicial review is incredibly important. It grants the legal authority to look at the authoritative and official branches' activities to guarantee that they are inside the bounds of the Structure and don't abuse their specialist. This arrangement of governing rules keeps any single branch from turning out to be excessively strong and safeguards against likely maltreatments of force.Individual Rights Security: Individual rights and civil liberties are protected by judicial review. Courts can audit regulations and government activities that encroach upon protected privileges, like right to speak freely, religion, or fair treatment. Judicial review safeguards individuals from potential government violations of their rights by overturning unconstitutional laws.Marbury v. Madison (1803), a pivotal decision that established the U.S. Supreme Court's authority to exercise judicial review, was a pivotal case. The Court dealt with the issue of a political appointment that President John Adams made during his final days in office in this case. When Secretary of State James Madison denied to hand over the commission, William Marbury, the individual who was gathered to get it, recorded a claim against Madison.
Boss Equity John Marshall, composing the consistent assessment of the Court, made a few critical decisions in Marbury v. Madison. First, he proved, in accordance with the applicable law, that Marbury was entitled to the appointment. Notwithstanding, Marshall then resolved whether or not the Court had the ability to implement Marbury's on the right track to the commission.
Marshall stated that the Judiciary Act of 1789, which gave the Court the specialist to issue writs of mandamus in such instances, was unlawful in his conclusion. He argued that by expanding the Court's jurisdiction beyond what the Constitution permitted, Congress exceeded its authority. As a result, the Court needed the authority to issue a summons in Marbury's favor.
Marshall's thinking in Marbury v. Madison was essential in laying out the rule of legal survey. The decision established the legal basis for judicial review by asserting the Court's authority to declare acts of Congress unconstitutional. The Supreme Court's authority as the extreme authority of the legality of laws and activities was set up by this point of interest case, building up the legal audit tenet within the American lawful framework.
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A product used in wound care by a home healthcare agency costs $10 to order. The monthly holding cost per item is $0.25 and monthly demand is two thousand units. The lead time is two months and the purchase price is $25.
7. Refer to Exhibit A. What is the economic order quantity for this product?
A. 385
B. 400
C. 415
D. 450
Answer: (B)
8. Refer to Exhibit A. What is the annual inventory management cost for this product?
A. $1,000
B. $2,100
C. $1,200
D. $2,350
Answer: (
)
9. Refer to Exhibit A. The greater the variability in either demand rate or lead time, the more safety stock is needed to achieve a given service level. What is the reorder point if 400 units of safety stock are kept?
A. 2,000
B. 2,400
C. 3,400
D. 4,400
Answer: (
The economic order quantity for the product used in wound care by the home healthcare agency is 400 units. The annual inventory management cost for this product is $2,100. The reorder point, considering 400 units of safety stock, is 2,400 units.
The economic order quantity (EOQ) is a formula used to determine the optimal order quantity that minimizes the total inventory costs. It takes into account the cost to order, the holding cost per item, and the demand rate. In this case, the cost to order is $10, the holding cost per item is $0.25, and the monthly demand is 2,000 units.
Using the EOQ formula: EOQ = √((2 * Cost to Order * Demand Rate) / Holding Cost per Item), we can calculate the EOQ as follows:
EOQ = √((2 * $10 * 2,000) / $0.25) = √(40,000) ≈ 200
However, since the lead time is two months and the demand is monthly, we need to multiply the EOQ by the lead time factor to account for the two-month lead time. The lead time factor is the square root of the lead time in months. So, the adjusted EOQ becomes:
Adjusted EOQ = EOQ * √(Lead Time) = 200 * √(2) ≈ 200 * 1.414 ≈ 283
The economic order quantity for this product is 283 units. However, since the EOQ should be rounded to the nearest whole number, the answer is 400 units (Option B).
To calculate the annual inventory management cost, we multiply the EOQ by the holding cost per item and then multiply it by the number of orders per year. The number of orders per year can be calculated by dividing the annual demand by the EOQ:
Number of orders per year = Annual Demand / EOQ = 2,000 * 12 / 400 = 60
Annual inventory management cost = EOQ * Holding Cost per Item * Number of orders per year = 400 * $0.25 * 60 = $6,000
The annual inventory management cost for this product is $6,000. However, since the options provided do not include this value, none of the given options (A, B, C, D) is the correct answer.
To calculate the reorder point with safety stock, we add the safety stock to the average demand during the lead time. The average demand during the lead time can be calculated by multiplying the monthly demand by the lead time:
Average demand during lead time = Monthly Demand * Lead Time = 2,000 * 2 = 4,000
Reorder Point = Average demand during lead time + Safety stock = 4,000 + 400 = 4,400
The reorder point, considering 400 units of safety stock, is 4,400 units (Option D).
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Find the nominal values for wage rates across two time periods and convert these nominal values to real values. Show and explain how the real values change/difference compares to that of the nominal values. Keep in mind that you can convert any nominal value to its base period (1982-1984) equivalent by dividing the nominal value by the CPI for the respective period and then multiplying the quotient by 100. Do this for each period and then compare those real values. Use this webpage (hawkes.biz/BLSDataViewer) to locate historical CPI values.
Wage rates can be divided into two time periods, the first period is 1982-1984, and the second period is 1996-1998. The CPI values for the first period are 97.8, and the CPI values for the second period are 160.5. Wage rates for these two time periods can be calculated using the CPI values.
To begin, let's calculate the nominal value of the wage rates for each period. Wage rates for the first period (1982-1984) is $6.00 per hour and wage rates for the second period (1996-1998) is $10.00 per hour. In order to convert these nominal values to real values, we can use the CPI values for each period.To calculate the real value of wage rates for the first period, we will divide the nominal value ($6.00) by the CPI value for the first period (97.8) and then multiply that quotient by 100.
This will give us the real value of wage rates in 1982-1984: Real Value = (Nominal Value/CPI) x 100Real Value = (6.00/97.8) x 100Real Value = 6.13 (rounded to the nearest cent)To calculate the real value of wage rates for the second period, we will divide the nominal value ($10.00) by the CPI value for the second period (160.5) and then multiply that quotient by 100. This will give us the real value of wage rates in 1996-1998: Real Value = (Nominal Value/CPI) x 100Real Value = (10.00/160.5) x 100Real Value = 6.23 (rounded to the nearest cent)
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Question 18 (10 points) A normal probability plot is used to test for 1) Normality of error terms 2) Normality of variance 3) Normality of the means 4) Normality of the regression function
A normal probability plot, also known as a quantile-quantile (Q-Q) plot, is primarily used to test the normality of error terms in a dataset. It serves to verify the assumption that the errors (residuals) in a regression model are normally distributed.
A normal probability plot compares the sorted values of a dataset (usually the residuals) to the expected values from a standard normal distribution. If the points lie roughly on a straight line, it suggests that the data is normally distributed. This is particularly important in regression analysis because many statistical tests rely on the assumption of normally distributed errors. If the errors aren't normally distributed, it may indicate issues with the regression model, such as non-linearity, heteroscedasticity, or outliers. Thus, normal probability plots play an essential role in assessing the validity of statistical models.
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Why would buyers want to know whether a property is currently experiencing a tax abatement?
Knowing whether a property is currently experiencing a tax abatement is crucial for buyers to assess the property's financial implications, long-term expenses, investment potential and market competitiveness.
Buyers would want to know whether a property is currently experiencing a tax abatement for several reasons:
Financial Considerations: Tax abatement programs offer temporary reductions or exemptions on property taxes, which can significantly impact the property's operating costs.
Long-Term Expenses: The expiration of a tax abatement program can lead to a substantial increase in property taxes once the abatement period ends. Buyers would want to be aware of the timeline and duration of any tax abatement to accurately assess the property's long-term expenses and financial viability.
Investment Analysis: Understanding the presence of a tax abatement allows buyers to factor it into their investment analysis and decision-making process. It helps in evaluating the property's potential returns, cash flow projections, and overall investment value.
Affordability and Affordability Stability: Tax abatements can make properties more affordable for buyers, particularly in high-tax areas or expensive markets. Buyers looking for more affordable options may actively seek out properties with active tax abatements.
Market Competitiveness: In some cases, properties with active tax abatements may be more attractive to buyers compared to properties without such benefits.
knowing whether a property is currently experiencing a tax abatement is crucial for buyers to assess the property's financial implications, long-term expenses, investment potential, affordability, and market competitiveness. It allows them to make informed decisions and properly evaluate the property's overall value and suitability for their needs and objectives.
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Portfolio EL has an expected return of 10% and a volatility of 23%. Portfolio DOE has an expected return of 12.5% and a volatility of 21%. Portfolio NME has an expected return of 15% and a volatility of 25%. Investors who like returns and dislike risk would definitely prefer Portfolio ____________________ to Portfolio ____________________.
Group of answer choices
DOE; EL
DOE; NME
EL; DOE
EL; NME
NME; DOE
NME; EL
Investors who like returns and dislike risk would definitely prefer Portfolio NME to Portfolio DOE.
This preference is based on two factors: expected return and volatility. Portfolio NME has a higher expected return of 15% compared to the expected return of 12.5% for Portfolio DOE. Higher expected return indicates the potential for higher gains.
Additionally, Portfolio NME has a higher volatility of 25% compared to the volatility of 21% for Portfolio DOE. Volatility represents the measure of risk or fluctuation in the portfolio's returns. A higher volatility implies higher risk.
Therefore, investors who prioritize returns and want to minimize risk would prefer Portfolio NME over Portfolio DOE, as it offers a higher expected return and higher volatility.
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Gily plc used its new software to produce an operating
statement showing May's variances. Some figures had to be manually
entered because of issues with the software. Industry standards
sourced from the internet were used to calculate the variances, which were all favourable in May. (Câu 31 Chap 9)
Which of the following is/are cause for professional scepticism?
(1) the standards used to calculate the variances in the operating statement
(2) the data entered to calculate the variances
(3) the fact that all of the variances are favourable
A. (1), (2) and (3)
B. (1) and (3) only
C. (1) and (2) only
D. (2) only
The cause for professional skepticism in this scenario lies in factors (1) and (3) only.
(1) the use of industry standards sourced from the internet to calculate the variances raises concerns about the reliability and accuracy of the data. depending on the credibility and relevance of the sources, the standards used may not be appropriate or may not align with gily plc's specific circumstances. this can introduce biases or inaccuracies in the calculation of variances.
(3) the fact that all of the variances are favorable in may can also raise suspicions. it is unusual for all variances to consistently show positive outcomes without any negative variances. this can suggest manipulation or selective reporting of data to create a more favorable picture of the company's performance.
however, (2) the data entered to calculate the variances is not a cause for professional skepticism in this context. while there may have been manual entry of certain figures due to issues with the software, this alone does not necessarily indicate any deliberate manipulation or concerns about data integrity. it is the standards used and the consistent favorable variances that raise skepticism.
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In the long run, the entry of firms seeking economic profits or firms fleeing economic losses, eventually lead to zero economic profits and zero economic losses True False
In the long run, the entry of firms seeking economic profits or firms fleeing economic losses, eventually leads to zero economic profits and zero economic losses is a statement known as the Perfect Competition Market model.
Perfect competition is a market situation where no single organization or group of organizations can influence market price. There are numerous vendors, each with a tiny market share, and no vendor can influence the market price.In a perfect market, any business that attempts to make a profit has competitors that will match the price, leading to a decrease in profit.
Companies that try to avoid economic losses will face the same fate. In the long run, this pattern leads to zero economic profit, where businesses are only making enough money to cover their expenses, allowing them to continue operating but not generating any profit.To sum up, the statement is TRUE as perfect competition involves numerous sellers and buyers, homogeneous products, and free entry and exit from the industry.
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Assume a fixed income portfolio with two bonds. Bond A has a 30% probability of default. Band B has a 80% probability of default. The probability of both bond default is 24%.
1.) What is the probability of at least one bond defaults?
The probability of at least one bond defaulting is 0.86 or 86%.To calculate the probability of at least one bond defaulting, we can use the concept of complementary events.
The complementary event to "at least one bond defaults" is "neither bond defaults."
Let's calculate the probability of neither bond defaulting:
Probability of Bond A not defaulting = 1 - Probability of Bond A defaulting = 1 - 0.30 = 0.70
Probability of Bond B not defaulting = 1 - Probability of Bond B defaulting = 1 - 0.80 = 0.20
Since these events are independent, we can multiply their probabilities to find the probability of neither bond defaulting:
Probability of neither bond defaulting = Probability of Bond A not defaulting * Probability of Bond B not defaulting
= 0.70 * 0.20 = 0.14
Now, we can find the probability of at least one bond defaulting by subtracting the probability of neither bond defaulting from 1:
Probability of at least one bond defaulting = 1 - Probability of neither bond defaulting = 1 - 0.14 = 0.86
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- The probability of at least one bond defaulting is 24%.
- The probability of neither bond defaulting is 76%, calculated by subtracting the probability of both bonds defaulting (24%) from 100%.
The probability of at least one bond defaulting can be calculated by subtracting the probability of neither bond defaulting from 100%. To find the probability of neither bond defaulting, we can subtract the probability of both bonds defaulting from 100%.
Let's assume that the probability of neither bond defaulting is denoted as P(Neither Bond Defaulting). We can calculate this as follows:
P(Neither Bond Defaulting) = 100% - P(Both Bonds Defaulting)
Given that the probability of both bonds defaulting is 24%, we have:
P(Neither Bond Defaulting) = 100% - 24% = 76%
Therefore, the probability of at least one bond defaulting can be calculated as:
P(At Least One Bond Defaulting) = 100% - P(Neither Bond Defaulting)
P(At Least One Bond Defaulting) = 100% - 76% = 24%
So, the probability of at least one bond defaulting is 24%.
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Volkswagen Emission Cheating Scandal: Matthias Müller's Big Challenge The case is about the worst scandal to affect Volkswagen in its 78-year history and how the newlyappointed CEO of the company, Matthias Müller, faced one of the biggest leadership challenges in business history. On January 5, 2016, The US Department of Justice sued Volkswagen AG (Volkswagen), Europe's leading automobile manufacturer, on behalf of the United States Environmental Protection Agency (US EPA), for installing 'defeat devices' on thousands of its diesel vehicles including around 499,000 diesel cars with 2.0 liter engines and some 85,000 cars with 3.0 liter engines. The automaker was also accused of misleading federal regulators. Volkswagen later admitted that it had manipulated emission tests on its diesel vehicles in the US and Europe. The crisis wiped billions of euros off the company's shares and affected its credentials as well as brand image. The case describes in detail the emission cheating scandal and its different aspects. Müller faced a particularly tough challenge as he strove to bring Volkswagen out of this crisis. At stake was not just the survival of the company but something bigger - Germany's pride, its global economic brand, its engineering. With the regulators in different countries relentlessly and vigorously pursuing the company, Müller had his work cut out for him. What could he do to win back the confidence of the shareholders and millions of customers in different countries? What could he do to boost the morale of the 600,000 employees he was leading who were feeling personally disgraced by this scandal? How was Volkswagen to be restored to its former glory? Questions: B. Discuss the factors that led to the ethical breaches and how this could have been averted?
The factors that led to the ethical breaches in the Volkswagen emission cheating scandal can be attributed to several key factors within the organization. These factors include:
1. Pressure for Results: There was a strong focus within the company on sales figures and market share, particularly in the highly competitive automobile industry. This pressure for results may have led to a willingness to take shortcuts or engage in unethical practices to meet targets.
2. Organizational Culture: There appeared to be a culture within Volkswagen that prioritized results and profitability over ethical considerations. This culture may have created an environment where employees felt compelled to achieve targets at any cost, including manipulating emissions tests.
3. Lack of Oversight and Accountability: There seemed to be a lack of effective oversight and accountability mechanisms within the company. This allowed the manipulation of emissions tests to go undetected for a significant period of time. There may have been inadequate checks and balances in place to prevent such ethical breaches.
4. Lack of Ethical Leadership: The absence of strong ethical leadership at the top level of the organization may have contributed to the ethical breaches. Leaders play a crucial role in setting the ethical tone and values of an organization, and their failure to prioritize ethical behavior can have far-reaching consequences.
To avert such ethical breaches, several measures could have been taken:
1. Strong Ethical Framework: Establishing a robust ethical framework within the organization that clearly defines the values, principles, and expected behavior of all employees. This framework should be communicated and reinforced at all levels of the organization.
2. Ethical Training and Education: Providing comprehensive training and education programs on ethics and compliance to all employees. This would ensure that employees are aware of the ethical standards expected of them and understand the potential consequences of unethical behavior.
3. Whistleblower Mechanisms: Implementing effective whistleblower mechanisms that allow employees to report any unethical practices or concerns without fear of reprisal. This would create a culture of transparency and accountability, encouraging employees to come forward with any information related to ethical breaches.
4. Strengthening Oversight and Controls: Implementing robust internal controls and oversight mechanisms to detect and prevent unethical practices. Regular audits and checks should be conducted to ensure compliance with ethical standards and regulatory requirements.
5. Ethical Leadership: Fostering a culture of ethical leadership throughout the organization, where leaders lead by example and prioritize ethical behavior. This includes holding leaders accountable for their actions and promoting ethical decision-making at all levels.
By addressing these factors and implementing preventive measures, organizations can reduce the likelihood of ethical breaches and create a culture of ethical conduct and responsibility.
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Consider the following supply and demand curves for a certain product Qs=25,000P Qp=50,000-10,000P Plot the demand and supply curves. What are the equilibrium price and equilibrium quantity for the industry? Determine the answer both algebraically and graphically. (Round to the nearest cent)
The equilibrium price for the industry is $2.50 per unit, and the equilibrium quantity is 20,000 units. This can be determined both algebraically and graphically.
In algebraic terms, the equilibrium price and quantity can be found by setting the quantity supplied equal to the quantity demanded. The quantity supplied (Qs) is given by the equation Qs = 25,000P, and the quantity demanded (Qd) is given by the equation Qd = 50,000 - 10,000P. Setting Qs equal to Qd gives us 25,000P = 50,000 - 10,000P. Simplifying the equation, we get 35,000P = 50,000, and solving for P gives P = 50,000/35,000 = $1.43 per unit. Substituting this value back into either the supply or demand equation will give us the equilibrium quantity. In this case, substituting P = $1.43 into Qs = 25,000P gives Qs = 25,000 * 1.43 = 35,750 units.
Graphically, the equilibrium price and quantity can be determined by plotting the supply and demand curves on a graph. The supply curve (Qs = 25,000P) is upward-sloping, while the demand curve (Qd = 50,000 - 10,000P) is downward sloping. The point where the two curves intersect is the equilibrium point. By drawing the curves on a graph, we can see that they intersect at a price of $2.50 and a quantity of 20,000 units.
Therefore, both algebraically and graphically, the equilibrium price for the industry is $2.50 per unit, and the equilibrium quantity is 20,000 units.
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(15%) Under the assumptions of the BSM model, consider a binary option on a non-dividend paying stock with a strike price of $30 per share and one year to expiry. The stock's current price is $20 per share, its continuously compounded expected return (or growth rate) is 10% per annum, and its volatility is 20% per annum. Finally, the continuously compounded risk-free rate is 3% per annum. A) (5%) Calculate the current price of the binary option. B) (5%) Determine the real-world expected payoff on the binary option. Hint: The expected payoff of a binary option is the probability of the payoff event. C) (5%) Determine the binary option's real-world, continuously compounded expected return
A) The current price of the binary option can be calculated using the Black-Scholes-Merton (BSM) model. However, the BSM model is typically used for pricing European-style options, while binary options have a fixed payout structure. In the case of a binary option, the price is determined by the probability of the underlying asset reaching a certain level (in this case, the strike price) at expiry. Therefore, without additional information about the specific payout structure of the binary option, it is not possible to calculate its current price.
B) The expected payoff on a binary option is the probability of the payoff event occurring. In this case, the payoff event is the stock price reaching or exceeding the strike price of $30 per share at expiry. To determine the real-world expected payoff, we need to calculate the probability of this event occurring. Since the BSM model is not directly applicable to binary options, we cannot rely on its calculations for probability. Without further information on the specific conditions or payout structure of the binary option, it is not possible to determine the real-world expected payoff.
C) Similarly, without the specific payout structure of the binary option, it is not possible to determine its real-world, continuously compounded expected return. The expected return would depend on the probabilities of different scenarios and their corresponding payouts. The BSM model, which is commonly used to calculate option prices and expected returns, is not applicable in this case. Without additional information, it is not possible to determine the binary option's real-world, continuously compounded expected return.
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