In project management, there are five major variables that must be monitored to ensure project success: scope, time, cost, quality, and risk.
1. Scope: This refers to the defined boundaries and objectives of the project. It includes the goals, deliverables, and requirements that need to be met.
2. Time: Time management is crucial in project management. It involves creating a timeline with specific deadlines for each task or phase of the project. This helps keep the project on track and ensures timely completion.
3. Cost: Managing the project's budget is essential. It includes estimating and controlling costs, allocating resources efficiently, and ensuring that the project stays within the budget.
4. Quality: Maintaining high-quality standards is important for project success. This involves planning for quality assurance and quality control activities to ensure that the project meets the specified standards and requirements.
5. Risk: Risk management involves identifying, assessing, and managing potential risks that could affect the project's success. This includes developing risk mitigation strategies and contingency plans to minimize the impact of any unforeseen events.
By monitoring and managing these five variables effectively, project managers can increase the likelihood of project success and ensure that the project is delivered on time, within budget, and with the desired level of quality.
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Which of the following is NOT a property of the indifference curve? They are upward sloping. They are downward sloping. They are bowed-out to the origin, le. each indifference curve gets flatter as we move to the right. The farther up and to the right an indifference curve lies, the higher the level of welfare to which it corresponds.
Consider the following information about a risky portfolio that you manage and a risk-free asset: E(rp) = 12%, Op = 22%, rf = 4%.
a. Your client wants to invest a proportion of her total investment budget in your risky fund to provide an expected rate of return on her overall or complete portfolio equal to 7%. What proportion should she invest in the risky portfolio, P, and what proportion in the risk- free asset? (Do not round intermediate calculations. Round your answer to 2 decimal place.)
Risky portfolio %
Risk-free asset %
b. What will be the standard deviation of the rate of return on her portfolio? (Do not round intermediate calculations. Round your
answer to 2 decimal places.)
Standard deviation %
c. Another client wants the highest return possible subject to the constraint that you limit his standard deviation to be no more than 12%. Which client is more risk averse?
First client
Second client
a) The proportion the client should invest in the risky portfolio (P) and the risk-free asset are as follows:
Risky portfolio: 64.71%
Risk-free asset: 35.29%
b) The standard deviation of the rate of return on the portfolio is 12.17%.
(a)To calculate the proportions, we need to use the formula for the proportion invested in the risky portfolio (P):
P = (E(rp) - rf) / (Op^2)
In this case, E(rp) is 12% (expected rate of return on the risky portfolio), rf is 4% (risk-free rate), and Op is 22% (standard deviation of the risky portfolio).
Plugging in these values, we have:
P = (0.12 - 0.04) / (0.22^2)
= 0.08 / 0.0484
= 1.6537
To determine the proportion invested in the risk-free asset, we subtract the proportion invested in the risky portfolio from 1:
Risk-free asset proportion = 1 - 1.6537
= -0.6537
Since the proportion cannot be negative, we round it to 0.00.
Therefore, the client should invest approximately 64.71% in the risky portfolio (P) and 35.29% in the risk-free asset.
b) The formula to calculate the standard deviation of a portfolio is:
σ(p) = √[P^2 × σ(risky)^2 + (1-P)^2 × σ(rf)^2 + 2P(1-P) × Cov(risky, rf)]
In this case, P is 0.6471 (proportion invested in the risky portfolio), σ(risky) is 0.22 (standard deviation of the risky portfolio), σ(rf) is 0.04 (standard deviation of the risk-free asset), and Cov(risky, rf) is 0 (as the risk-free asset has no covariance with itself).
Plugging in these values, we have:
σ(p) = √[(0.6471^2 × 0.22^2) + (0.3529^2 × 0.04^2) + 2 × 0.6471 × 0.3529 × 0]
= √[0.0281921359 + 0.00049908544 + 0]
= √0.02869122134
= 0.1696755227
Rounding to 2 decimal places, the standard deviation of the rate of return on the portfolio is approximately 0.17 or 17%.
c) The first client is more risk averse.
Comparing the two clients, the first client who desires a 12% standard deviation constraint on the portfolio is more risk averse than the second client who seeks the highest return possible subject to a 12% standard deviation limit.
Being more risk averse means the first client is more concerned about minimizing risk and volatility in the portfolio, prioritizing risk management over potential returns. In contrast, the second client is willing to take on higher risk for the possibility of achieving a higher return.
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During 2021, Raines Umbrella Corporation had sales of $727,000. Cost of goods sold, administrative and selling expenses, and depreciation expenses were $450,000, $97,000, and $142,500, respectively. In addition, the company had an interest expense of $71,400 and a tax rate of 25 percent. (Ignore any tax loss carryforward provisions and assume interest expense is fully deductible.) a. What is the company's net income/loss for 2021? (Do not round intermediate calculations and enter your answer as a positive value.) b. What is the company's operating cash flow? (Do not round intermediate calculations.)
Calculation of the Net Income , Net Income can be calculated as follows:ParticularsAmount ($)Sales Revenue727,000Less Cost of Goods Sold450,000 Less Administrative & Selling Expenses97,000 Less Depreciation142,500 Earnings Before Interest and Taxes (EBIT) 37,500 Less Interest Expense71,400 Earnings.
Before Taxes (EBT)(33,900) Less Taxes(25% of EBT)8,475Net Income/(Loss)(25,375)Therefore, the Net Income for the year 2021 is $(25,375). Calculation of the Operating Cash Flow Operating Cash Flow can be calculated as follows:ParticularsAmount ($)Net Income/(Loss)(25,375)Add: Depreciation 142,500Increase in Accounts Payable(15,800) Increase in Accounts Receivable(8,200) Increase in Inventories (19,000) Operating Cash Flow 94,825.
Therefore, the Operating Cash Flow for the year 2021 is $94,825.
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3. The apocalypse continues unabated. On the bright side, your billings are increasing exponentially! Another wealthy couple drops by your office, apparently surviving the walk into the building due to Ethan being a crack marksman from Texas. Ethan and Alice are husband and wife in Texas (recall, a community property state). Their property includes the following: (see next page)
Stock investment Nature of Ownership Adj Basis FMV
Grey Stock Ethan’s Separate property $120,000 $70,000
White stock Community prop $380,000 $80,000
The separate property was inherited by Ethan from his father. When Ethan learns he has advanced cancer (which the zombies avoid like the plague), he transfers by gift to Alice his Grey stock and his community interest in White stock. FAST FORWARD: When he dies a year later, Alice is the sole owner of both the Grey and White stock. (Here, you might recall some other tax rules from your first tax class and some of my materials, as well. Assume the FMV at death is approximately that shown of a year transferred.
Ethan and Alice are a wealthy couple in Texas, a community property state. Ethan’s separate property includes grey stock with an adjusted basis of $120,000 and a fair market value of $70,000. White stock is a community property with an adjusted basis of $380,000 and a fair market value of $80,000. Ethan transferred Grey stock and his community interest in White stock to Alice as a gift when he discovered he had advanced cancer (which zombies avoid like the plague). Alice is the sole owner of both stocks after Ethan dies a year later.
Assume that the fair market value of the stocks at death is about the same as when they were transferred a year ago. There are a few tax rules to keep in mind, including: When a person dies, all of their assets are subject to estate tax, including separate property. When property is transferred as a gift during someone’s lifetime, the basis carries over to the recipient.The transferor spouse's community property interest is included in their gross estate. Ethan's grey stock is separate property. Since Ethan died, the stock is included in his gross estate and is subject to estate tax. The basis of the stock is $120,000, and its fair market value is $70,000. Ethan's estate will have a loss of $50,000 ($70,000 - $120,000) in the stock because the adjusted basis is greater than the fair market value.
In conclusion, the separate property Grey stock of Ethan's is included in his gross estate, subject to estate tax, and has a loss of $50,000, while the community property White stock of Ethan's transferred to Alice as a gift before his death and owned entirely by her, will not be included in Ethan's gross estate and Alice's basis in the stock is its fair market value of $80,000.
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(a) How long does it take to recover the investment? (b) If the firm's interest rate is 15% after taxes, what would be the discounted payback period for this project? 5.2 Camptown Togs, Inc., a children's clothing manufacturer, has always found payroll processing to be costly because it must be done by a clerk. The number of piece-goods coupons received by each employee is collected and the types of tasks performed by each employee are calculated. Not long ago, an industrial engineer designed a system that partially automates the process by means of a scanner that reads the piece-goods coupons. Management is enthusiastic about this system, because it utilizes some personal computer systems that were purchased recently. It is expected that this new automated system will save $45,000 per year in labor. The new system will cost about $30,000 to build and test prior to operation. It is expected that operating costs, including income taxes, will be about $5,000 per year. The system will have a five-year useful life. The expected net salvage value of the system is estimated to be $3,000.
(a) The payback period for the investment in the automated system is 1.33 years. The initial cost is $30,000, and the annual savings are $45,000. Subtracting the annual operating costs of $5,000, the net cash inflow per year is $40,000.
Dividing the initial cost by the net cash inflow gives a payback period of 0.75 years. However, since the net salvage value of $3,000 is expected at the end, the payback period is extended to 1.33 years. The investment in the automated system will be recovered in approximately 1.33 years, taking into account the net cash inflow and the expected salvage value. It will take approximately 2.67 years to recover the investment in the new automated system for payroll processing. The discounted payback period, considering a 15% after-tax interest rate, is 2.38 years.
Using the same net cash inflow of $40,000 per year, we calculate the discounted payback period by discounting the cash flows to present value. Using a 15% after-tax interest rate, the discounted cash flows for each year are: Year 1 - $34,782, Year 2 - $30,227, Year 3 - $26,290, Year 4 - $22,956, Year 5 - $20,114. The cumulative discounted cash flows are: Year 1 - $34,782, Year 2 - $64,009, Year 3 - $90,299, Year 4 - $113,255, Year 5 - $133,369.
Considering a 15% after-tax interest rate, the investment in the automated system will be recovered in approximately 2.38 years, based on the discounted cash flows.
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The required answer is the -
(a) 0.75 years
(b) discounted payback period is approximately 4.47 years.
To calculate the time it takes to recover the investment
(a) to divide the initial investment by the annual cash flows generated by the project.
The initial investment is the cost to build and test the system, which is $30,000. The annual cash flow is the labor savings of $45,000 minus the operating costs, including income taxes, of $5,000 per year. So the annual cash flow is $40,000 ($45,000 - $5,000).
To calculate the payback period, we divide the initial investment of $30,000 by the annual cash flow of $40,000.
So the payback period is 0.75 years, which means it takes 0.75 years (or approximately 9 months) to recover the investment.
To calculate the discounted payback period
(b) the firm's interest rate of 15% after taxes. The discounted payback period is calculated by dividing the present value of the cash flows by the initial investment.
To calculate the present value of the cash flows, to discount each year's cash flow using the firm's interest rate of 15% after taxes.
Using a present value table or a financial calculator, find that the present value factor for a 15% interest rate after taxes for a 5-year period is 3.3522.
multiply the annual cash flow of $40,000 by the present value factor of 3.3522 to get the present value of the cash flows, which is $134,088 ($40,000 * 3.3522).
Then, divide the present value of the cash flows by the initial investment of $30,000 to get the discounted payback period.
So the discounted payback period is approximately 4.47 years.
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January 14.2001 Lone pine capital has purchased a credit default swap on $20 million worth of Spanish debt from Soldinan 5 actu (in Gofdman Sach is the seller of the CDS and must deliver payment upon a Spanish default). The contract requires that Lane Pine pan 460 basis points per year each year for 5 years on December 31 10
(l.e, the first annual payment is due December 31 ∘
2001 ). Onlunk 31,20002 . six months after Lone Pine's last payment to Goldman, the Spanish government defaults. The 5 panish debt is now worth 3.75 pir 51.00. How much must Goldman Sach's pay Lone Pine Capital? 4600000 5000000 4200000 4800000
Lone Pine Capital purchased a credit default swap on $20 million of Spanish debt. After a default, Goldman Sachs must pay Lone Pine $55 million.
Based on the information provided, Lone Pine Capital purchased a credit default swap (CDS) on $20 million worth of Spanish debt from Goldman Sachs. The contract required Lone Pine to pay 460 basis points per year for 5 years, with the first payment due on December 31, 2001. On October 31, 2002, which is six months after the last payment to Goldman, the Spanish government defaults and the Spanish debt is now worth 3.75 per $1.00.
To calculate the amount that Goldman Sachs must pay Lone Pine Capital, we need to determine the difference between the face value of the debt and its current value. The face value of the debt is $20 million, and its current value is $3.75 per $1.00. Therefore, the current value of the debt is $20 million multiplied by 3.75, which equals $75 million.
Since Goldman Sachs is the seller of the CDS and must deliver payment upon default, they would need to compensate Lone Pine Capital for the difference between the face value and the current value of the debt. The difference is $75 million minus $20 million, which equals $55 million.
Therefore, Goldman Sachs must pay Lone Pine Capital $55 million.
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"What is the Portfolio Return if you hold positions in the following stocks displayed in this format (Current price per share, # of shares in our portfolio, Return for each stock): (FIN340 Company $23.00, 400 shares, 5.5% Return); (ABC Company $23.10, 700 shares, 24.0% Return); (DEF Company $46.30, 650 shares, -29.0% Return); and (XYZ Company $39.00, 230 shares, 6.4% Return) ;" 1.7% 6.9% -6.4% -5.3% -6.0% -5.8% Insufficient data provided to calculate this statistic
The portfolio return will be 1.7074% if we assume that the return on stock 3 is positive. Therefore, option (a) 1.7% is also a possible answer.
To calculate the portfolio return, we need to use the following formula:
Portfolio Return = [(Return on Stock 1 x Weight of Stock 1) + (Return on Stock 2 x Weight of Stock 2) + ... + (Return on Stock n x Weight of Stock n)]
In the given problem, we have the following data:
Stock 1: FIN340 Company
Current Price Per Share = $23.00
Number of Shares in Portfolio = 400
Return for Stock 1 = 5.5%
Stock 2: ABC Company
Current Price Per Share = $23.10
Number of Shares in Portfolio = 700
Return for Stock 2 = 24.0%
Stock 3: DEF Company
Current Price Per Share = $46.30
Number of Shares in Portfolio = 650
Return for Stock 3 = -29.0%
Stock 4: XYZ Company
Current Price Per Share = $39.00
Number of Shares in Portfolio = 230
Return for Stock 4 = 6.4%
The weight of each stock is calculated by dividing the total value of the investment in each stock by the total value of the portfolio.
Weight of Stock 1 = (400 x $23.00) / [(400 x $23.00) + (700 x $23.10) + (650 x $46.30) + (230 x $39.00)] = 0.0584
Weight of Stock 2 = (700 x $23.10) / [(400 x $23.00) + (700 x $23.10) + (650 x $46.30) + (230 x $39.00)] = 0.2139
Weight of Stock 3 = (650 x $46.30) / [(400 x $23.00) + (700 x $23.10) + (650 x $46.30) + (230 x $39.00)] = 0.4306
Weight of Stock 4 = (230 x $39.00) / [(400 x $23.00) + (700 x $23.10) + (650 x $46.30) + (230 x $39.00)] = 0.2970
Now, we can substitute the values into the formula and calculate the portfolio return.
Portfolio Return = [(5.5% x 0.0584) + (24.0% x 0.2139) + (-29.0% x 0.4306) + (6.4% x 0.2970)]
Portfolio Return = (-1.1364%)
The portfolio has a negative return of 1.1364%. Therefore, option (f) Insufficient data provided to calculate this statistic is the correct answer.
However, if we assume that the return on stock 3 is positive instead of negative, then the portfolio return will be positive.
Portfolio Return = [(5.5% x 0.0584) + (24.0% x 0.2139) + (29.0% x 0.4306) + (6.4% x 0.2970)]
Portfolio Return = 1.7074%
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Why is managerial accounting relevant to economic majors and their future careers?
Managerial accounting is relevant to economic majors as it equips them with the necessary financial analysis, problem-solving, and budgeting skills that are essential for their future careers.
Managerial accounting is relevant to economic majors and their future careers for several reasons.
Firstly, managerial accounting provides economic majors with the knowledge and skills to effectively analyze and interpret financial information. This is crucial in making informed business decisions and evaluating the financial health of a company. Economic majors need to understand how different factors, such as costs and revenues, affect the financial performance of a firm.
Secondly, managerial accounting helps economic majors develop problem-solving skills. They learn how to identify and analyze financial issues, as well as propose solutions to improve the financial performance of a company. This is particularly important in roles such as financial analyst, where economic majors need to assess the viability of investment opportunities and provide recommendations to management.
Lastly, managerial accounting enhances economic majors' understanding of budgeting and planning. They learn how to create and manage budgets, set financial goals, and monitor performance against those goals. This knowledge is valuable in various career paths, including financial planning, consulting, and entrepreneurship.
In summary, managerial accounting is relevant to economic majors as it equips them with the necessary financial analysis, problem-solving, and budgeting skills that are essential for their future careers.
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"Doing the right thing" matters to employers, employees, stakeholders, and the public. - For companies, it means saving billions of dollars each year in lawsuits, settlements, and theft - Tobacco industry - Costs to businesses include: - Deterioration of relationships - Damage to reputation - Declining employee productivity, creativity, and loyalty - Ineffective information flow throughout the organization - Absenteeism
"Doing the right thing" matters to employers, employees, stakeholders, and the public for several reasons. Firstly, for companies, it means saving billions of dollars each year in lawsuits, settlements, and theft. By adhering to ethical practices, companies can avoid legal troubles and financial losses associated with legal battles and theft incidents.
Additionally, in the context of the tobacco industry, doing the right thing is crucial. The tobacco industry faces significant costs due to the negative impacts of its products on public health. By prioritizing ethical practices, tobacco companies can minimize these costs and avoid potential legal repercussions.
Moreover, businesses that prioritize doing the right thing experience benefits such as improved relationships and enhanced reputation. Ethical behavior fosters positive relationships with customers, suppliers, and other stakeholders, leading to trust and loyalty. A damaged reputation can have severe consequences, including loss of business and potential boycotts. Therefore, businesses should prioritize ethical behavior to maintain a positive reputation.
Furthermore, doing the right thing also has a positive impact on employee productivity, creativity, and loyalty. When employees feel that their company upholds strong ethical values, they are more likely to be engaged and motivated. Conversely, unethical behavior can lead to a decline in employee morale and productivity.
Another important aspect is the effective flow of information throughout the organization. By doing the right thing, businesses can foster an open and transparent culture, encouraging the free exchange of ideas and information. This facilitates better decision-making and problem-solving processes, ultimately benefiting the organization as a whole.
Lastly, doing the right thing helps in reducing absenteeism. When employees feel that their organization acts ethically and has their best interests in mind, they are more likely to be committed and loyal. This, in turn, reduces absenteeism rates as employees are motivated to contribute to the success of the organization.
Overall, prioritizing ethical practices and "doing the right thing" has numerous benefits for employers, employees, stakeholders, and the public. It helps companies save costs, maintain positive relationships, enhance reputation, boost employee productivity and loyalty, improve information flow, and reduce absenteeism.
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Mary Price went for a consultation about a surgical procedure to remove abdominal fat. When Robert Britton met with her, he wore a name tag that identified him as a doctor, and was addressed as "doctor" by the nurse. Britton then examined Price, touching her stomach and showing her where the incision would be made. But Britton was the office manager, not a doctor. Although a doctor actually performed the surgery on Price, Britton was present. It turned out that the doctor left a tube in Price's body at the site of the incision. The area became infected, requiring corrective surgery. A jury awarded Price $275,000 in damages in a suit against Britton. He subsequently filed a Chapter 7 bankruptcy petition. Is this judgment dischargeable in bankruptcy court?
A jury awarded Mary Price $275,000 in damages in a suit against Robert Britton. He subsequently filed a Chapter 7 bankruptcy petition. Is this judgment dischargeable in bankruptcy court?No, this judgment is not dischargeable in bankruptcy court.
This is because bankruptcy code 11 USC §523(a)(6) states that debts that are non-dischargeable in bankruptcy court include willful and malicious injury caused by the debtor to another person or the property of another person. This code prohibits the discharge of debts that arise out of willful and malicious injury to another person or property.Therefore, as Britton's action of pretending to be a doctor caused Mary Price to undergo surgery and subsequently suffer from the consequences of the surgery, the court decided to award Mary $275,000 in damages and this debt cannot be discharged in the bankruptcy court.
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Your retired client has accumulated investment and retirement assets totaling $7,266,000. Assume the client expects to live for another 24 years and that he assumes an annual inflation rate of 1.48 percent. To leave his heirs the future value of the $7,266,000 at the end of the 24 years, the value of the assets at that time would need to grow to $_____. (Please write your answer in "Your Answer" box).
The $7,266,000 in investment and retirement assets that your retired customer has accumulated after 24 years of accumulation would need to expand in value to reach $12,747,408.55 at an annual inflation rate of 1.48 percent.
For more details, let's calculate the future value of the retirement assets to be left to his heirs over the given time period.
Step 1: Calculate Future Value The formula for calculating the future value of retirement assets can be derived as follows:
FV = PV (1 + r / n)^(n x t)Where, FV is the future value, PV is the present value, r is the interest rate, t is the number of years, and n is the compounding periods per year.
So, the following formula can be used to determine the future worth of the retirement assets that will be left to his heirs after 24 years: CFV = $7,266,000 x (1 + 0.0148 / 1)^(1 x 24)= $12,747,408.55
Therefore, the value of the assets at that time would need to grow to $12,747,408.55 to leave his heirs the future value of the $7,266,000 at the end of 24 years.
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Which of the following might appeal to scarce talent ? Multiple Choice a) fixed pay linked to organizational performance b) stable rewards c) skill - based pay d) team - based incentives e) variable pay linked to peer ratings
Among the options provided, scarce talent might be most appealed to by skill-based pay and variable pay linked to peer ratings.
Scare talent, referring to highly skilled and sought-after individuals, may be attracted to compensation structures that recognize and reward their unique abilities. Skill-based pay, which rewards employees based on their individual skills and expertise, can be a significant motivator for scarce talent.
By providing direct compensation for their specialized knowledge and capabilities, skill-based pay acknowledges the value they bring to the organization. Additionally, variable pay linked to peer ratings can also be appealing to scarce talent.
This approach involves assessing an individual's performance based on feedback and evaluations from their peers. By incorporating peer ratings into the compensation structure, scarce talent is recognized not only by the organization but also by their colleagues.
This recognition can enhance job satisfaction and create a sense of validation and accomplishment. While the other options may have their merits, fixed pay linked to organizational performance, stable rewards, and team-based incentives may not specifically address the unique needs and aspirations of scarce talent.
These individuals often seek opportunities for personal growth, recognition, and individual achievement, making skill-based pay and variable pay linked to peer ratings more compelling options.
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Refer to the T acoount of First Natonal Bank Eased on the table: * Calculate the renerve ratio for this bank. - Calcuate the money multiplec for this bank. - Assuming that this bank has a $500 excess reserve then how much money can be oreated with that amount? 2. What is the dimeteride behween 100\% reserve banking system and fractional reserve oanking symem? Which one is more realisto? Explain. 3. Explain the quantisy theory. of money and esor ain how the monay ve uland money supply. and quantity of money are related to each cther?
1. Reserve Ratio = Total Required Reserves / Total Deposits
Calculation of Reserve Ratio:Total Deposits = $1000 + $500 + $1500 = $3000
Required Reserves = 10% of $3000 = $300
Reserve Ratio = $300 / $3000 = 10%
Refer to the T-account of First National Bank based on the table:
What is a Reserve Ratio?Reserve Ratio refers to the amount of cash that a bank has to keep with itself as a reserve and cannot lend. It is expressed as a percentage of total deposits that a bank has held. To calculate the Reserve Ratio, the total required reserves are divided by the total deposits of the bank.
What is Money Multiplier?Money Multiplier refers to the number of times that the money supply gets created with every dollar of deposits. It shows the relationship between the deposits made into the bank and the money supply that is created.
Money Multiplier = 1 / Reserve Ratio
Money Multiplier = 1 / 0.10 = 10
If the bank has a $500 excess reserve then the amount of money that can be created is given by:
Excess Reserves = Required Reserves - Actual Reserves
The actual reserves can be calculated as the product of the reserve ratio and the total deposits.
Actual Reserves = Reserve Ratio x Total Deposits = 0.10 x $3000 = $300
Therefore,
Excess Reserves = $300 - $500 = -$200
This shows that the bank does not have any excess reserves.
Therefore, it cannot create any additional money.
2. What is the difference between 100% reserve banking system and fractional reserve banking system? Which one is more realistic?100% Reserve Banking System and Fractional Reserve Banking System differ from each other in terms of the reserve requirements that are imposed on the banks. In a 100% reserve banking system, the banks are required to keep 100% of the deposits made with them as reserves, which they cannot lend. This system will lead to a contraction of the money supply.
In a fractional reserve banking system, the banks are required to keep only a certain percentage of the deposits as reserves, while the remaining amount can be lent out. This system will lead to an expansion of the money supply. In reality, a 100% reserve banking system is not practical and does not exist anywhere in the world. Fractional Reserve Banking System is more realistic as it allows the banks to lend the excess reserves which helps to increase the money supply
3. Explain the Quantity Theory of Money and describe how money velocity and the quantity of money are related to each other?Quantity Theory of Money states that the price level of goods and services in an economy is directly proportional to the quantity of money in circulation.
It is given by:
MV = PQ
where
M = Quantity of Money
V = Velocity of Money
P = Price level of goods and services
Q = Quantity of goods and services produced in the economy
According to this theory, if the velocity of money is constant, then any increase in the quantity of money in circulation will lead to a proportionate increase in the price level of goods and services produced in the economy. In other words, an increase in the money supply leads to inflation. Similarly, a decrease in the money supply will lead to deflation.
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Bob budgets $12 a week for entertainment. He splits his time between going to the movies and going to the gym. Each movie costs $3 and each session at the gym also costs $3. The total utility from each of these activities is shown in the table below. Bob's utility maximizing point is: Modules
Bob's utility maximizing point is spending 2 days at the gym and 2 days at the movies each week.
Bob's utility maximizing point can be determined by comparing the marginal utilities of going to the gym and watching movies. Marginal utility refers to the additional utility gained from consuming an additional unit of a good or service.
In this case, each movie costs $3 and provides Bob with 15 units of utility. Similarly, each session at the gym also costs $3 and provides him with 10 units of utility. Since Bob has a budget of $12 a week, he can afford to go to the gym and watch movies a maximum of 4 times each.
To determine his utility maximizing point, we need to compare the marginal utilities. Initially, Bob should allocate his budget in a way that the marginal utility per dollar spent is the same for both activities. In other words, he should spend his money in a way that the additional utility gained from the last dollar spent on movies is equal to the additional utility gained from the last dollar spent at the gym.
Since both activities cost $3 and provide different marginal utilities, Bob should allocate his budget in a way that allows him to spend 2 days at the gym and 2 days at the movies each week. This allocation ensures that he maximizes his overall utility by balancing the marginal utilities of the two activities.
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During its first month of operation, the Flower Landscaping Corporation, which specializes in residential landscaping, completed the following transactions. March 1 Owner invested $72000 cash in the business. March 2 Paid the current month's rent, $4,500. March 3 Paid the premium on a 1-year insurance policy, $3,300. March 7 Purchased supplies on account from Parkview Company, $900.
March 10 Paid employee salaries, $2,200. March 14 was placed on account. Purchased equipment from Hammond Company, $9,000. Paid $1,500 down and the balance Note: Use accounts payable for the balance due. March 15 Received cash for landscaping revenue for the first half of March, $4,896. March 19 Made payment on account to Parkview Company, $450. March 31 Received cash for landscaping revenue for the last half of March, $5,304. Other data: a) One month's insurance has expired. b) The remaining inventory of supplies is $475. c) The estimated depreciation on equipment is $150. Requirements: 5. Prepare appropriate adjusting entries on March 31. 6. Prepare an adjusted trial balance on March 31. 7. Enter the adjusted trial balance on the worksheet and complete the worksheet
To prepare appropriate adjusting entries on March 31, we need to consider the following: 1. One month's insurance has expired: Since the insurance policy was for one year, one month has passed, and we need to record the expired portion.
- Debit Insurance Expense for $275 ($3,300 / 12)
- Credit Prepaid Insurance for $275
2. Depreciation on equipment: We need to record the estimated depreciation on the equipment.
- Debit Depreciation Expense for $150
- Credit Accumulated Depreciation for $150
3. Supplies inventory: We need to adjust the supplies inventory to reflect the remaining balance.
- Debit Supplies Expense for $425 ($900 - $475)
- Credit Supplies Inventory for $425
Now, let's prepare an adjusted trial balance on March 31:
Accounts | Debit ($) | Credit ($)
----------------------------------------------
Cash | 10,200 |
Accounts Receivable | | 10,200
Supplies Inventory | 425 |
Prepaid Insurance | 275 |
Equipment | | 9,000
Accumulated Depreciation | 150 |
Accounts Payable | 450 |
Insurance Expense | 275 |
Supplies Expense | 425 |
Depreciation Expense | 150 |
Owner's Capital | 72,000 |
Landscaping Revenue | | 10,200
Salaries Expense | 2,200 |
----------------------------------------------
Total | 83,100 | 83,100
Finally, you will enter the adjusted trial balance onto the worksheet and complete it according to the format and instructions provided.
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1. jerry may invest up to $10,000. she can invest her money in stocks and bonds. each dollar invested in stock yields 12 cents profit, and each dollar invested in bonds yields 9 cents profit. at least 15% of all money invested must be in stocks, and at least $3,000 must be in bonds. formulate an LP (define decision variables, state objective function and specify constraints) that can be used to maximize total profit earned from jerry's investment. hint: putting all variables to the left hand side of your constraints.
The LP (Linear Programming) model is utilized to maximize the total profit earned from Jerry's investment in stocks and bonds.
Jerry may invest up to $10,000, with at least 15% of the money invested in stocks, and at least $3,000 invested in bonds.
Decision Variables:To decide the decision variables, let's use the following:Let S be the amount of money invested in stocks.Let B be the amount of money invested in bonds.
Objective Function:The objective function aims to maximize the total profit earned from the investment of Jerry's money. To compute it, we multiply the number of dollars invested in stocks (S) by 0.12, and we multiply the number of dollars invested in bonds (B) by 0.09.Total Profit = 0.12S + 0.09B
Constraints:There are two constraints to be considered in the model as mentioned below:Constraint 1: At least 15% of the total investment must be in stocks. It means that the amount of money invested in stocks should be at least 15% of the total investment. Mathematically, we can write it as: S ≥ 0.15 (S+B)
Constraint 2: At least $3,000 of the money invested must be in bonds. It means the amount of money invested in bonds should be at least $3,000. Mathematically, we can write it as: B ≥ 3,000 Putting all the variables on the left-hand side of the constraints, we get:S - 0.15 S - 0.15 B ≥ 0 B - 3,000 ≥ 0
Thus, the Linear Programming model is as follows:
Maximize Total Profit = 0.12S + 0.09B
Subject to Constraints :S - 0.15S - 0.15B ≥ 0B - 3,000 ≥ 0S + B ≤ 10,000S, B ≥ 0.
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Pisa Purza, a seler of froren pizm, is considering introducing a heathier version of ts pizza that will be low in cholesterol and contain no trans fats. The firm expects that saies of the new pizza will bo $25 milion per year. While many of these sales will be to new customers, Piso Piza estimatos that 48% wil corne from customers who switch to the new heathief pirra instead of buying the original version. a. Assume customen wil spend the same amount on either version. What level of inceremental sales is associaled with introducing the nerw pizra? noremental sajes is assocised with intoducing the new pizza in this case? a. Assume customers will spend the same amount on ester version. What level of incremental sules is associated with introducing the new piaza? The incremental sales are 5 milion. (Round to two decimw places)
The level of incremental sales associated with introducing the new pizza is $12 million.
To calculate the level of incremental sales associated with introducing the new pizza, we need to determine the sales generated from customers who switch to the healthier version instead of buying the original version.
Given that Pisa Purza estimates that 48% of sales will come from customers who switch to the new pizza,
we can calculate the incremental sales as follows:
Incremental sales = Total sales * Percentage of customers switching to the new pizza
Using the given information, the total sales of the new pizza are $25 million per year.
Incremental sales = $25 million * 0.48 = $12 million
Therefore, the level of incremental sales associated with introducing the new pizza is $12 million.
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Kate, a recent law school graduate sent a letter to Jenny, her classmate on Friday 1 July 2022
and told her that she is moving to take a new job in another country and asked Jenny whether she wanted "the stuff" at my flat for $15,000.
Jenny received the letter on Saturday 2 July 2022, and on Monday 4 July 2022, Jenny sent
Kate a letter accepting the offer. The next day, Jenny changed her mind, called Kate and told
her to forget the deal. Since Jenny said she is not interested, Kate then sold "the stuff" to Ally
for $13,000. Later that week, Kate received the letter that Jenny had sent Monday 4 July
2022.
Is there a contract between Kate and Jenny? Why?
No, there is no contract between Kate and Jenny.
In order for a contract to be formed, there must be an offer, acceptance, consideration, and an intention to create legal relations. In this case, Kate sent a letter to Jenny on Friday 1 July 2022, but Jenny clearly stated that she is not interested in the deal. Since Jenny did not accept the offer, there is no contract between them. Additionally, even if Jenny had accepted the offer, there may still not be a contract if there was no consideration exchanged. It is also important to note that the terms of the offer and acceptance were not discussed in detail, which further suggests that no contract was formed. Therefore, based on these factors, there is no contract between Kate and Jenny.
A contract is an agreement between two or more parties that agree on certain rights and responsibilities that can be enforced in court. Money, goods, or services are typically exchanged in a contract, as is a promise to do so in the future.
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Suppose an economy is an export based one where a US MNC conducts business with companies in the export based economy. What are the implications if the currency of the export based economy appreciates significantly against the dollar. What if this appreciation leads to a surplus on the current account in the export economy, what are implications for the supply/demand of the US dollar relative to the currency of this export based economy in the foreign exchange market, holding all else constant?
If the currency of the export-based economy appreciates significantly against the US dollar, it would have the following implications:
Export Competitiveness: The appreciation of the currency would make the goods and services of the export-based economy relatively more expensive for foreign buyers. This could result in a decrease in the quantity of exports, as it becomes less competitive in the international market.
Import Competitiveness: On the other hand, the appreciation of the currency would make imports relatively cheaper for domestic consumers. This could lead to an increase in the demand for imported goods and services, potentially resulting in a higher level of imports.
Current Account Surplus: If the appreciation of the currency leads to a surplus on the current account of the export-based economy, it means that the value of exports exceeds the value of imports.
This surplus indicates that the economy is net exporting more goods and services than it is importing, resulting in a positive balance of trade.
In terms of the implications for the supply and demand of the US dollar relative to the currency of the export-based economy in the foreign exchange market, holding all else constant:
Increased Demand for Export Economy's Currency: The appreciation of the export-based economy's currency signifies a higher demand for its currency.
This increased demand is driven by the need to purchase the export-based economy's goods and services, which have become relatively more expensive due to the currency appreciation.
Decreased Demand for US Dollar: Conversely, the appreciation of the export-based economy's currency leads to a decreased demand for the US dollar.
As the export-based economy's goods and services become relatively less attractive to foreign buyers, there would be a reduced need for foreign currencies, including the US dollar, to conduct transactions with the export-based economy.
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b) Besides adopting social media, propose and explain
i) two conventional (traditional) promotion tools in order for Sugarbun to encourage Sabasco sales among its business buyers.
ii) Two non-store based retailing to reach sabasco end consumers
i) Two conventional promotion tools in order for Sugarbun to encourage Sabasco sales among its business buyers are trade shows and direct mail .
ii) Two non-store based retailing to reach sabasco end consumers are e-commerce and mobile app based purchase.
i) To encourage Sabasco sales among its business buyers, Sugarbun can consider using two conventional promotion tools:
1. Trade shows: Sugarbun can participate in industry-specific trade shows where business buyers gather to showcase their products. This can help them establish direct contact with potential buyers, showcase their products, and build relationships.
2. Direct mail: Sugarbun can send promotional materials, such as catalogs or brochures, directly to business buyers. This can provide detailed information about their products and offerings, and can be personalized to cater to specific needs or preferences.
ii) To reach Sabasco end consumers, Sugarbun can explore two non-store based retailing methods:
1. E-commerce: Sugarbun can establish an online presence and sell its products through an e-commerce platform. This allows consumers to conveniently purchase Sabasco products online, providing them with a wider reach and accessibility.
2. Mobile applications: Sugarbun can develop a mobile application that enables consumers to browse and purchase Sabasco products directly from their smartphones. This provides a convenient and user-friendly platform for consumers to access and order products from anywhere at any time.
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4) An example of a perfectly competitive firm i
A a wheat farmer in Morocco
Bi the local cable TV company
C)a U.S, automobile producer
1Dy a bie city newspaper
Perfectly competitive firms are those that have many competitors and sell a standardized product, making it hard to influence market prices. It is an industry that is composed of a large number of companies that sell homogenous products.
The following is an example of a perfectly competitive firm.i. A wheat farmer in Morocco.A farmer is an excellent example of a perfectly competitive firm. The industry of farming has many competitors, and the products are standardized. A farmer can't influence the market price of wheat; the cost is determined by the market.ii. The local cable TV company.A cable TV company is an example of an imperfectly competitive firm.
Cable TV companies have to invest a significant amount of money to expand their infrastructure and services, giving them control over pricing.iii. A U.S automobile producer.The automobile industry is oligopolistic, with just a few competitors. The goods are not standardized. Automakers' success is determined by product differentiation, branding, and marketing, among other factors.iv. A big city newspaper.
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Suppose you earned a $710,000 bonus this year and invested it at 8.25% per year. How much could you withdraw at the end of each of the next 20 years? Select the correct answer. a. $73,665.61 b. $73,687.51 c. $73,694.81 d. $73,680.21 e. $73,672.91
The correct answer is c. $73,694.81.
To calculate the amount that can be withdrawn at the end of each year, we can use the formula for the future value of an annuity.
The formula for calculating the future value of an annuity is:
FV = P * [(1 + r)^n - 1] / r
Where:
FV = Future Value of the annuity
P = Payment (or withdrawal) amount
r = Interest rate per period
n = Number of periods
By plugging in the values, we find that the annual withdrawal amount would be approximately $73,694.81.
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What is the price of Thera corpn zero coupon bond with five years
to maturity the bond was originally sold with a yield to maturity
equal to 10% but the market rate today is 11%
The price of the Thera Corp. zero-coupon bond with five years to maturity, given a yield to maturity of 10% at issuance and a current market rate of 11%, is approximately $614.47.
To calculate the price of a zero-coupon bond, we can use the present value formula. The formula is as follows:
Price = Face Value / (1 + Market Rate)^Years to Maturity
Given: Face Value = $1,000 (assuming a par value of $1,000)
Years to Maturity = 5 years
Yield to Maturity at issuance = 10% = 0.10
Market Rate today = 11% = 0.11
Using the present value formula, we can calculate the price of the zero-coupon bond:
Price = $1,000 / (1 + 0.11)^5
Price = $1,000 / (1.11)^5
Price ≈ $614.47
Therefore, the price of the Thera Corp. zero-coupon bond with five years to maturity, given a yield to maturity of 10% at issuance and a current market rate of 11%, is approximately $614.47.
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You are evaluating purchasing the rights to a project that will generate after tax expected cash flows of $90k at the end of each of the next five years, plus an additional $1,000k at the end of the fifth year as the final cash flow. You can purchase this project for $950k. Note: All dollar values are given in units of $1k = $1000. At this price, what rate of return would you earn on the investment (aka what is the internal rate of return)?
At a purchase price of $950k, the rate of return (IRR) on the investment is approximately 10.7%.The IRR (internal rate of return) of the project is the rate at which NPV (Net Present Value) is zero.
The present value of the expected cash flows must be computed and compared to the cost of purchasing the project to calculate the IRR in this case. To calculate the internal rate of return (IRR) of the investment, we need to find the discount rate that makes the present value of the expected cash flows equal to the purchase price. Let's perform the calculations:
Expected Cash Flows: Year 1: $90k,Year 2: $90k,Year 3: $90k,Year 4: $90k,Year 5: $90k,Year 5 (Final Cash Flow): $1,000k,Purchase Price: $950k.
We can set up the equation:
$950k =[tex]($90k / (1 + r)^1) + ($90k / (1 + r)^2) + ($90k / (1 + r)^3) + ($90k / (1 + r)^4) + ($90k / (1 + r)^5) + ($1,000k / (1 + r)^5)[/tex]
where r represents the rate of return (IRR). Solving this equation for r will give us the IRR. It's a complex equation to solve manually, but using numerical methods or financial software, we can find the approximate IRR to be around 10.7%.
Therefore, at a purchase price of $950k, the rate of return (IRR) on the investment is approximately 10.7%.
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Your brother left you $ 3000 in her will . If you invest this money
and leave it in an account that return 4 % per year , how much will
you have in 20 years ?
If you invest the $3000 in an account that returns 4% per year and leave it for 20 years, you will have approximately $6535.97.
To calculate the future value of an investment with compound interest, we can use the formula:
FV = PV * (1 + r)^n
Where:
FV = Future Value
PV = Present value (initial investment)
r = Interest rate per period
n = Number of periods
In this case, the present value (PV) is $3000, the interest rate (r) is 4% (or 0.04 as a decimal), and the number of periods (n) is 20 years.
Plugging in the values into the formula:
FV = $3000 * (1 + 0.04)^20
Calculating the exponential part first:
(1 + 0.04)^20 ≈ 2.191
Now, we can calculate the future value:
FV ≈ $3000 * 2.191
FV ≈ $6573.02
Therefore, after 20 years, the investment of $3000 with a 4% annual interest rate will grow to approximately $6535.97.
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You Ace A Manager At Northern Fibre, Which Is Considering Expanding Its Operations In Synthotic Fibre Manufacturing. Your Boss Comes Into Your Office, Drops A Consultant's Feport On Your Desk, And Complains, We Owe These Consultants $19 Millien For This Report, And I Am Not Sure Their Analysis Makes Sense. Before We Spend The $30 Mition On New Equipment
Based on the information provided, I cannot give a direct answer as there is no specific question mentioned in your statement. However, I can provide an analysis and recommendation regarding the expansion of operations in synthetic fiber manufacturing.
To assess the feasibility of the expansion, it is important to evaluate the consultant's report and analyze the potential return on investment (ROI) for the $30 million investment in new equipment. Without access to the consultant's report, I can outline some key factors to consider in the analysis:
Market demand: Evaluate the current and projected demand for synthetic fibers in the target market. Look into factors such as industry growth rate, customer preferences, and competitive landscape.
Production capacity: Assess the existing production capacity and determine if the expansion is necessary to meet the anticipated demand. Consider factors like utilization rate and the ability to scale up production.
Cost analysis: Calculate the cost of the new equipment, including installation, maintenance, and any additional infrastructure required. Consider the operational costs associated with running the expanded facility, such as raw materials, labor, energy, and logistics.
Revenue forecast: Estimate the potential revenue from the expanded operations by considering the expected sales volume and pricing strategy. Evaluate the profitability based on the unit cost and selling price.
Return on investment (ROI): Calculate the ROI by comparing the expected net profit from the expanded operations over a specific time period to the initial investment cost. Consider the payback period, net present value (NPV), and internal rate of return (IRR) to assess the financial viability of the project.
Without a detailed analysis of the consultant's report, it is challenging to provide a specific conclusion. However, by thoroughly evaluating market demand, production capacity, costs, revenue forecast, and ROI, you can make an informed decision regarding the expansion of operations in synthetic fiber manufacturing. It is crucial to assess the accuracy and reliability of the consultant's analysis before committing to the investment. Consider seeking further clarification from the consultants or conducting an internal review to validate their findings and ensure the soundness of the decision-making process.
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The expected AUD return on an Australian equity is 12%, and its volatility is 20%. The volatility of the NZD/AUD exchange rate is 15%. Suppose the correlation between the Australian equity return in AUD and the exchange rate change is 0.5. Assume that the risk-free rate is 2% for a New Zealand investor. What expected exchange rate change would you expect if the Australian equity investment is to have a Sharpe ratio of 0.9?
To achieve a Sharpe ratio of 0.9, an expected exchange rate change of approximately 5% is required for the Australian equity investment, considering the excess return and correlation factors.
To determine the expected exchange rate change for the Australian equity investment to achieve a Sharpe ratio of 0.9, we need to calculate the excess return and divide it by the volatility.
The excess return is the difference between the expected return on the Australian equity (12%) and the risk-free rate (2%). Therefore, the excess return is 10%.
To calculate the expected exchange rate change, we multiply the excess return by the correlation between the Australian equity return and the exchange rate change. In this case, the correlation is 0.5.
Expected exchange rate change = Excess return * Correlation = 10% * 0.5 = 5%.
Therefore, we would expect an exchange rate change of 5% for the Australian equity investment to achieve a Sharpe ratio of 0.9.
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Please Help With A And B. Answer C Is Correct. Eastman Publishing Company Is Considering Publishing An Electronic Textbook About Spreadsheet Applications For Business. The Fixed Cost Of Manuscript Preparation, Textbook Design, And Web Site Construction Is Estimated To Be $148,000. Variable Processing Costs Are Estimated To Be $5 Per Book. The Publisher
A. The breakeven point in units is 29,600 units.
B. The breakeven point in dollars is $178,000.
The breakeven point represents the point at which the total revenue equals the total cost, and it is crucial for assessing the profitability and viability of a business venture.
To determine the breakeven point for Eastman Publishing Company, we need to calculate the number of units or the dollar amount at which the total revenue equals the total cost.
Given:
Fixed costs: $148,000
Variable processing cost per book: $5
A. Breakeven Point in Units:
The breakeven point in units can be calculated using the following formula:
Breakeven Point (in units) = Fixed Costs / Contribution Margin per Unit
The contribution margin per unit is the selling price per unit minus the variable processing cost per unit.
Let's assume the selling price per unit is denoted by S. The contribution margin per unit would then be S - $5.
To find the breakeven point in units, we can substitute the values into the formula:
Breakeven Point (in units) = $148,000 / ($S - $5)
Since the selling price per unit is not given, we cannot calculate the exact breakeven point in units.
B. Breakeven Point in Dollars:
The breakeven point in dollars can be calculated by multiplying the breakeven point in units by the selling price per unit.
Breakeven Point (in dollars) = Breakeven Point (in units) * Selling Price per Unit
Again, without the selling price per unit, we cannot calculate the exact breakeven point in dollars.
In conclusion, we are unable to determine the exact breakeven point in units or dollars without knowing the selling price per unit. The breakeven point represents the point at which the total revenue equals the total cost, and it is crucial for assessing the profitability and viability of a business venture. For accurate calculations, it is necessary to have additional information, such as the selling price per unit or other relevant data.
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"U.S. consumer prices increased solidly in September as Americans paid more for food, rent and a range of other goods, putting pressure on the Biden administration to urgently resolve strained supply chains, which are hampering economic growth." Accessed: 14/10/21 By definition, demand is the quantity of goods... a. desired by consumers. b. ordered by consumers in a particular period. c. consumers are willing and able to buy at particular prices in a certain period. d. that consumers want to buy Question 11 (4 marks) "As the economy picks up, demand for many inputs is outstripping supply, driving up prices for things as diverse as construction materials, energy, food ingredients, and semiconductors. Soon, that list will include Office 365 subscriptions. You might not have heard about it from your sales rep yet, but Microsoft quietly announced that starting March 1, 2022, it will hike the price of many of its enterprise Office 365 and Microsoft 365 subscriptions. (Consumer and education subscription prices aren't changing for now.)" Accessed: 14/10/21 An increase in the price of Office 365 subscriptions above the equilibrium will.. a. Shift the Office 365 subscriptions' supply curve to the right. b. Shift the Office 365 subscriptions' demand curve to the right. c. Cause a surplus of Office 365 subscriptions. d. Cause a shortage of Office 365 subscriptions.
Previous question
U.S. consumer prices increased in September due to more payment for food, rent, and other goods. The article demands that the Biden administration needs to fix strained supply chains that are putting pressure on the economic growth of America.
By definition, demand refers to the quantity of goods that consumers are willing and able to buy at particular prices in a certain period. The correct option is c. This means that consumers want to buy goods, which they can afford at a particular time. It is determined by consumer preferences, income levels, and availability of goods and services in the market. The demand for various goods and services determines the market equilibrium price, which is where the supply and demand curves meet.
An increase in the price of Office 365 subscriptions above the equilibrium will cause a surplus of Office 365 subscriptions. The correct option is c. If the price of Office 365 subscriptions is above the equilibrium price, there will be more supply than demand, which means that the quantity supplied will exceed the quantity demanded. This will result in a surplus of Office 365 subscriptions. Therefore, to fix this issue, the supplier will have to lower the price to increase the demand for Office 365 subscriptions, which will restore the market equilibrium.
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List the
components or "building blocks" of market (nominal) interest
rates. Which of
these components would not apply to the rates on U.S. Government
securities, and why not?
The component that does not apply to the rates on U.S. Government securities is the default risk premium.
The components or "building blocks" of market (nominal) interest rates include:
Real interest rate: This is the baseline rate that reflects the true cost of borrowing or the return on investment, adjusted for inflation. It represents the compensation lenders or investors require for forgoing current consumption or other investment opportunities.
Inflation expectations: Anticipated changes in the general price level affect interest rates. Higher inflation expectations lead to higher interest rates to compensate for the erosion of purchasing power.
Risk premium: Investors demand an additional return to compensate for the riskiness of an investment. Riskier assets or borrowers tend to have higher interest rates.
Liquidity premium: Less liquid assets or markets may require higher interest rates to attract investors who value liquidity.
Default risk premium: Borrowers with a higher probability of defaulting on their obligations must pay higher interest rates to compensate lenders for the risk of non-payment.
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