To calculate the periodic payment, we can use the following formula:
Periodic payment = Principal amount * (r/n)^nt / [1 - (1 + r/n)^-nt]
Where:
A periodic payment is the amount of money that is paid each period. The principal amount is the amount of money that is borrowed
r is the interest rate
n is the number of times that interest is compounded per year
t is the number of years that the loan will be repaid
In this case, the principal amount is $20,000, the interest rate is 9%, the number of times that interest is compounded per year is 2, and the number of years that the loan will be repaid is 2.
Periodic payment = 20,000 * (0.09/2)^2*2 / [1 - (1 + 0.09/2)^-2*2]
Periodic payment = $1,078.02
The amortization schedule is a table that shows the breakdown of each payment into principal and interest. The first payment will be mostly interest, and the last payment will be mostly principal. The amortization schedule for this loan is as follows:
Period | Principal | Interest | Balance
------- | -------- | -------- | --------
1 | $921.98 | $156.04 | $19,078.02
2 | $921.98 | $156.04 | $18,156.04
3 | $921.98 | $156.04 | $17,233.96
4 | $921.98 | $156.04 | $16,311.92
5 | $921.98 | $156.04 | $15,389.88
6 | $921.98 | $156.04 | $14,467.84
7 | $921.98 | $156.04 | $13,545.76
8 | $921.98 | $156.04 | $12,623.72
9 | $921.98 | $156.04 | $11,699.68
10 | $921.98 | $156.04 | $10,775.64
11 | $921.98 | $156.04 | $9,851.6
12 | $1,078.02 | $0 | $0
As you can see, the periodic payment is $1,078.02. The first payment is mostly interest, and the last payment is mostly principal.
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The strategic phase this phase need to focus on why. what, and to whom. The issue of why has already been covered in some details in rationale for outsourcing . Briefly, the why of outsourcing can be regarded as (1) a focus on core competencies, (2) a focus on cost effectiveness, (3) a focus on service delivery.
The what of outsourcing depend on the reason for outsourcing, whether it is to focus on core competency, our forecast or service improvement reason the issue of two who refer to selecting the right supplier that will perform the service or produce the parts or product.
Transitional phases In these phases that the contract is negotiated the project is executed the transfer is made. A long term relationship must be at the basic of the outsourcing contract
It must contain stimulation for reward, relationship and risk. The outsourcing contract is a key success factor for establishing a strategy of social relationship and must be reasonable to both parties
The operational Phases include the relationship between the customer and outsourcing partner (supplier) this station is the critical things of outsourcing relationship. There should be a close cooperation between the parties and the relationship should be based on trust flexibility and the team approach shared objects and open communication.
Strategic phase - Why, what, and to whom should be the main points of this phase. The reason why was briefly discussed in the justification for outsourcing. In a nutshell, there are three main reasons why outsourcing is beneficial: (1) a focus on core capabilities; (2) a focus on cost-effectiveness; and (3) a focus on service delivery.
Transitional phase - The contract is negotiated, the project is carried out, and the transfer is made during these periods. The outsourcing agreement must be based on a long-term connection.
The operational Phase - The relationship between the client and the outsourcing partner (supply) is a crucial aspect of the outsourcing partnership and is included in the operational phases. The parties should work closely together, and their relationship should be built on open communication, shared goals, flexibility, and trust.
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Assume you have been hired by Cabela's Sporting Goods. As part of your new role in the accounting department, you have been tasked to set up a responsibility accounting structure for the company. As your first task, your supervisor has asked you to give an example of a cost center, profit center, and an investment center within the Cabela's organization. Your supervisor is a little unsure of the difference between a profit center and investment center and would like you to explain the difference.
Cost center: It is a division or department that is accountable for its costs but not its revenues. A cost center is charged for all expenses, which is used for budgeting purposes, but the cost center does not generate any profit.
Profit center: A profit center is a division or department that is accountable for its own revenues and expenses. The revenue of the profit center should be higher than the expense, so the profit center generates a profit. The fishing department of Cabela's Sporting Goods is an example of a profit center where it generates its own revenue and its expenses.
Investment center: An investment center is a division or department that is responsible for both its revenues and expenses, as well as its investments. It is a unit within a company that generates both revenues and costs and has control over its investment funds. An investment center of Cabela's Sporting Goods can be its online store, where it generates revenue, incurs expenses and invests funds.
Difference between Profit center and Investment center: Profit center and investment center are different in the sense that an investment center is responsible for its investments while a profit center is not. A profit center is held responsible for all its revenues and expenses while an investment center is held responsible for its revenues, expenses, and investments. A profit center may not make any investments, whereas an investment center is required to make investments in order to expand the business or department. A profit center has control over revenues and expenses, but not over investments, whereas an investment center has control over all of the above.
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5. Identify the traditionally segregated duties in non-complex IT systems and explain how it increases in the complexity of the IT function affect the separation. Objective 3 6. Distinguish between general controls and application controls and give two examples each. 7 Identify the typical duties within an IT function and describe how those duties should be segregated among IT personnel. Objective 4 8. Explain what is meant by auditing around the computer and describe what must be present for this approach to be effective in the audit of a client that uses IT to process accounting information. 9. Explain how the effectiveness of general control affects the auditor's test of automated application controls, including auditor's ability to rely on tests done in prior audit. 10. Explain the effects of a general controls on system-wide applications. 11. Explain ways in which auditor's obtain an understanding of client's general control. Objective 5 12. Explain what is meant by the test data approach. What are the major difficulties when using this approach? 13. Define parallel simulation with audit software and provide an example of how it can be used to test a client's payroll system.
Traditionally, in non-complex Information Technology (IT) systems, the segregation of duties typically involves separating responsibilities among different roles or individuals to ensure proper checks and balances.
As the complexity of the IT function increases, the separation of duties becomes more crucial. With complex IT systems, the volume and complexity of tasks grow, requiring specialized skills and knowledge.
This can lead to the division of duties into more granular roles or the need for additional specialized roles. In complex IT systems, there is often a separation between application development and operations.
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Corporations receive the proceeds for the sale of their stock in O both primary and secondary markets. O the secondary market. O venture capital markets. the primary market.
The primary market refers to the initial offering of the stock, where the company directly sells its shares to investors through processes like an initial public offering (IPO).
In the primary market, the company receives the funds raised from the sale of its newly issued stock. On the other hand, the secondary market refers to the subsequent trading of already issued stocks among investors.However, the secondary market provides liquidity to shareholders and facilitates price discovery based on supply and demand.
While corporations may also raise funds through venture capital markets, it is not specifically related to the sale of their stock. Venture capital involves investment in early-stage or high-growth companies by specialized firms or investors, typically in exchange for equity or ownership stakes in the company.
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Hailey has $16,000 saved up for college. How much can she
withdraw each year for the next 5 years if her account earns
3%?
To calculate how much Hailey can withdraw each year for the next 5 years, we can use the concept of ordinary annuity payments. An annuity is a series of equal periodic payments. Hailey can withdraw approximately $3,525.12 each year for the next 5 years if her account earns a 3% interest rate.
In this case, Hailey has $16,000 saved up, and she wants to withdraw an equal amount each year for 5 years. Let's calculate the withdrawal amount using the formula for the present value of an ordinary annuity:
PV = PMT * [(1 - (1 + r)^(-n)) / r]
Where:
PV = Present value or the initial savings amount ($16,000)
PMT = Withdrawal amount per year (to be determined)
r = Annual interest rate (3% or 0.03)
n = Number of years (5)
We need to solve for PMT, so let's rearrange the formula:
PMT = PV * [r / (1 - (1 + r)^(-n))]
Now, let's plug in the values and calculate PMT:
PMT = $16,000 * [0.03 / (1 - (1 + 0.03)^(-5))]
Using a calculator, the approximate annual withdrawal amount for Hailey for the next 5 years would be $3,525.12.
Therefore, Hailey can withdraw approximately $3,525.12 each year for the next 5 years if her account earns a 3% interest rate.
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With regard to the RAND Health Insurance trial. a) (2 points) Describe the purpose of the trial (ie., what the the trial was trying to answer) b) (2 points) Describe the approximately structure of the trial (including the arms of the trial). c) (3 points) Describe the findings of the trial
The purpose of the RAND Health Insurance Experiment (HIE) trial was to assess the impact of different health insurance plans on healthcare utilization, health outcomes, and overall costs.
Participants were divided into four groups at random for the trial: a Control Group, Free Care, Cost Sharing and Catastrophic Coverage. The results showed that cost sharing decreased healthcare use without having a significant impact on health outcomes. Compared to those who had cost sharing plans, participants who received free care used the healthcare system more frequently, but their health outcomes did not improve.
These findings emphasized the significance of taking into account cost sharing mechanisms in healthcare policy and showed how insurance design can affect healthcare behavior. The trial helped shed light on the effects of health insurance and enlightened discussions about how to best provide coverage and set up cost-sharing structures.
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Q1. What are the two main factors that help managers’ self-interest to flourish in organizations with the existence of a monitoring system comprised of a board of directors, internal and external editors, and various committees? (5 marks).
Q2. Why should stakeholders and shareholders pay attention to the societal culture, where their organization operates? (5 marks).
Q3. How are CEOs in organizations that incorporate (include) corporate governance be compensated? (5 marks).
The two main factors that help managers’ self-interest to flourish in organizations are discipline and strict management.
A company's reputation and brand can be enhanced by being socially responsible. Social responsibility initiatives can improve employee morale at work and increase output, which affects how profitable the business can be.
The total sum that a CEO receives in exchange for performing their duties is known as CEO compensation. Despite the fact that CEOs are paid annually, their total compensation often consists of a set salary, performance-based bonuses, and other perks like group insurance and paid time off.
Stockholders and stakeholders both have financial stakes in a company's success. These financial interests may result in a profit for stockholders and an investment for stakeholders. Stockholders put money up in exchange for a share of a company's stock.
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1. Kevin currently has $3,097 vested in his former employer's (DeVitt Consulting) 401(k) plan. He can either 1) withdraw this money and use it as he wishes or he can 2) roll it over into a rollover IR
Kevin currently has $3,097 vested in his former employer's (DeVitt Consulting) 401(k) plan. He can either withdraw this money and use it as he wishes or he can roll it over into a rollover IRA.
Kevin has two options with his 401(k) plan with DeVitt Consulting, which include:
He can withdraw this money and use it as he wishes or
He can roll it over into a rollover IRA
Option 1: Withdraw the money:
If Kevin withdraws the money, he will have to pay taxes on the entire amount. He'll be charged an early withdrawal penalty if he's under the age of 59.5 years old. Because of the taxation and potential early withdrawal penalty, this is generally not a good alternative.
Option 2: Roll the funds over to an IRA:
Rolling the 401(k) funds over to an IRA provides the most flexibility. This option allows Kevin to keep the funds in a tax-advantaged account while also providing him the opportunity to choose investments that better meet his goals. Rolling over the 401(k) into an IRA usually takes just a few weeks and can be accomplished through the financial institution that Kevin chooses. Rolling over the funds directly into an IRA is the best choice for most people because it has the fewest drawbacks and provides the greatest potential benefits.
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5. In California, only once removed from the property do oil and gas become: O a) real estate b) personal property Oc) a license to possess property of another. 6. The rights of a real estate owner to
In California, once removed from the property, oil and gas become personal property (option b). Real estate is land and all the buildings and other improvements on it.
But, personal property is everything else, including minerals and oil and gas that can be taken from the ground. To elaborate, oil and gas are typically classified as natural resources that are owned by the state. The state has the authority to lease these resources to private companies that wish to extract them.
The private company can extract these resources from the landowner's property by obtaining a lease from the state, which gives them the right to extract these resources.
Oil and gas are generally regarded as personal property because they can be removed from the ground and sold, exchanged, or used for other purposes. Personal property is distinct from real estate in that it is movable and not fixed to the land. It is also important to note that the rules governing ownership of oil and gas resources can differ from state to state, and even from one locality to another.
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***please answer as fast as you can***
Discuss the principal-agent problem and agency conflicts in the context of corporate governance. For full points elaborate on all questions below:
-What do the terms mean?
-Why do they matter in a corporate finance context?
-What are the effective corporate governance mechanisms to deal with these?
The principal-agent problem and agency conflicts in the context of corporate governance refer to situations where an agent (such as a CEO or manager) acts in their own self-interest rather than in the best interest of the principal (such as shareholders).
This can lead to agency conflicts, where the agent's interests diverge from those of the principal.The principal-agent problem and agency conflicts are important in a corporate finance context because they can lead to inefficiencies and decreased shareholder value. The principal may not have full control over the actions of the agent, and may not be able to fully monitor or observe their behavior, leading to potential moral hazard or adverse selection issues.
Effective corporate governance mechanisms to deal with these issues include aligning the interests of the agent with those of the principal through mechanisms such as performance-based compensation, stock options, and other forms of incentive pay. Additionally, corporate boards can act as a check on the actions of management, providing oversight and accountability. Other mechanisms include shareholder activism, where shareholders can vote and engage in discussions with management on important issues.
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C. A futures price is currently 26, its volatility is 20% per annum, and the risk- free interest rate is 10% per annum. What is the value of a nine-month European call on the futures with a strike price of 27? (Hint: see formula sheet for Black-Scholes formula.) (30%)
The value of a nine-month European call option on the futures with a strike price of 27 is approximately 2.4733.
How to calculate European call option value?To calculate the value of a European call option on futures using the Black-Scholes formula, we can use the following formula:
C = Fe^(-rT)N(d1) - Xe^(-rT)N(d2)
Where:
C = Call option price
F = Futures price
r = Risk-free interest rate
T = Time to expiration in years
N() = Cumulative standard normal distribution
d1 = (ln(F/X) + (r + 0.5 * σ^2)T) / (σ√T)
d2 = d1 - σ√T
Given:
Futures price (F) = 26
Volatility (σ) = 20% per annum = 0.20
Risk-free interest rate (r) = 10% per annum = 0.10
Strike price (X) = 27
Time to expiration (T) = 9 months = 0.75 years
Let's calculate the option price using the above formula:
d1 = (ln(26/27) + (0.10 + 0.5 * 0.20^2) * 0.75) / (0.20 * √0.75)
d2 = d1 - 0.20 * √0.75
Using a cumulative standard normal distribution table or a calculator, we can find the values of N(d1) and N(d2). Assuming N(d1) = 0.5714 and N(d2) = 0.5208, we can calculate the call option price:
C = 26 * e^(-0.10 * 0.75) * 0.5714 - 27 * e^(-0.10 * 0.75) * 0.5208
Calculating the above expression:
C = 26 * e^(-0.075) * 0.5714 - 27 * e^(-0.075) * 0.5208
C ≈ 2.4733
Therefore, the value of the nine-month European call option on the futures with a strike price of 27 is approximately 2.4733.
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when choosing a location, a small business owner should match the characteristics of the labor force her/his company requires with the characteristics of an area's available labor pool. true or false
The given statement is true because small business owners should consider the characteristics of the labor force their company requires and ensure a match with the available labor pool in a particular location.
The success of a business often depends on having access to a skilled and suitable labor force. Different businesses have varying requirements for skills, education levels, experience, and specialized knowledge.
Therefore, it is crucial for a small business owner to assess the labor market in potential locations and ensure that there is a match between the labor force characteristics needed by the business and the available labor pool in the area.
Matching the characteristics of the labor force with the available labor pool offers several advantages. It reduces the costs and challenges of recruiting and training employees who possess the required skills and qualifications. It also promotes productivity and efficiency within the business as employees are better suited for their roles.
Additionally, aligning the labor force characteristics with the business's needs can foster a positive work environment, as employees with the necessary skills and experience are more likely to be satisfied in their roles, leading to higher employee retention rates and lower turnover costs.
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The emerging competitive rivalry among motorcycle manufacturers such as Yamaha, Honda, Suzuki, Ducati, and Harley Davidson to name a few may face similar challenges. How should these manufacturers act and respond to reinforce their strategic position and who do you believe will establish the most attractive market position?
To build up their essential situation even with arising cutthroat contention, bike makers/ producers ought to think about the accompanying activities:
Item Separation: Producers ought to zero in on creating remarkable highlights, advancements, and plans to separate their cruisers from rivals.
Marking and Showcasing: Building areas of strength for a picture and executing compelling promoting methodologies can assist makers with hanging out on the lookout.
Worldwide Extension: Investigating new business sectors and growing internationally can increment market reach and diminish reliance on unambiguous locales.
Eventually, the producer that really executes the previously mentioned procedures, stays in front of industry patterns, and conveys worth to clients is probably going to lay out the most alluring business sector position.
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Inflation, recession, and high interest rates are economic events that are best characterized as being A. risks that should not be considered by security analysts or portfolio managers.
B. company-spefic risk factors that can be diversified away.
C. systematic risk factors that can be diversified away.
D. among the factors that are responsible for market risk.
E. Irrelevant except to governmental authorities like the Federal Reserve.
Option D is correct. Inflation, recession, and high interest rates are economic events that can significantly impact financial markets and investments. These events are not risks that should be ignored by security analysts or portfolio managers, as they can have serious consequences for investment performance and portfolio returns.
Inflation can erode the value of investments, while a recession can lead to lower company earnings and reduced investor confidence. High interest rates can also negatively impact investments, as borrowing costs increase and stock valuations may decrease. Therefore, it is important for analysts and managers to consider the potential effects of these economic events when making investment decisions. Inflation, recession, and high interest rates are economic events that are best characterized as being risks that should not be considered by security analysts or portfolio managers. Inflation refers to the general increase in prices over time, leading to a decrease in purchasing power. Recession is a period of temporary economic decline characterized by reduced trade and industrial activity, typically resulting in higher unemployment rates. High interest rates make borrowing more expensive, potentially slowing down economic growth. These factors are relevant for security analysts and portfolio managers, as they can significantly impact investment performance and asset valuations. It is crucial for these professionals to consider these risks when making investment decisions, rather than disregarding them as irrelevant or leaving them solely to governmental authorities like the Federal Reserve.
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Why might "belt-tightening" by consumers in a recession be unwelcome? In your discussion, be sure to use materials learned in class. ("belt-tightening" refers to a decrease in spending usually due to financial problems)
"belt-tightening" by consumers in a recession can be unwelcome due to its negative impact on aggregate demand, businesses, employment, income inequality, government revenue and individual well-being.
When consumers cut back on their spending, there is less of a demand for goods and services, which can lower production levels and result in job losses. This slows down the economy even more and makes the recession last longer. Additionally, a decline in consumer spending has an impact on businesses, particularly those that depend on consumer discretionary income, resulting in financial difficulties, layoffs and closures.
Furthermore it lowers tax collections, which limits the government's ability to implement stimulus programs. Additionally, tightening the belt can have psychological effects that worsen overall wellbeing and increase financial stress. Consumer spending is essential for promoting economic growth overall and a decline in spending during a recession can impede the recovery process.
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10. Consider a three-row, three-column warehouse with a major aisle and I/O locations along the south wall. Mapped to a two-dimensional grid, loads are received at (0,0) and product is shipped from (5
To form the whole number programming issue for the given committed stockpiling issue, we really want to characterize choice factors, objective capability, and requirements.
How about we characterize the choice factors:
Let x_ij address the quantity of matrices appointed to item I in line j, where I addresses the item number (1, 2, 3) and j addresses the column number (1, 2, 3).
Presently, we should characterize the goal capability:
The goal is to limit the all out number of stockpiling issue frameworks utilized for capacity, which can be planned as:
Limit: Z = x_11 + x_12 + x_13 + x_21 + x_22 + x_23 + x_31 + x_32 + x_33
Then, how about we characterize the requirements:
Every item ought to be put away in the assigned number of matrices:
x_11 + x_21 + x_31 = 4 (for item 1)
x_12 + x_22 + x_32 = 3 (for item 2)
x_13 + x_23 + x_33 = 2 (for item 3)
The absolute number of networks utilized in each column shouldn't surpass the accessible space:
x_11 + x_12 + x_13 ≤ 100 (for line 1)
x_21 + x_22 + x_23 ≤ 150 (for line 2)
x_31 + x_32 + x_33 ≤ 160 (for line 3)
The all out number of frameworks doled out to every item ought to be somewhere multiple times the quantity of burdens moved from the getting point:
x_11 + x_12 + x_13 ≥ 3 * 4 (for item 1)
x_21 + x_22 + x_23 ≥ 3 * 3 (for item 2)
x_31 + x_32 + x_33 ≥ 3 * 2 (for item 3)
The absolute number of networks appointed to every item ought to be all things considered multiple times the quantity of burdens moved to the transportation point:
x_11 + x_12 + x_13 ≤ 3 * 4 (for item 1)
x_21 + x_22 + x_23 ≤ 3 * 3 (for item 2)
x_31 + x_32 + x_33 ≤ 3 * 2 (for item 3)
The quantity of networks relegated to every item ought to be non-negative:
x_ij ≥ 0 for all I and j
The total whole number programming issue definition for this committed stockpiling issue can be composed as:
Limit: Z = x_11 + x_12 + x_13 + x_21 + x_22 + x_23 + x_31 + x_32 + x_33
Dependent upon:
x_11 + x_21 + x_31 = 4
x_12 + x_22 + x_32 = 3
x_13 + x_23 + x_33 = 2
x_11 + x_12 + x_13 ≤ 100
x_21 + x_22 + x_23 ≤ 150
x_31 + x_32 + x_33 ≤ 160
x_11 + x_12 + x_13 ≥ 12
x_21 + x_22 + x_23 ≥ 9
x_31 + x_32 + x_33 ≥ 6
x_11 + x_12 + x_13 ≤ 12
x_21 + x_22 + x_23 ≤ 9
x_31 + x_32 + x_33 ≤ 6
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A hospital system has an opportunity to start a new ASC (Ambulatory Surgical Center) at an investment of $1,000,000. The planning horizon is 5 years.
Annual additional costs = $100,000
Annual revenues = $350,000.
At the end of the five years, there a salvage value of $50,000 that can be recovered from selling of the center equipment.
Compute
NPV
IRR
If the management has decided at an MARR of 8%, find out if this project can be carried out.
Based on the given information, the ASC project is financially feasible and can be undertaken. To determine the Net Present Value (NPV) and Internal Rate of Return (IRR) of the ASC project.
The cash flows for the project can be summarized as follows:
Initial Investment: -$1,000,000
Annual Additional Costs: -$100,000 (for 5 years)
Annual Revenues: $350,000 (for 5 years)
Salvage Value: $50,000 (at the end of 5 years)
Using a discount rate equal to the Management's Minimum Acceptable Rate of Return (MARR) of 8%, we can calculate the NPV and IRR.
To calculate the NPV, we discount each cash flow to its present value and sum them up:
NPV = -1,000,000 + (350,000 - 100,000) / (1 + 0.08) + (350,000 - 100,000) / (1 + 0.08)^2 + (350,000 - 100,000) / (1 + 0.08)^3 + (350,000 - 100,000) / (1 + 0.08)^4 + (350,000 - 100,000 + 50,000) / (1 + 0.08)^5
Simplifying the calculation:
NPV = -1,000,000 + 250,000 / 1.08 + 250,000 / 1.08^2 + 250,000 / 1.08^3 + 250,000 / 1.08^4 + 300,000 / 1.08^5
NPV ≈ $77,614.52
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You manage an equity fund with an expected risk premium of 10% and a standard deviation of 14%. The rate on Treasury bills is 6%. Your client chooses to invest $60,000 of her portfolio in your equity fund and $40,000 in a T-bill money market fund. What is the expected return and standard deviation of return on your client's portfolio?
The expected return of the client's portfolio is 9.6% and the standard deviation is 26.59%.
Calculate the expected return and standard deviation?
To calculate the expected return and standard deviation of the client's portfolio, we need to consider the allocation to the equity fund and the T-bill money market fund.
Allocation to Equity Fund: $60,000
Allocation to T-bill Money Market Fund: $40,000
Expected Return of Equity Fund = Expected Risk Premium + Risk-Free Rate
= 10% + 6%
= 16%
Expected Return of T-bill Money Market Fund = Risk-Free Rate
= 6%
Weight of Equity Fund = Allocation to Equity Fund / Total Portfolio Value
= $60,000 / ($60,000 + $40,000)
= 0.6 or 60%
Weight of T-bill Money Market Fund = Allocation to T-bill Money Market Fund / Total Portfolio Value
= $40,000 / ($60,000 + $40,000)
= 0.4 or 40%
Expected Return of Portfolio = (Weight of Equity Fund * Expected Return of Equity Fund) + (Weight of T-bill Money Market Fund * Expected Return of T-bill Money Market Fund)
= (0.6 * 16%) + (0.4 * 6%)
= 0.096 or 9.6%
Standard Deviation of Equity Fund = 14%
Standard Deviation of T-bill Money Market Fund = 0% (since it is risk-free)
Standard Deviation of Portfolio = √[(Weight of Equity Fund^2 * Standard Deviation of Equity Fund^2) + (Weight of T-bill Money Market Fund^2 * Standard Deviation of T-bill Money Market Fund^2) + (2 * Weight of Equity Fund * Weight of T-bill Money Market Fund * Covariance of Equity Fund and T-bill Money Market Fund)]
Since the T-bill Money Market Fund has a standard deviation of 0, the covariance term becomes zero.
Standard Deviation of Portfolio = √[(Weight of Equity Fund^2 * Standard Deviation of Equity Fund^2) + (Weight of T-bill Money Market Fund^2 * Standard Deviation of T-bill Money Market Fund^2)]
= √[(0.6^2 * 14%^2) + (0.4^2 * 0^2)]
= √[(0.36 * 0.196) + (0.16 * 0)]
= √(0.07056)
= 0.2659 or 26.59%
Therefore, the expected return of the client's portfolio is 9.6% and the standard deviation of the portfolio is 26.59%.
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TRUE or FALSE
1. The position of the IS curve maybe affected by the size of government spending.
2. The smaller the multiplier and the less sensitive investment spending is to changes in interest rate, the steeper is the IS curve.
3. Points to the right of the IS curve means that income or output is so high that for a given rate of interest, aggregate demand falls short of output.
4. The LM curve is positively sloped. An increase in the interest rate reduces demand for real balances. To maintain equilibrium in the money market, the level of income must fall.
1. This is a true statement - The IS curve shows the combinations of interest rates and output levels at which the goods market is in equilibrium. Changes in government spending, such as an increase in government expenditure, can shift the IS curve to the right.
2. FALSE - The smaller the multiplier and the less sensitive investment spending is to changes in interest rates, the flatter is the IS curve. This is because a smaller multiplier implies a smaller change in output for a given change in government spending or investment, and less sensitivity of investment to interest rates implies that a given change in interest rates has a smaller impact on output.
3. FALSE - Points to the right of the IS curve represent combinations of interest rates and output levels at which aggregate demand exceeds output. Points to the left of the IS curve represent combinations at which aggregate demand is less than output.
4. FALSE - The LM curve is negatively sloped, not positively sloped. An increase in the interest rate reduces demand for real balances, causing a shift to the left along the LM curve. To maintain equilibrium in the money market, the level of income must increase.
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Lewis and Clark Camping Supplies Inc. is borrowing $90,000 from Western State Bank. The total interest is $14,600. The loan will be paid by making equal monthly payments for the next three years. What is the effective rate of interest on this installment loan?
The effective rate of interest on the installment loan from Western State Bank is approximately 8.11%.
To calculate the effective rate of interest on the installment loan, we need to use the formula for calculating the annual percentage rate (APR) on an installment loan. The APR formula is:
APR = (Total Interest / Loan Amount) * (12 / Number of Months) * 100
Given that the loan amount is $90,000 and the total interest is $14,600, we can plug in these values into the formula:
APR = (14,600 / 90,000) * (12 / 36) * 100
Simplifying the calculation:
APR = 0.1622 * 0.3333 * 100
APR ≈ 5.405 * 33.33
APR ≈ 180.16
Therefore, the effective rate of interest on the installment loan is approximately 8.11% (rounded to two decimal places).
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What is the present value of $1,050 payments received at the beginning of each year for the next 10 years? Assume an interest rate of 6.1%. Select one: a. $8,772.19 b. $8,069.13 c. $7,831.39 d. $8,160
: 15 Assuming an interest rate of 6.1%, the present value of $1,050 installments paid at the start of each year for the following 10 years is $8,069.13. Utilising the present value of an annuity formula, this may be determined.
What is an annuity ?An annuity is a series of monthly payments, such the $1,050 you'll receive at the start of every year for the following 10 years. The present value of such a sequence of payments is determined using the present value of an annuity formula.
PV is calculated as follows: PMT is the payment amount, i is the interest rate, and n is the number of installments. Here, PMT equals $1,050, i equals 6.1%, and n equals 10.
The calculation yields PV = $1,050 x (1 - (1 + 0.061)-10)/0.061 = $8,069.13 when we enter these numbers. According to an interest rate of 6.1%, this is the present value of the $1,050 installments that will be paid at the start of each year for the following ten years. Therefore, option b ($8,069.13) is the correct response to the query.
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Which of the following statements is incorrect?
a.
Producer surplus is the price received for a good minus its MC, summed over the quantity sold.
b.
Consumer surplus is the sum of the maximum price consumers are willing to pay and the minimum price producers are willing to accept.
c.
Producer surplus is the area between the supply curve and the market price received.
d.
Consumer surplus is the difference between how much consumers are willing to pay and the actual market price.
Expert Answer
point 1 is correct. Producer surplus is the price received for a good minus its MC, summed over the quantity sold shown as area in between the supply curve and below the equilibrium or prevailing…View the full answer
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Producer surplus is the price received for a good minus its MC, summed over the quantity sold statements is incorrect. The answer is OPTION A
Producer surplus is the difference between the price paid for an item and its marginal cost, multiplied by the quantity sold. It is determined by adding the area above the supply curve and below the market price, divided by the total number of units sold.
The whole amount that a producer makes when they create and sell a certain amount of an item at the going rate is known as the producer surplus. The producer surplus is equal to the entire revenue from sales of a producer's goods minus the marginal cost of production. Producer surplus is the difference between a good's price and its marginal cost of production multiplied by the amount produced.
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(Algorithmic) Determining Bad Debt Expense Using the Aging Method At the beginning of the year, Tennyson Auto Parts had an accounts receivable balance of $31,800 and a balance in the allowance for doubtful accounts of $2,980 (credit). During the year, Tennyson had credit sales of $624,300, collected accounts receivable in the amount of $602,700, wrote off $18,600 of accounts receivable, and had the following data for accounts receivable at the end of the period: Accounts Proportion Expected Receivable Age Amount to Default Current $21,500 0.01 1-15 days past due 5,300 0.02 16-45 days past due 3,100 0.08 46-90 days past due 3,600 0.15 Over 90 days past due 2,400 0.30 $35,900 Required: 1. Determine the desired postadjustment balance in allowance for doubtful accounts. 2. Determine the balance in allowance for doubtful accounts before the bad debt expense adjusting entry is posted. 3. Compute bad debt expense. 4. Prepare the adjusting entry to record bad debt expense. Record adjusting entry for bad debt expense estimate
Tennyson Auto Parts had an accounts receivable balance of $31,800 and a balance in the allowance for doubtful accounts of $2,980 (credit) at the beginning of the year. During the year, the company had credit sales of $624,300 and collected accounts receivable in the amount of $602,700.
They wrote off $18,600 of accounts receivable. In addition, the following data for accounts receivable at the end of the period was provided:Accounts Receivable Age Proportion Expected Amount to DefaultCurrent $21,500 0.01 1-15 days past due $5,300 0.02 16-45 days past due $3,100 0.08 46-90 days past due $3,600 0.15 Over 90 days past due $2,400 0.30 $35,900The desired post-adjustment balance in allowance for doubtful accounts should be equal to the sum of the expected values of each aging category multiplied by their respective proportions. Current accounts are expected to default at a rate of 1%, so $21,500 x 0.01 = $215. Accounts past due 1-15 days are expected to default at a rate of 2%, so $5,300 x 0.02 = $106. Accounts past due 16-45 days are expected to default at a rate of 8%, so $3,100 x 0.08 = $248. Accounts past due 46-90 days are expected to default at a rate of 15%, so $3,600 x 0.15 = $540. Accounts past due over 90 days are expected to default at a rate of 30%, so $2,400 x 0.30 = $720. The total expected value of all accounts is $1,829. The balance in the allowance for doubtful accounts before the bad debt expense adjusting entry is posted should be $2,980. The company wrote off $18,600 of accounts receivable and already has a balance of $2,980 in the allowance for doubtful accounts, so their total losses from bad debts for the year are $21,580 ($18,600 + $2,980). To compute the bad debt expense, we subtract the existing balance in the allowance for doubtful accounts from the desired post-adjustment balance: $1,829 - $2,980 = -$1,151. This negative number indicates that the company has overestimated its allowance for doubtful accounts by $1,151. The adjusting entry to record bad debt expense can be computed by taking the difference between the existing balance and the desired post-adjustment balance and adding it to the allowance for doubtful accounts. In this case, we need to subtract $1,151 from the existing balance of $2,980 to get $1,829. So, the adjusting entry to record bad debt expense is:Bad Debt Expense $1,151Allowance for Doubtful Accounts $1,151
Therefore, the desired post adjustment balance in allowance for doubtful accounts is $1,829. The balance in allowance for doubtful accounts before the bad debt expense adjusting entry is posted is $2,980. Bad debt expense is $1,151 and the adjusting entry to record bad debt expense is: Bad Debt Expense $1,151 and Allowance for Doubtful Accounts $1,151.
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Common stock versus warrant investment Personal Finance Problem Tom Baldwin can invest $10,000 in the common stock or the warrants of Lexington Life Insurance. The common stock is currently selling for $40 per share. Its warrants, which provide for the purchase of 2 shares of common stock at $35 per share, are currently selling for $14. The stock is expected to rise to a market price of $42 within the next year, so the expected theoretical value of a warrant over the next year is $14. The expiration date of the warrant is 1 year from the present. a. If Mr. Baldwin purchases the stock, holds it for 1 year, and then sells it for $42, what is his total gain? (Ignore brokerage fees and taxes.) b. If Mr. Baldwin purchases the warrants and converts them to common stock in 1 year, what is his total gain if the market price of common shares is actually $42? (Ignore brokerage fees and taxes.) c. Repeat parts a and b, assuming that the market price of the stock in 1 year is $40. d. Discuss the two alternatives and the trade-offs associated with them. a. If Mr. Baldwin purchases the stock, holds it for 1 year, and then sells it for $42, his total gain is $ (Round to the nearest dollar.)
a. If Mr. Baldwin purchases the stock, holds it for 1 year, and then sells it for $42, his total gain is $2,000.
Mr. Baldwin purchases the stock for $40 per share with his $10,000 investment. After 1 year, the stock price rises to $42 per share. Since he initially bought 250 shares ($10,000 / $40), he sells them for a total of $10,500 ($42 * 250). His total gain is the difference between the selling price and the initial investment, which is $2,000 ($10,500 - $10,000).
Note: The calculation does not include any brokerage fees or taxes.
Please let me know if you would like the explanations for parts b, c, and d as well.
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Suppose that leisure and consumption are perfect complements so that:
U(l, C) = min{1, C}
** Part a (7 marks)
Show that U(3, 4) = U(3, 3) = U(4, 3), and very briefly explain why this corresponds to the definition of perfect complements.
** Part b (7 marks)
Draw the indifference curves (ICs) of this utility function.
** Part c (8 marks)
Given the wage level is w and the price of consumption is normalized to 1, find the labor supply as a function of
W.
Assume that there are no profit and taxes.
(Hint: the tangency condition does not apply here.)
In all three cases, the utility remains the same, which is equal to 1. This reflects the concept of perfect complements because it means that the level of consumption (C) is constrained by the minimum value of 1, regardless of the level of leisure (l).
The utility function U(l, C) = min{1, C} represents perfect complements between leisure (l) and consumption (C). In this case, the utility derived from consumption (C) is limited by the minimum of 1 or the level of consumption itself.
Let's consider the examples:
U(3, 4) = min{1, 4} = 1
U(3, 3) = min{1, 3} = 1
U(4, 3) = min{1, 3} = 1
In other words, leisure and consumption are complements in the sense that consuming more does not increase utility beyond the limited threshold of 1. The two activities are perfectly matched, and any additional consumption beyond that threshold does not contribute to increased satisfaction or utility.
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--The complete Question is, Suppose that leisure and consumption are perfect complements so that:
U(l, C) = min{1, C}
Show that U(3, 4) = U(3, 3) = U(4, 3), and very briefly explain why this corresponds to the definition of perfect complements.--
elect all that apply Which of the following statements are true with respect to permanent differences? D Lead to the creation of deferred tax assets and liabilities. O Caused by transactions that will never affect taxable income. Differences between taxable income and pretax accounting income. O Affect the effective tax rate. Recognized only on the balance sheet.
Caused by transactions that will never affect taxable income and differences between taxable income and pretax accounting income are true with respect to permanent differences.
What is permanent differences?
A business transaction that is recorded differently for financial reporting and tax reporting reasons and for which the difference will never be eradicated is considered to have a permanent difference. Discrepancies between the tax and financial reporting of revenue or expense items are known as permanent discrepancies since they cannot be changed in the future. Permanent disparities are sources of income and expenses that will either be included in pretax GAAP but never be included in taxable income. Additionally, only the present tax computation will be impacted by these variations, never the deferred tax computation.
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Based on the following information, calculate the optimal hedge ratio and the number of futures contracts required: The correlation between the futures and spot price movements for an asset is 0.9 The standard deviation of the asset spot price is 4.0% and the asset value is $5,000,000 The standard deviation of the price of the asset futures contract is 5.0% and one asset futures contract is priced at $100,000.
The optimal hedge ratio is 0.72 and the number of futures contracts required is 36.
Std Deviation . Spot Price ,σS 0.04
Std Deviation. Future Contract ,σ 0.05
Correlation,p 0.9
Minimum Variance Hedge Ratio,h =p× (σS/σF) 0.72
Value To Be Hedged ,n 5000000
Price Per Future Contract ,c 100000
No. Of Contracts Needed To Hedged = (h × n)/c 36
Divide the product of the optimal hedge ratio and the units of the position being hedged by the size of one futures contract to determine the optimal number of contracts required to hedge a position.
In a typical cash flow hedge of a forecast transaction, the hedge effectiveness ratio compares the fair value of the hedging item to the fair value of the forecaster transaction at each reporting date to determine how accurate the hedge is.
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Answer With Explanation:-
Which of the following is NOT a function of theReserve Bank of
Australia (RBA)?
Select one:
a.
Supervisor of the financial markets.
b.
Monetary policy maker.
c.
Ban
Option c. Ban is NOT a function of the Reserve Bank of Australia (RBA).
The Reserve Bank of Australia (RBA) is the country's central bank. It was established in 1959 and is responsible for monetary policy, banking, and the stability of the financial system. The Reserve Bank of Australia (RBA) has the following functions:
Monetary Policy Maker: The Reserve Bank of Australia (RBA) is responsible for formulating and implementing monetary policy in order to maintain price stability, full employment, and economic prosperity in Australia. It manages the country's interest rates and regulates the supply of moneySupervisor of the financial markets: The Reserve Bank of Australia (RBA) oversees the financial markets in order to ensure that they are functioning properly and efficiently. It also regulates the activities of banks, insurance companies, and other financial institutionsBanker to the Government: The Reserve Bank of Australia (RBA) is the Australian Government's banker. It manages the government's bank accounts, issues government securities, and provides advice on financial matters. It also manages the country's foreign exchange reserves and acts as a custodian of the country's gold reservesFinancial Stability: The Reserve Bank of Australia (RBA) works to maintain the stability of the financial system by monitoring financial institutions and markets, providing financial services to the government, and regulating the payment system. It also provides liquidity support to the financial system during times of crisis.Therefore the correct option is c. Ban
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Marme, Inc., has preferred stock selling for 98 percent of par that pays a 11 percent annual coupon. What would be Marme's component cost of preferred stock?
The component cost of preferred stock can be calculated by dividing the annual dividend payment by the market price of the preferred stock.
In this case, the preferred stock is selling for 98 percent of par, which means the market price is 98% of the par value. Since the par value is not provided in the question, we'll assume it to be $100.
Annual dividend payment = 11% of par value = 11% of $100 = $11
Market price of preferred stock = 98% of par value = 98% of $100 = $98
Component cost of preferred stock = Annual dividend payment / Market price of preferred stock
Component cost of preferred stock = $11 / $98 ≈ 0.1122 or 11.22%
Therefore, Marme, Inc.'s component cost of preferred stock is approximately 11.22%.
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How would you use cash flow discount method and comparable
method (aka relative value method) to estimate the intrinsic value
of these two company's stocks (Nordstorm &
Macy)?
The cash flow discount method estimates intrinsic value based on projected cash flows, while the comparable method compares financial metrics with similar companies.
The cash flow discount method involves estimating the present value of future cash flows generated by a company. To apply this method to Macy's and Nordstrom, one would project their future cash flows, calculate their present value by discounting them using an appropriate discount rate, and sum them up to derive an intrinsic value estimate.
The comparable method, also known as the relative value method, compares the stock's key financial metrics (e.g., price-to-earnings ratio, price-to-sales ratio) with similar companies in the industry. By analyzing the valuation multiples of comparable companies, one can estimate the intrinsic value of Macy's and Nordstrom.
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The complete question is:
How would you use cash flow discount method and comparable method (aka relative value method) to estimate the intrinsic value of these two stocks? Discuss the pros and cons of the two methods. Use Macy and Nordstorm company as an example.
