Answer:
1) Suppose that GDP is $10,000, Consumption is $6,000, and Government spending is $1,500 with a deficit of $200. (Assume net exports are zero) What is the level of private saving in this economy?
d) 2,700GDP = C + (G - deficit) + I + NX
GDP = $10,000
C = $6,000
G - deficit = $1,300
NX = $0
$10,000 = $6,000 + $1,300 + I
I = $2,700
2) The population of Scottsdale is 100 people. 40 people work full time, 20 work half time but prefer to work full time, 10 are seeking work, 10 would like to work but are discouraged from seeking, 10 are full time students without a desire to work while in school, and 10 are retired. What is the unemployment rate?
14.29%total work force = 40 (working full time) + 20 (working part time) + 10 (not working but seeking a job) = 70 people
Students are not part of the labor force, retired people are not part of it either and those without a job but not actively looking for one are not part of the labor force either.
unemployed = 10
unemployment rate = unemployed / total labor force = 10 / 70 = 14.29%
3) Lately, talks about creating more barriers to trade has contributed to some volatility in the stock market. In this case, short downturns in the market would reflect the fact that firms are unsure about how to make investment plans. This uncertainty in the investment market would tend to _______ investment and _______ interest rates.
c) lower, raise.Investors are risk averse, that means that the higher the risk, the higher the expected returns form an investment. Uncertainty increases risk, which decreases total investment and increases interest rates (price of money).
4) In the Hans Rosling video discussing the magic washing machine, which of the following points is made?
D) One valuable aspect of the washing machine is the time it frees up to engage in other activities, such as learning, which ultimately promotes economic growth.The consumption of energy is divided almost equally between rich people and poor people, the problem is that poor people represent more than 86% of the world's population. You must also remember that not all the people living in developed countries are rich, e.g. in the US, 11% of the population is poor. The % of poor people increase as you go from developed to developing countries.
If you combine total energy consumption of developing countries, it only represents 30% of the world's energy consumption.
An actor invests some money at %, and $ more than the amount at The total annual interest earned from the investment is $. How much did he invest at each amount? Use the six-step method.
no lo se xd pero solo se que hoka
Are employees more likely to favor defined contribution plans over defined benefit plans? How about employers? Explain your answers.
Answer: the contribution plan favours the employer while the defined benefit plan favours the employee
Explanation:
Defined contribution plans is described as a type of retirement plan where the employer, employee or both make contributions on a regular basis. While the defined benefit plan, the employer is responsible for all of the planning and investment risk, where employees are paid benefit based on length of employment and salary history. The employees are more likely to prefer the benefit plan, while the employer would prefer the contribution plan which favours him because of the contribution the employees make
On November 10 of the current year, Flores Mills sold carpet to a customer for $8,000 with credit terms 2/10, n/30. Flores uses the gross method of accountin g for cash discounts What is the correct entry for Flores on November 17, assuming the correct payment was received on that date? A) cash 7,840 Accounts receivable 7,840 B) cash 7,840 Sales discounts 8,00 Accounts receivablhe C) 7,84 cash Sales Accouts receivable D) 8,000 Cash Sales discounts l6 8,00 Accounts receivable 160 Sales
Answer:
Following are the solution to this question:
Explanation:
In all the given choices some of the data is missing so, its correct entry can be defined as follows
Cash account $7,840
Sales discount $160
To Accounts receivable $8,000
In order to create an environment where employees can achieve their potential as they move the organization towards its goals, the manager role needs to be that of _____________. a. resource allocator b. resource controller c. a flexible resource d. an advocator of the status quo
Answer: c. Flexible resource
Explanation:
In order to create an environment where employees can achieve their potential as they move the organization towards its goals, the manager role needs to be that of a flexible resource.
A flexible manager helps the employees achieve their potential as he or she tailors them in the right direction. They also help the workers to work productively which will be vital in the accomplishment of the goals of the organization.
Answer:
c. a flexible resource
Explanation:
A flexible resource use is the process by which businesses make changes to adapt to different circumstances in order to maintain competitive edge in the industry.
This method emphasises efficiency by use of available resources.
Resources employed include working tools and human resources.
This creates an environment where employees can achieve their potential as they move the organization towards its goals.
As new changes are made new roles are created that will lead to staff growth
If the risk-free rate is 6 percent, the return on an average stock is 10 percent, and the beta of a capital budgeting project is 1.50, the project's required rate of return from the project is _____. a. 19% b. 21% c. 24% d. 12% e. 4%
Answer:
r = 0.12 or 12%
Option d is the correct answer.
Explanation:
Using the CAPM, we can calculate the required/expected rate of return on a stock. This is the minimum return required by the investors to invest in a stock based on its systematic risk, the market's risk premium and the risk free rate.
The formula for required rate of return under CAPM is,
r = rRF + Beta * (rM - rRF)
Where,
rRF is the risk free rate rM is the market return
We assume that the return on an average stock in the market is the return on market or rM.
r = 0.06 + 1.5 * (0.1 - 0.06)
r = 0.12 or 12%
Emphasizing personal selling rather than mass media advertising is an example of a __________ strategy.
Answer: personal selling rather than mass media advertising in the promotional mix the firm is using a Standardized strategy
Explanation:
Hope this helps <3
When did high school education
become more widespread in the
United States?
Kapoor Company uses job-order costing. During January, the following data were reported:
a. Materials purchased on account: direct materials, $98,500; indirect materials, $14,800.
b. Materials issued: direct materials, $82,500; indirect materials, $8,800.
c. Labor cost incurred: direct labor, $67,000; indirect labor, $18,750.
d. Other manufacturing costs incurred (all payables), $46,200.
e. Overhead is applied on the basis of 110 percent of direct labor cost.
f. Work finished and transferred to Finished Goods Inventory cost $230,000.
g. Finished goods costing $215,000 were sold on account for 140 percent of cost.
h. Any over- or underapplied overhead is closed to Cost of Goods Sold.
Required:
1. Prepare journal entries to record these transactions.
2. Prepare a T-account for Overhead Control. Post all relevant information to this account. What is the ending balance in this account?
3. Prepare a T-account for Work-in-Process Inventory. Assume a beginning balance of $10,000, and post all relevant information to this account. Did you assign any actual overhead costs to Work-in-Process Inventory? Why or why not?
Answer:
Required 1
a.
Direct materials $98,500 (debit)
Indirect materials $14,800 (debit)
Trade Payable $113,300 (credit)
b.
Work in Process : direct materials $82,500 (debit)
Work in Process : indirect materials $8,800 (debit)
Direct material $82,500 (credit)
Indirect material $8,800 (credit)
c.
Work In Process: direct labor $67,000 (debit)
Work In Process: indirect labor $18,750 (debit)
Salaries Payable $85,750 (credit)
d.
Overheads $46,200 (debit)
Trade Payables $46,200 (credit)
e.
Work in Process $73,700 (debit)
Overheads $73,700 (credit)
f.
Finished goods Inventory $230,000 (debit)
Work in Process $230,000 (credit)
g.
Trade Receivable $301,000 (debit)
Cost of goods sold $215,000 (debit)
Inventory $215,000 (credit)
Sales Revenue $301,000 (credit)
h.
Overheads $27,500 (debit)
Cost of Sales $27,500 (credit)
Required 2
Overheads Account
Debit :
Trade Payables $46,200
Over- applied $27,500
Total $73,700
Credit :
Work in Process $73,700
Total $73,700
Required 3
Work In Process Account
Debit :
Beginning balance $10,000
Direct material $82,500
Direct labor $67,000
Overheads $73,700
Total $233,200
Credit :
Finished goods Inventory $230,000
Ending Balance $3,200
Total $233,200
Why use applied overheads instead of actual overheads
We assign applied overheads to Work-in-Process Inventory. This is because the actuals are usually not readily available to costs the products and determine selling prices. The actuals are available later during the end of the period and using these, we would delay the product costing and pricing seasons.
Explanation:
Required 1
Theses are journal entries. Accumulate the production costs in the Work In Process Inventory Account. When units are completed, the cost from the Work In Process to the Finished Goods Account.
Required 2
This is the overheads Account. On the debit side of this account we record the overheads actually incurred during the production period. On the credit side we record the overheads applied. The balance of this account is either overapplied (debit) or under-applied (credit). In our case, we had an overapplied situation (debit).
Required 3
This is the Work-in-Process Account. Make sure to include the applied overheads instead of actual overheads.
Toys "R" Us has decreased its receivable turnover over the last three years: which of the following may be a possible cause of this decrease? A) the company has been more selective in choosing reliable customers. B) salesmen have granted customers an extension of credit terms. C) the accounting department has increased the allowance for doubtful accounts. D) all of the above are correct
Answer:
B) salesmen have granted customers an extension of credit terms.
Explanation:
receivables turnover ratio = net sales / average accounts receivable
A low receivables turnover ratio is usually a bad thing, since most companies sell on credit, i.e. their accounts receivable should be important. A high receivables turnover ratio means that the company is collecting its accounts receivable efficiently and its customers are good payers.
The key point here is average accounts receivable. What can result in a company having very high accounts receivable (compared to its total sales)? The answer is simple, their customers are not paying on time or the company had to extend their credit terms in order to attract more customers.
Bloomington Inc. exchanged land for equipment and $2,400 in cash. The book value and the fair value of the land were $104,300 and $88,100, respectively. Bloomington would record equipment and a gain/(loss) of:________
Answer:
Loss = $18,600
Explanation:
Given:
Cash paid = $2,400
Book value = $104,300
Fair value = $88,100
Find:
Gain/Loss
Computation:
Equipment book value = Fair value - Cash payment
Equipment book value = $88,100 - $2,400
Equipment book value = $85,700
Loss = Equipment book value - Fair value
Loss = $104,300 - $ 85,700
Loss = $18,600
What was the value proposition of Maggi in India which made it a success but not in Pakistan? What is the better value proposition in Pakistan?
Answer:
WHY IS IT SO HARD TO GET THE FIRST QUESTION!!!
Explanation:
Answer:
sorry to tell you that I also want to know because I don't it
Seal Polymer Industries sold two freight containers of latex gloves to Med-Express, Inc., a com- pany based in North Carolina. When Med-Express failed to pay the $104,000 owed for the gloves, Seal Polymer sued in an Illinois court and obtained a judgment against Med-Express. Med-Express argued that it did not have minimum contacts with Illinois and therefore the Illinois judgment based on per- sonal jurisdiction was invalid. Med-Express stated that it was incorporated under North Carolina law, had its principal place of business in North Carolina, and therefore had no minimum contacts with Illinois.
Required:
Was this statement alone sufficient to prevent the Illinois judgment from being collected against Med-Express in North Carolina?
Answer:
Seal Polymer Industries (SPI) can sue Med-Express in an Illinois court due to the minimum contacts doctrine. This is an actual court case that the North Carolina Court of Appeals ruled in favor of SPI. The minimum contacts rule states that in order for a business to be sued in another jurisdiction it must have maintained minimum contacts with residents of that state. Minimum contacts may include making business with individuals or companies that reside in the other state, visiting the other state or incorporating in the other state. In this case, Med-Express made business with SPI, and SPI is a resident of Illinois.
Crowding out, crowding in, and the twin deficits crowding out The stimulative effect that budget deficits can have on private investment is known as:___________
Answer:
Crowding in.
Explanation:
The stimulative effect that budget deficits can have on private investment is known as crowding in.
This ultimately implies that, crowding in is typically as a result of an increase in government spending leading to an increase in private spending of its citizens living in a particular country.
Generally, crowding is caused due to the contractionary fiscal policy. Thus, this results in economic boom and growth as many investors are encouraged to invest in the country.
The general ledger of Pop's Fireworks includes the following account balances in 2021:
Accounts Debit Credit
Cash $21,200
Accounts Receivable 41,500
Allowance for Uncollectible Accounts $2,200
Supplies 6,700
Notes Receivable (8%, due in 2 years) 10,000
Land 85,000
Accounts Payable 12,300
Common Stock 106,000
Retained Earnings 29,900
Service Revenue 124,800
Salaries Expense 70,900
Utilities Expense 24,200
Supplies Expense 15,700
Totals $275,200 $275,200
In addition, the following transactions occurred during 2021 and are not yet reflected in the account balances above:
June 3 Provide additional services on account for $7,000. All services on account include terms 2/10, n/30.
June 8 Receive cash from customers within 10 days of the services being provided on account. The customers were originally charged $5,000.
November 15 Write off customer accounts of $1,500 as uncollectible.
Required:
Record each of the transactions listed above. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.)
Answer:
June 3
Account Receivable $7,000 (debit)
Service Revenue $7,000 (credit)
June 8
Cash $4,500 (debit)
Discount allowed $500 (debit)
Accounts Receivables $5,000 (credit)
November 15
Bad Debt $1,500 (debit)
Accounts Receivables $1,500 (credit)
Explanation
The above transactions must be adjusted as they affect our transactions at the reporting date. Remember to grant the cash discount on early settlement of the payment made on June 8. The policy of sales on account is on the terms of 2% cash discount on payments made within 10 days.
A candidate for office theorizes that the high unemployment rate is due to a high natural rate of unemployment. Which of the following is the best plan that the candidate might present to lower the natural rate of unemployment?
A. Require firms to fill job openings within 3 months of first advertising a position.
B. Use exdpansionary fiscal policy to increase aggregate demand and create more jobs
C. Increase tariffs to protect domestic industries that will provide more jobs.
D. Repeal restrictive labor laws that make it cumbersome for firms to hire new workers.
E. Increase unemployment benefits so that the unemployed can move to a new location that has more job opportunities.
F. Implement stricter immigration laws to prevent immigrants from taking jobs away from citizens.
Answer:
C. Increase tariffs to protect domestic industries that will provide more jobs.
Explanation:
Remember, the problem here according to the high natural rate of unemployment principle is the rate at which people lose their jobs. In other words, the problem not the lack of jobs, but the desired need to create job sustainability (protection).
Hence, the best plan that the candidate might present to lower the natural rate of unemployment is to Increase tariffs to protect domestic industries that will provide more jobs. By protecting these industries they can better sustain their workers thereby lowering the natural rate of unemployment.
Answer:
D. Repeal restrictive labor laws that make it cumbersome for firms to hire new workers.
Explanation:
Got answer wrong first try. Then got this as the correct answer
Geralds manufacturing firm sold goods worth $6000 to some customers on credit in the month of January. His customers plan to pay him the entire amount at once in March. Gerald plans to record and recognize this income in the business’s accounts in March. Which accounting method does Geralds business follow?
His business follows the (________) method of accounting.
Answer:
Cash accounting method
Explanation:
The cash accounting method records receipts and expenses during the period in which cash changes hands. In this method, revenue will be recorded when payment from a customer is received. Expenses are not recorded unless money is paid out. In short, revenues and expenses are recognized and recorded only when cash is received or paid.
Cash accounting contrasts with the accrual accounting system, which recognizes revenues and expenses when their respective events occur.
Troy will receive $7,500 at the end of Year 2. At the end of the following two years, he will receive $9,000 and $12,500, respectively. What is the future value of these cash flows at the end of Year 6 if the interest rate is 8%?a. $36.121.08.b. $38,418.80.c. $32,90767.d. $39,010.77.e. $33,445.44.
Answer:
Total FV= $36,121.08
Explanation:
Giving the following information:
Cash flows:
Cf2= $7,500
Cf3= $9,000
Cf4= $12,500
Interest rate= 8%
To calculate the future value, we need to use the following formula on each cash flow:
FV= PV*(1+i)^n
Cf2= 7,500*(1.08^4)= 10,203.67
Cf3= 9,000*(1.08^3)= 11,337.41
Cf4= 12,500*(1.08^2)= 14,580
Total FV= $36,121.08
Suppose that the average P/E multiple oil industry stocks are 18. is an integrated oil company and analysts at expected the company to earn $5.25 in the coming year. What is the intrinsic value of stock?
Answer:
$94.50
Explanation:
Calculation for the intrinsic value of stock
Using this formula
Intrinsic value of stock=Average P/E multiple oil stock*Amount to earn
Let plug in the formula
Intrinsic value of stock=18*$5.25
Intrinsic value of stock=$94.50
Therefore the Intrinsic value of stock will be $94.50
Sarinda consumes crab cakes and tuna. Sarinda's utility increases with the consumption of crab cakes, but her utility neither increases nor decreases with the consumption of tuna. Assuming tuna is on the x-axis and crab cake is on the y-axis, what do Sarinda's indifference curves look like?a. vertical lines.b. downward-sloping lines.c. horizontal lines.d. upward-sloping lines from the origin
Answer:
a. vertical lines
Explanation:
Suppose that instead of paying per hour, a moving company offers a flat rate of $1,200 for movers plus a truck for an eight hour day. If you hired this moving company and used them for the entire eight hours, how much consumer surplus would you gain?
Answer:
the first part of the question is missing, so I looked for a similar one (see attached image):
the cost of hiring a moving crew for 8 hours = $250 per hour x 8 hours = $2,000
the competing company offered you a deal worth $1,200
since you expect to use the moving crew during the whole 8 hours, you will gain = $2,000 - $1,200 = $800 in consumer surplus
Consumer surplus is the difference between what a consumer (in this case you) are willing to pay for a good or service and the actual price of the good or service. Consumer should be willing to consumer a good or service as long as the consumer surplus is ≥ 0.
800 dollars of consumer surplus would be earned.
We can arrive at this answer as follows:
You must calculate the cost of hiring the team. This will be done with the following calculation:[tex]250*8=2,000[/tex]
In this case, we can consider that the cost of hiring the team for eight hours of work will be [tex]2,000[/tex] dollars.
Then, we can calculate the difference between the team's hiring price and the $1,200 that the competitor offered. This will be done with the following calculation:
[tex]2,000-1,200=800[/tex]
With that, we can say that the consumer surplus is equal to 800 dollars.
The question above is incomplete. The full question is in the attached image.
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What is the net effect on a firm's working capital if a new project requires: $38,991 increase in inventory, $31,869 increase in accounts receivable, $35,000.00 increase in machinery, and a $41,802 increase in accounts payable
Answer: Increase by $29,058
Explanation:
A firm's net working capital is the Current Assets less the current liabilities.
From the above, the current assets are; inventory and accounts receivable.
Current Assets
= 38,991 + 31,869
= $70,860
Current liabilities = Accounts payable = $41,802
Net effect on working capital
= 70,860 - 41,802
= $29,058
Required information Exercise 6-9A Record transactions using a perpetual system (LO6-5) Skip to question [The following information applies to the questions displayed below.] Littleton Books has the following transactions during May.
May 2 Purchases books on account from Readers Wholesale for $3,300, terms 1/10, n/30.
May 3 Pays cash for freight costs of $200 on books purchased from Readers.
May 5 Returns books with a cost of $400 to Readers because part of the order is incorrect.
May 10 Pays the full amount due to Readers.
May 30 Sells all books purchased on May 2 (less those returned on May 5) for $4,000 on account. Exercise 6-9A
Required: 1. Record the transactions of Littleton Books, assuming the company uses a perpetual inventory system. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)
Answer:
Littleton Books
Journal Entries:
May 2 Debit Inventory $3,300
Credit Accounts Payable (Readers Wholesale) $3,300
To record the purchase of books on account, terms, 1/10, n/30.
May 3 Debit Freight-in $200
Credit Cash Account $200
To record the payment of freight costs for books purchased from Readers.
May 5 Debit Accounts Payable (Readers Wholesale) $400
Credit Inventory $400
To record the return of books.
May 10 Debit Accounts Payable (Readers Wholesale) $2,900
Credit Cash Discount Received $29
Credit Cash Account $2,871
To record the settlement of account.
May 30 Debit Accounts Receivable $4,000
Credit Sales Revenue $4,000
To record the sale of books on account.
May 30 Debit Cost of goods sold $2,900
Credit Inventory $2,900
To record the cost of goods sold.
Explanation:
The journal entries in Littleton Books' accounting records show the accounts to be debited and credited as they occur on a daily basis.
Your cover letter should be no more than 1 page each
Answer:
I didn't understand your question.
MacKenzie Company sold $640 of merchandise to a customer who used a Regional Bank credit card. Regional Bank deducts a 5.5% service charge for sales on its credit cards. MacKenzie electronically remits the credit card sales receipts to the credit card company and receives payment immediately. The journal entry to record this sale transaction would be:________
Answer and Explanation:
The Journal entry is shown below:-
Cash Dr, $604.80 ($640 × 5.5%)
Card Expense $35.20
To Sales $640
(Being sale is recorded)
Here we debited the cash and expenses as assets are increasing also it increased the expenses On the other hand it also increased the sales. Also assets and expenses contains normal debit balance and the sales revenue contains normal credit balance
You would like your child, who was born today, to attend a private university for 4 years beginning at age 18. Tuition is currently $20,000 per year and has increased 5% annually. Your after-tax rate of return is 8%. How much must you save at the end of each year if you would like to make your last payment at the beginning of your child's first year of college?
Answer:
Annual deposit= $5,539.52
Explanation:
First, we need to calculate the total worth of the 4 years tuition 18 years from now:
FV= PV*(1+i)^n
Year 1= 20,000*1.05^18= 48,132.39
Year 2= 48,132.39*1.05= 50,539
Year 3= 50,539*1.05= 53,065.95
Year 4= 53,065.95*1.05= 55,719.25
Total FV= $207,456.59
Now, using the following formula we can determine the annual deposit:
FV= {A*[(1+i)^n-1]}/i
A= annual deposit
Isolating A:
A= (FV*i)/{[(1+i)^n]-1}
A= (207,456.59*0.08) / [(1.08^18) - 1]
A= $5,539.52
A 14-week construction activity requires a crane that rents for $1,000 per week and a crew of general laborers that costs $5,000 per week. In order to complete this activity within 10 weeks, you must hire additional general laborers at a cost of $2,000 per week. What is the slope for this activity?A) $0 per week.B) $1,000 per week.C) $2,000 per week.D) $6,000 per week.
Answer: C) $2,000 per week.
Explanation:
The slope of the project refers to the additional amount that it would cost to be able to finish the project faster than schedule.
In the question, the construction activity is for 14 weeks at a rate of $5,000 for the laborers per week. If you wanted to reduce this project duration to 10 weeks, you will have to spend an additional $2,000 more per week.
This $2,000 is therefore the slope of the activity.
The correct option is C.
The following information should be considered:
The slope of the project means the additional amount that it would cost to be able to finish the project faster than schedule. In the question, the construction activity is for 14 weeks at a rate of $5,000 for the laborers per week. If you wanted to decrease this project duration to 10 weeks, you will have to spend an additional $2,000 more per week. This $2,000 is therefore the slope of the activity.Learn more: brainly.com/question/17429689
Sienna Company uses the FIFO cost flow assumption. Sienna has inventory with a selling price of $100, packaging costs of $5, and transportation costs of $10. Sienna's normal profit margin is $20. However, due to limited supply of the product from the manufacturer, it would cost Sienna $80 to replace the inventory. What amount should be used as the market value?a. $ 65b. $ 80c. $ 85d. $ 100
Answer: $85
Explanation:
The following information can be gotten from the question:
Selling price = $100
Less: Packaging cost = $5
Less: Transportation cost = $10
Ceiling price = $100 - $5 - $10 = $85
Net profit = $20
Floor price = $85 - $20 = $65
In this scenario, the replacement cost of the inventory is higher than the floor price of $65, therefore the market value should be $85.
Which of these is an important factor in the paid search auction system?
AHow famous your brand name is
BHow cool your logo is
CHow long your business has been around
DHow relevant your ads are
Answer:
DHow relevant your ads are
Thank you and please rate me as brainliest as it will help me to level up
How relevant your ads are is an important factor in the paid search auction system. Hence, option D is correct.
What is auction system?An auction is a method of purchasing goods or services by putting them up for bids, allowing people to enter bids, and selling to the highest bidder. As the bidders compete with one another, each bid is higher than the one before it.
Animals can be bought and sold at livestock markets, artwork can be bid on in an auction room at Sotheby's or Christie's, and cars can be bought and sold at auto auctions. On the well-known online marketplace eBay, online auctions are regularly held.
The most common kind of auction is probably the open ascending price auction, which has been used historically.
Thus, option D is correct.
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A firm has 72 units of product A on hand. Forecasts of demand are for 10 units per week. A Master Production Schedule (MPS) quantity of 150 units is planned to arrive in period 4. Customer orders are 17 for period 1, 12 for period 2, 8 for period 3, and 4 for period 4.
Required:
What quantity is available for commitment (available to promise) to new customers in weeks 1, 2, and 3?
Answer:
35 units
Explanation:
72 units are on hand:
customer orders for periods 1, 2 and 3 = 17 + 12 + 8 = 37 units
units available for commitment to new customers = 72 - 37 = 35 units
these units can be committed either at week 1, 2, or 3.
Customer orders for period 4 will be covered with the 150 units that should arrive during period 4.
An assumption of CAPM is that investors do not face transaction costs. In particular, CAPM assumes that markets are liquid in the sense that you can always trade any number of shares you would like to any time. In reality, the overall market may become more illiquid in certain times and less illiquid in other times. When the market is illiquid, investors are more hindered from trading by frictions in the market. Suppose that the price of a certain security tends to go up when the overall market becomes more illiquid. Would you expect this security to have a higher or lower expected return than what the CAPM predicts?
Answer: Higher return than CAPM
Explanation:
CAPM assumes that markets are liquid and that there are no transaction costs. This means that when it gives the expected return of a security, it does so without accounting for illiquidity.
If the security is therefore affected by illiquidity such that the price goes up in such a situation, CAPM would not have accounted for this which means that the expected return of the security should be higher than what CAPM predicts to cater for this price increase.