Answer:
D. S&P 500
Explanation:
The market index that is used as a proxy for the portfolio of the market in the Capital Asset Pricing Model (CAPM) is S&P 500. This refers to a broad index of the market that involves the 500 stocks performance listed on the US stock exchange. Also it used for the calculation market weighted so that the value of the index could come
Hence, the correct option is d.
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.
More information:
https://brainly.com/question/20840766?referrer=searchResults
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
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
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
Due to recent beef recalls, Southwest Steakhouse is considering incorporating. Bob, the owner, wants to protect his personal assets in the event the restaurant is sued. Requirements:1. Which advantage of incorporating is most applicable?A. A corporation has continuous life. B. There is a mutual agency among the stockholders. C. Corporations can raise more money to pay for government regulations. D. The transfer of corporate ownership is easy. E. Stockholders have limited liability.2. What are other advantages of organizing as a corporate entity? A. A corporation has continuous life. B. Start-up costs are lower than other business forms. C. The corporation is taxed separately from the shareholders. D. A majority vote is all that is required for any business decision. E. All income and expenses are split evenly among the shareholders. F. It does not allow stockholders to bind the business to a contract. G. There is no mutual agency among the stockholders and the corporation.3. What are some disadvantages of organizing as a corporation?A. Start-up costs are higher than other business forms.
B. Stockholders have limited liability.
C. The transfer of corporate ownership is easy.
D. Earnings of the corporation are subject to double taxation.
E. Ownership and management are often separated.
F. Corporations can raise more money than a proprietorship or partnership.
G. It has an indefinite life.
Answer:
D. Earnings of the corporation are subject to double taxation.
Regular corporations, not S corporation, are subject to double taxation, because the are taxed on corporate income, and taxed on dividends: stockholders pay a dividend tax when these are distributed.
E. Ownership and management are often separated.
In most corporations, specially those that are very large, management and owners are different people, something that creates the principal-agent problem: the agent (management) may not always work in the best interest of the principal (the owner) because their interests are not fully aligned.
Historically, a factory has been able to produce a very specialized nano-technology component with 35% reliability, i.e., 35% of the components passed its quality assurance test. They have now changed their manufacturing process and hope that this has improved the reliability. To test this, they took a random sample of 24 components produced using the new process and found that 13 components passed the test. If you do a hypothesis test to see if the new manufacturing process is more reliable, does this observation give you enough evidence to reject the null hypothesis at 5% level of significance? (Suggestion: Use Microsoft Excel for your calculations.)The table below shows the probability of observing number of components (X) passing the test out of 24 components, if the reliability is 35%.X Probability0 0.00001 0.00042 0.00263 0.01024 0.02895 0.06226 0.10617 0.14708 0.16829 0.161010 0.130011 0.089112 0.052013 0.025814 0.010915 0.003916 0.001217 or more 0.0004A) NoB) Yes
Answer:
Yes
Explanation:
From the given output
The Probability of getting 13 or more passed
when the reliability = 0.35. can be calculated as follows
=0.0258+0.0109+0.0039+.0012+0.0004 = 0.0422 ≈ 4.2%
Since the probability is less than the 5% level we will therefore reject the Null hypothesis
answer : YES
Monroe manufacturing has a quick ratio of 2.00x $31,000 in cash $17,500 in accounts recivable some inventory total current assets of $70,000 and total current liabilities of $24,500 the company reported annaul sales of $400,000 in the most recent annual reportOver the past year how often did Monroe manufacturing sell and replace its inventory?A) 19.05 xB) 20.96 xC) 2.86 xD) 8.01 x
Answer:
Inventory turnover ratio = 19.05 times
Explanation:
Quick ratio = (Current assets - Inventory) / Current liabilities
2 = (70,000 - Inventory) / 24,500
Inventory = $21,000
Inventory turnover ratio = Total sales / Inventory
Inventory turnover ratio = 400,000 / 21,000
Inventory turnover ratio = 19.05 times
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
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.
Your cover letter should be no more than 1 page each
Answer:
I didn't understand your question.
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.
Jane has always made budgets for herself. She plans her expenses according to her budget. However, despite creating plans, some unforeseen circumstance often puts her off the budget. Which course of action should Jane follow to prepare herself for unforeseen circumstances and stay on a budget?
A. Follow the plan strictly at any cost
B. Create an emergency fund
C. Follow the same plan
D. Tweak her financial goals
Answer:
C.
Explanation:
Sana makatulong
Answer:
B
Explanation:
Having an emergency fund will help cover unexpected costs.
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
A home furniture store, David's Furnishings, lowers its prices below those of
their competitors, Ada's Home Store. A price war then ensues. What must the
response of Ada's Home Store have been in order for the price war to begin?
A. Ada's Home Store started a marketing campaign against David's
Furnishings and their lower quality.
B. Ada's Home Store took David's Furnishings to court in an attempt
to make them raise their prices back up.
C. Ada's Home Store raised prices to show consumers that their
products are better.
O D. Ada's Home Store lowered prices even lower than David's
Furnishings did.
Answer:
d.
Explanation:
The response of Ada's Home Store has been in order for the price war to begin as Ada's Home Store lowered prices even lower than David's Furnishings did. Thus option D is correct.
What is the Price?A price refers to the amount which takes place between two individuals when performing the exchange of goods and services. This price is determined by the willingness of both parties involved in the exchange.
A price war took place when the competitors lower their prices in order to retain more customers will create conflicts in the market.
In the given case when an organization named David's Furnishings lower its prices with its competitors to begin a price war the competitors also lower their prices in order to capture the market gain effectively.
Therefore, option D is appropriate.
learn more about the price, here:
https://brainly.com/question/18117910
#SPJ5
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
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.
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%
Assume the state of Alabama placed a tax on playing cards of 6 cents per pack. If the state generated $48600 in revenue, how many packs of cards were sold?
Answer:
the number of packs of cards sold is 810,000 units
Explanation:
The computation of the number of packs of cards sold is shown below:
Tax revenue = tax per good × goods
$48,600 = 0.06 × Q
Q =$48,600 ÷ 0.06
Q = 810,000
hence, the number of packs of cards sold is 810,000 units
We simply applied the above formula so that the correct value could come
And, the same is to be considered
Societies choose what share of their resources to devote to consumption and what share to devote to investment. Some of these decisions involve private spending; others involve government spending.
For each form of private spending, indicate whether it represents consumption or investment.
Private Spending Consumption Investment
Laundromats buying washing machines
People buying houses
People buying newspapers
People buying food
For each form of government spending, indicate whether it represents consumption or investment.
Government Spending Consumption Investment
Payment for public safety employees
Building hospitals
Building roads
Buying military equipment
Explanation:
Note, for private spending, consumption refers to purchases usually made for present needs, while investment refers to purchases that may provide. For government spending, consumption refers to purchase made to care for the immediate welfare or needs of those governed without any monetary benefits, while investment purchases are done with the perceived future benefits in mind.
Private Spending
Laundromats buying washing machines = InvestmentPeople buying houses = InvestmentPeople buying newspapers = ConsumptionPeople buying food = ConsumptionGovernment Spending
Payment for public safety employees = InvestmentBuilding hospitals = InvestmentBuilding roads = InvestmentsBuying military equipment = InvestmentAirQual Test Corporation provides on-site air quality testing services. The company has provided the following cost formulas and actual results for the month of February:
Fixed Component per Month Variable Component per Job Actual Total for February
Revenue $280 $39,250
Technician wages $8,400 $8,250
Mobile lab operating expenses $4,800 $31 $9,290
Office expenses $2,400 $3 $2,700
Advertising expenses $1,580 $1,650
Insurance $2,870 $2,870
Miscellaneous expenses $970 $1 $425
The company uses the number of jobs as its measure of activity. For example, mobile lab operating expenses should be $4,800 plus $31 per job, and the actual mobile lab operating expenses for February were $9,290. The company expected to work 150 jobs in February, but actually worked 154 jobs.
Required:
Prepare a flexible budget performance report showing AirQual Test Corporation's revenue and spending variances and activity variances for February.
Answer:
I used an excel spreadsheet since there is not enough room here. I ordered the given data:
Fixed Variable Actual Total
Revenue $280 $39,250
Technician wages $8,400 $8,250
Mobile lab operating exp. $4,800 $31 $9,290
Office expenses $2,400 $3 $2,700
Advertising expenses $1,580 $1,650
Insurance $2,870 $2,870
Miscellaneous expenses $970 $1 $425
The actual results yielded an unfavorable operating income variance. Operating income = $14,065, unfavorable variance = $2,645
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.
When did high school education
become more widespread in the
United States?
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.
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:
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
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.
For more information about auction system, click here
https://brainly.com/question/24261307
#SPJ6
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.
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
If a consumer buys flour because he loves baking, the flour is counted as part of GDP. If a bakery buys flour as an input to bake things in order to sell, the flour is not counted as part of GDP. Briefly explain why we treat these purchases differently.
Explanation:
Remember, the GDP (Gross Domestic Product) is an economic term that refers to the total value of goods and services produced in an economy in a particular period, usually in a period of one year.
Note, the standard way of counting GDP tries to avoid double counting by noting only the final value of goods or services.
Hence, the flour bought by the consumer (the final user) is measured by the producer as output or goods produced, whereas If a bakery buys flour as an input to bake things in order to sell, the flour is not counted as part of GDP because it is not the final value of the goods as value is still going to be transferred to whatever output from the bakery (eg bread, cakes).