Answer:
Par amount = $9,615.39
Explanation:
The condition that must hold in order to meet full immunization are as follows:
Condition 1: PV(assets) = PV(liabilities)
Condition 2: MD(assets) = MD(liabilities) or P'assets = P'liabilities
Condition 3: There is one asset cash inflow before the liability cash outflow, and there is also one asset cash inflow after the liability cash outflow.
Where PV denotes Present Value and MD denotes Macaulay Duration.
PV(liabilities) = Amount required to pay / (1 + i)^n ............ (1)
Where;
Amount required to pay = $20,000
i = interest rate = 4%
n = number of years after = 3 years
Substituting the values into equation (1), we have:
PV(liabilities) = $20,000 / (1 + 4%)^3 = 17,779.93
Let;
A = Weight of two-year-zero-coupon bond in the portfolio
n = Macaulay Duration of n-year-zero-coupon bond
Therefore, we can construct a portfolio of assets using a 2-year zero-coupon bond and a 4-year zero-coupon bond as follows:
A(2) + (1 – A)(4) = 3
2A + 4 – 4A = 3
2A – 4A = 3 – 4
-2A = - 1
A = -1/-2
A = 0.5
We can now calculate the par amount as follows:
Par amount = PV(liabilities) * A * (1 + i)^t .............. (2)
Where t = 2 as the duration of the bond
Substituting the values into equation (2), we have:
Par amount = 17,779.93 * 0.5 * (1 + 4%)^2
Par amount = 17,779.93 * 0.5 * 1.04^2
Par amount = 17,779.93 * 0.5 * 1.0816
Par amount = $9,615.39
Therefore, the par amount for the 2-year zero-coupon bond assuming full immunization is met is $9,615.39.
Which of the following goals of a performance evaluation system is accomplished when the company's actual results are compared to industry standards?
A) Benchmarking
B) Motivating unit managers
C) Promoting goal congruence
D) Providing feedback
Answer:
A) Benchmarking
Explanation:
Benchmarking refers to a process in which the performance of the company could be measured with respect to the product, services, processes as compared with the industry performance
Here in the given situation, when an actual result is compared with the industry standards than we called as a benchmarking and the same is to be used for the evaluation of the performance system
The budget philosophy that ignores budget outcomes and focuses on whatever is necessary to achieve economic goals and stabilize the economy is: g
Answer:
functional finance.
Explanation:
The budget philosophy of functional finance implies that the government should do all that is necessary in order to make the economy operate at full potential. The outcomes of whatever budget preparations are ignored in philosophy of functional finance. What is most paramount is to focus on whatever that would bring growth and stability to the economy.
In the philosophy of functional finance, what is most important about balancing the federal budget is its use to promote an economy so that it can operate at full potential.
On December 31, 2016, when its Allowance for Doubtful Accounts had a debit balance of $1,432, Sunland Company estimates that 9% of its accounts receivable balance of $105,900 will become uncollectible and records the necessary adjustment to Allowance for Doubtful Accounts. On May 11, 2017, Sunland Company determined that B. Jared’s account was uncollectible and wrote off $1,091. On June 12, 2017, Jared paid the amount previously written off.Required:Prepare the journal entries on December 31, 2016, May 11, 2017, and June 12, 2017.
Answer: Please see explanation column for answers
Explanation:
1) To record bad debts expense
Date Account Debit Credit
Dec 31, 2016 Bad Debt Expense $10,963
Allowance for doubtful account $10,963
Calculation ;
Bad debts expense
9% x $105,900 = $9,531
Adjustment= $9,531 + debit balance of $1,432=$10,963
2) To write off uncollectible accounts receivables
Date Account Debit Credit
May 11, 2017 Allowance for doubtful account $1,091.
Accounts receivable--- B. Jared $1,091.
3) To reinstate accounts accounts previously written off
Date Account Debit Credit
June 12, 2017 Accounts receivable--- B. Jared $1,091.
Allowance for doubtful account $1,091.
3b)to collect cash from receivables
Date Account Debit Credit
June 12, 2017 Cash $1,091.
Accounts receivable--- B. Jared $1,091.
Spruce Ceramics produces large planters to be used in urban landscaping projects. A special earth clay is used to make the planters. The standard quantity of clay used for each planter is 24 pounds. The company uses a standard cost of $2.20 per pound of clay. Spruce produced 3,000 planters in May. In that month, 75,000 pounds of clay were purchased and used at the total cost of $162,000 Read the requirementsLOADING.... Requirement 1. Calculate the direct material price variance. Begin by determining the formula for the price variance, then compute the price variance for the direct materials. (Enter the variance as a positive number. Enter currency amounts in the formula to the nearest cent and then round the final variance amount to the nearest whole dollar. Label the variance as favorable (F) or unfavorable (U). Abbreviations used: DM = Direct materials)
Answer:
1. $3,000 Favorable
2. $6,600 Unfavorable.
Explanation:
This is an incomplete question. However, the completed part is question number 2, which has been solved below.
1. Direct material price variance
= (Actual price - Standard price) Actual quantity
= ($2.16 - $2.20) × 75,000
= -$0.04 × 75,000
= $3,000 Favorable
Note: Actual price is gotten by; $162,000 / 75,000
= $2.16
2. Direct material quantity variance
= (Actual quantity - Standard quantity) × Standard price
= (75,000 - $72,000) × $2.20
= 3,000 × $2.20
= $6,600 Unfavorable
Note: Standard quantity is gotten by;
24 × 3,000
= 72,000
The government wants to set the socially optimal level of nitrogen runoff, and government regulators believe that the actual marginal benefit of pollution (MBP) is given by the estimated MBP curve. The deadweight loss associated with a quota is _____, w
Answer:
Hello your question is incomplete attached below is the complete question
Explanation:
Dead weight loss = 0.5 [( Δp ) * ( ΔD ) ]
D = DEMAND
P = PRICE
DWL with quota = 0.5 [ ( $10 -$6 ) * (12 - 8 ) ]
= 0.5 ( 4*4 ) = $8
DWL with pigouvian tax = 0.5 [ ($10- $6 )*(9 - 8 ) ]
= 0.5 [ 4 * 1 ] = $2
7.. Getaway Travel Company reported net income for 2021 in the amount of $50,000. During 2021, Getaway declared and paid $2,000 in cash dividends on its nonconvertible preferred stock. Getaway also paid $10,000 cash dividends on its common stock. Getaway had 40,000 common shares outstanding from January 1 until 10,000 new shares were sold for cash on July 1, 2021. A 2-for-1 stock split was granted on July 5, 2021. What is the 2021 basic earnings per share
Answer:Earnings per share fOR 2021= 0.53
Explanation:
Earnings per share =Total earnings available to shareholders(Net income - preferred dividends )/Weighted Average Outstanding shares
Net income = $50,000
preferred dividend= $2,000
Total earnings available to common shareholders = $50,000 - $2000= $48,000
using a 2-1 stock spilt , outstanding shares= 40,000 x 2 + 10,000 x 6/12(jan- 1st july ) x 2 = 80,000 + 10,000 = $90,000
Earnings per share = $48,000/ $90,000 =0.53
Pizza sells an average of pizzas per week, of which % are single-topping pizzas and % are supreme pizzas with multiple toppings. Singles sell for each and incur variable costs of . Supremes sell for each and incur variable costs of . The contribution margin per unit and total contribution margin for Singles and Supremes are
Answer:
the question is incomplete, so I looked for a similar question:
"Pizza sells an average of 150 pizzas per week, of which 20% are single-topping pizzas and 80% are supreme pizzas with multiple toppings. Singles sell for $8 each and incur variable costs of $2. Supremes sell for $12 each and incur variable costs of $6."
contribution margin for Singles = $8 - $2 = $6
contribution margin ratio for Singles = $6 / $8 = 75%
total contribution margin for Singles = $6 x 150 x 20% = $180
contribution margin for Supremes = $12 - $6 = $6
contribution margin ratio for Supremes = $6 / $12 = 50%
total contribution margin for Supremes = $6 x 150 x 80% = $720
Journalize the following, assuming a 360-day year is used for interest calculations: Apr. 30 Issued a $108,000, 30-day, 6% note dated April 30 to Misner Co. on account. May 30 Paid Misner Co. the amount owed on the note dated April 30. If an amount box does not require an entry, leave it blank. When required, round your answers to the nearest dollar.
Answer and Explanation:
The journal entries are shown below:
a. Account payable Dr $108,000
To note payable $108,000
(Being the issuance of the note is recorded)
b. Note payable Dr $108,000
Interest expense Dr $540 ($108,000 × 30 days ÷ 360 days × 6%)
To cash $108,540
(being the note payable and the interest expense is recorded)
If a company has the following data, is the budget variance favorable or unfavorable? Budgeted Sales $10,000 Actual Sales. $8,000
Answer:
$2,000 unfavorable
Explanation:
The computation of the budget variance is shown below:
Budget variance is
= Budgeted sales - actual sales
where,
Budgeted sales is $10,000
And the actual sales is $8,000
Now placing these values to the above formula
So, the budget variance is
= $10,000 - $8,000
= $2,000 unfavorable
Since the actual sales is less than the budgeted sales so the same is to be unfavorable else it is favorable
Bronn tells Jaime, "I really like your armor." Jaime responds, "I will sell it to you for $800." Bronn states, "Sure, and throw in your sword too." Jaime then writes out the contract, detailing only that he will sell Bronn his armor and the sword. He also lists the delivery date for next Wednesday. The next week on the day of performance, Jaime fails to deliver the armor and sword. Bronn sues him for breach of contract, but Jaime claims the contract is not enforceable because it was missing the price. When Bronn filed his lawsuit, which of the following needed to be included in the written contract for enforceability?
a. signature of both parties
b. price subject
c. matter
d. delivery
e. performance
Answer:
B. price subject
Explanation:
For this contract to be enforceable, it must include price, matter and delivery date. These aspects are all best essential and should be included in the contract. From the question when Jaime wrote the contract he failed to detail the price they agreed upon. Even though the rest were included. Therefore this contract cannot be enforced since it is missing this important aspect. Option b is the answer to the question
Eric left high school to work in a factory where he has been for the last 9 years. He married at 19 and has two children. He is unhappy and cynical. He doesn't like working hard to make purchase decisions so he waits until a product is easy to find before he buys.
A. EA
B. EM
C. I
D. L
E. LM
Answer: D. L
Explanation:
Eric is a Laggard. A Laggard is one of the 5 Adopter categories when it comes to new products in the market. These categories define people in terms of when they adopt a product as well as why.
Laggards are the last group to adopt a product. They do not like change and as such will only adopt a product when it is forced on them on when they have no choice because the product is so widespread that everyone is using it. Eric prefers to make a purchase only when it is easy to find. That is when the product has become quite widespread which is during the Laggard adoption stage.
Skysong, Inc. reports the following liabilities (in thousands) on its December 31, 2020, balance sheet and notes to the financial statements. Accounts payable $4,392.0 Mortgage payable $6,845.0 Unearned rent revenue 1,650.0 Notes payable (due in 2023) 351.0 Bonds payable 2,003.0 Salaries and wages payable 651.0 Current portion of mortgage payable 2,228.0 Notes payable (due in 2021) 2,584.0 Prepare the liabilities section of Skysong’s balance sheet as at December 31, 2020.
Answer:
Skysong, Inc.
Liabilities section
Current liabilities:
Accounts payable $4,392Salaries and wages payable $651Unearned rent revenue $1,650Mortgage payable $2,228Notes payable $2,584Total current liabilities $11,505Long term liabilities:
Mortgage payable $4,617 Notes payable (due in 2023) $351Bonds payable $2,003Total long term liabilities $6,971Total liabilities: $18,476
The federal gas tax has been stuck at 18.4cents¢ a gallon since 1993. Today, Americans are driving fewer miles, and vehicles have become more fuel-efficient. Less gas consumption means less gas-tax revenue to repair the nation's roads. Source: Bloomberg News, July 17, 2014 Would a tax per mile driven by more efficient or less efficient than a tax per gallon of gasoline? Which tax would be more regressive? Explain your answers.
Answer:
1. A Tax per mile driven would be more efficient than a tax per gallon of gasoline.
2. A tax per gallon of gasoline is more regressive. The tax is based on a fixed dollar per gallon since 1993. instead of being based on a percentage per the price of gasoline per gallon. With the current rate, the price of gasoline per gallon may even be less than the tax. One can then ask, "what is the purpose of the tax?" Is the tax a road tax or a per gallon use tax?
Explanation:
When the federal gas tax remains at 18.4 cents per gallon for a very long period, the tax can be described as regressive as it does not take into consideration the trend that Americans are driving fewer miles, and vehicles have become more fuel-efficient. This means that the gas tax is not fit for purpose. If its purpose is to generate revenue for road repairs, then instead of a gallon tax, government should institute a road use tax.
7. Ms. House utilizes a strategy of "Check 1 – 2- 3". Why does she do this? How do you think this was initially taught?
Explanation:
To get her student's attention. Remember, the check 1 2 3 strategy allows teachers to get an inside into the students understanding.
However, in this scenario, Ms. House uses the strategy to lower her student's voices, so as to get their attention. She likely started using this strategy at the start of the school year and kept doing it.
Which of the following promises is subject to the "strict performance" standard? Assume that performance of the promise is not an express condition of the promisee's duty to perform. cousrse hero
Answer:
A promise to deliver a deed
Explanation:
The term, 'strict performance' is used to describe a contract between two parties. A contract is an agreement between two parties, and it is legally binding. When discharging contracts involving services, 'substantial performance' is required. For example, if I tell a painter to paint my house blue except for the kitchen and storeroom which should be painted white, and he does accordingly but failed in painting the kitchen white, he has performed substantially even though there was a minor breach. The consequences of which would be borne by him.
'Strict performance' is required in contracts where the terms are stated in express terms and the standards are very high. A 'deed' is such a contract because it is a document specifying the legal rights of a person or the ownership of a property. It requires the signatures of the two parties. Therefore, strict performance and adherence to the contractual deed are required.
Assuming a bottom-up process of budget development, which of the following should be initially responsible for developing sales estimates?
a. The budget committee.
b. The accounting department.
c. The sales department.
d. Top management.
e. The marketing department.
Answer: The Sales Department
Explanation:
In budgeting, a bottom-up approach simply means that each head of department in the organization create a budget that'll be sent upwards for approval.
Assuming a bottom-up process of budget development, the sales department should be initially responsible for developing sales estimate.
A company incurs $4,050,000 of overhead each year in three departments: Ordering and Receiving, Mixing, and Testing. The company prepares 2,000 purchase orders, works 50,000 mixing hours, and performs 1,500 tests per year in producing 200,000 drums of Goo and 600,000 drums of Slime. The following data are available: Department Expected use of Driver Cost Ordering and Receiving 2,000 $1,200,000 Mixing 50,000 1,500,000 Testing 1,500 1,350,000 Production information for Goo is as follows: Department Expected use of Driver Ordering and Receiving 400 Mixing 20,000 Testing 500 Compute the amount of overhead assigned to Goo. $2,760,000.
Answer:
$1,290,000
Explanation:
Goo:
Ordering and Receiving = 400 / 2,000 = 20%
Mixing = 20,000 / 50,000 = 40%
Testing = 500 / 1,500 = 33.33%
allocated overhead costs:
Ordering and Receiving = 20% x $1,200,000 = $240,000
Mixing = 40% x $1,500,000 = $600,000
Testing = 33.33% x $1,350,000 = $450,000
total allocated overhead costs = $1,290,000
Question 59 of 83 Project M requires an initial investment of $25 million. The project is expected to generate $2.25 million in after-tax cash flow each year forever. Calculate the IRR for the project. 10% 9% 8% 7%
Answer:
9%
Explanation:
In order to calculate the internal rate of return (IRR) for a project that yields cash flows perpetually, we need to divide the yearly cash flow by the project's initial outlay:
IRR = $2,250,000 / $25,000,000 = 0.09 = 9%
The IRR represents the discount rate at which the project's net present value (NPV) equals 0.
A consumer plays the role of:
A)a wage earner.
B)a saver.
C)a borrower.
D)All of these choices are correct.
Answer:
c) borrower
Explanation:
A consumer plays the role of a borrower. The consumer is the important role in the economy. Thus, option (c) is correct.
What is consumer?The term “consumer” means purchasing a product or service for the purpose of personal use. The consumer are consumed the product and services. The consumer are buying the product and services with exchange of money.
According to the role of the consumer are the played in the significant role of the economy. The business are the sale of the goods and the services are the borrower are the paid the money to the business. The economy cycle was the continue run.
As a result, the consumer plays the role of a borrower. The consumer is the significant role in the economy. Therefore, option (c) is correct.
Learn more about on consumer, here:
https://brainly.com/question/13420317
#SPJ5
Suppose taxi fares from Logan Airport to downtown Boston is known to be normally distributed and a sample of seven taxi fares produces a mean fare of $22.31 and a 95% confidence interval of [$20.5051, $24.2091]. Which of the following statements is a valid explanation of the confidence interval.
A) 95% of all taxi fares are between $20.51 and $24.21.
B) We are 95% confident that a randomly selected taxi fare will be between $20.51 and $24.21.
C) The mean amount of a taxi fare is $22.31, 95% of the time.
D) We are 95% confident that the average taxi fare between Logan Airport and downtown Boston will fall between $20.51 and $24.21.
Answer: D) We are 95% confident that the average taxi fare between Logan Airport and downtown Boston will fall between $20.51 and $24.21.
Explanation:
The Confidence interval allows one to speculate between which values the average of a population will be. In a 95% confidence interval, this means that we are 95% certain that the average value of a variable will be between the higher and lower limits set by the interval.
The 95% confidence interval here has an upper limit of $24.2091 and a lower limit of $20.5051 for taxi fares from Logan Airport to downtown Boston. This means that with a 95% certainty, the taxi charge from Logan Airport to downtown Boston will be between these 2 charges so you can expect to pay an amount between them.
12-8. Dealerships for Subaru and other automobile manufacturers keep records of the mileage of cars they sell and service. Mileage data are used to remind customers of when they need to schedule service appointments, but they are used for other purposes as well. What kinds of decisions does this piece of data support at the local level and at the corporate level
Answer:
The Dealerships for Sabaru and other automobile manufacturers keeps records of the mileage of cars they sell and service due to various reasons. At the local level, it afford them the opportunity to know the car brand with the highest mileage being used by their customers.
Also, the ability to know the brand of car with least requirement for servicing. On the other-hand, at the corporate level, the records afford them the opportunity to know the automobile manufacturers which they will keep on trading with under dealership due to feedback from their customers.
Explanation:
The decisions that this piece of data supports at the local level and at the corporate level include the car that requires the least servicing.
From the complete information, it should be noted that the dealerships for Sabaru and other automobile manufacturers keep records of the mileage of cars they sell and service.
This can be pivotal in order to know the car brand with the highest mileage being used by their customers. Also, it's important to know the brand of car with the least requirement for servicing. At the corporate level, it's vital to know the automobile manufacturers that they'll continue trading with.
Read related link on:
https://brainly.com/question/17143538
Nichols, Inc. has 1,000 shares of 4%, $100 par value, cumulative preferred stock and 75,000 shares of $1 par value common stock outstanding at December 31 of the current year and has declared a dividend for the year. What is the annual dividend that will be paid to the preferred stockholders
Answer: $20,000
Explanation:
The dividends due to preferred stock are fixed and quoted on the preference shares.
The above shares are to get 4% of their par value in dividends.
= (4% * 100) * 5,000 shares
= $20,000
A yearly dividend is a the price paid per share of funds by the firm to its stockholders.
The yearly dividend that will be paid to the elected stockholders will be $20,000
It can be determined by using the formula:[tex]= \text{Monthly Shares} \times \text{Number of payments per year}[/tex]
The above shares are to get 4% of their par price in interests:[tex]= (4\% \times 100) \times 5,000 \; \text{shares}[/tex]
= $20,000
Therefore, $20,000 will be paid to the stockholders.
To learn more about the annual dividend follow the link:
https://brainly.com/question/18687546
Some 150 million customers a month visit Amazon and the company passes through $160 billion in sales via its global supply channels and partnerships making interorganizational relationships very important to the company. Which interacting organization has a low coordination, low integration, transactional focus
Answer with Explanation:
Amazon is fastest growing company in the world which has crossed 2 billion customer visits. It has also increased the worth of the company to $1.14 trillions. The supply chain management is where the strengths of the company lies and nobody can match the pricing strategy, quality management and other significant factors that are included in the supply chain management to ensure that the customer is having what they are paying for.
Supply chain management process includes the key partners which includes their suppliers, partners, clients and customers as well who play important roles in the supply chain process by coordinating, integrating systems with each other and are involved in the transaction-al process.
The customers are the one who interact fewer than partners, suppliers, clients, etc because all they do is order a particular product. This is the first interaction of the customer with Amazon and the last interaction is when the customer received the order. So this means they are less interacting party in this process.
Suppliers are continuously contacted and informed about the pricing, supply chain issues, etc so that the company is able to deliver its customers what they are desiring. Supply chain partners also in the process of interacting with Amazon as they have to move products from supplier to the customer. These partners are highly interacted, possess integrating systems and of transaction-al importance to the company.
Time Again LLC produces and sells a mantel clock for $150.00 per unit. In 2017, 43,000 clocks were produced and 36,000 were sold. Other information for the year includes: Direct materials $43.00 per unit Direct manufacturing labor $8.00 per unit Variable manufacturing costs $4.00 per unit Sales commissions $15.00 per part Fixed manufacturing costs $63.00 per unit Administrative expenses, all fixed $38.50 per unit What is the inventoriable cost per unit using absorption costing?
Answer:
Unitary cost= $118
Explanation:
Giving the following information:
Production= 43,000
Direct materials $43.00 per unit
Direct manufacturing labor $8.00 per unit
Variable manufacturing costs $4.00 per unit
Fixed manufacturing costs $63.00 per unit
The absorption costing method includes all costs related to production, both fixed and variable. The unit product cost is calculated using direct material, direct labor, and total unitary manufacturing overhead.
Unitary cost= 43 + 8 + 4 + 63
Unitary cost= $118
E-tailers, such as Amazon and Expedia, that sell products and services directly to final buyers exclusively over the Internet are known as ________.
Answer:
E-tailers
Explanation:
E-tailers are also known as e-retailers. Where you can purchase things via the internet.
Glad I could help you!
Portia Grant is an employee who is paid monthly. For the month of January of the current year, she earned a total of 8,588. The FICA tax for social security is 6.2% of the first $118,500 of employee earnings each calendar year and the FICA tax rate for Medicare is 1.45% of all earnings. The FUTA tax rate of 0.6% and the SUTA tax rate of 5.4% are applied to the first $7,000 of an employee's pay. The amount of federal income tax withheld from her earnings was $1,424.97. Her net pay for the month is: (Round your intermediate calculations to two decimal places.)
a) $7,038.50
b) $5,141.03
c) $6,072.04
d) $6,566.00
e) $6,506.04
Answer: e) $6,506.04
Explanation:
Employees do not pay FUTA or SUTA. Employers pay those.
Ms. Grant's net pay for the month therefore is;
= Gross earnings - FICA Social Security - FICA Medicare - Federal Income tax withheld
= 8,588 - (6.2% * 8,588) - ( 1.45% * 8,588) - 1,424.97
= 8,588 - 532.46 - 124.53 - 1,424.97
= $6,506.04
Gilley Co. had 200,000 shares of common stock, 20,000 shares of convertible preferred stock, and $1,000,000 of 10% convertible bonds outstanding during 2015. The preferred stock is convertible into 40,000 shares of common stock. During 2015, Gilley paid dividends of $.90 per share on the common stock and $3.00 per share on the preferred stock. Each $1,000 bond is convertible into 45 shares of common stock. The net income for 2015 was $600,000 and the income tax rate was 30%.
Diluted earnings per share for 2015 is:_____________ (rounded to the nearest penny)
Answer:
Gilley Co.
Diluted earnings per share for 2015 is:_____________ $1.68
Explanation:
a) Data and Calculations:
Number of common stock shares = 200,000
Number of convertible preferred = 40,000
Number of convertible bonds = 45,000 ($1,000,000/$1,000 x 45)
Total shares = 285,000
Earnings = $600,000
Income tax (180,000)
Net Income $420,000
Plus preferred dividend = $60,000
Adjusted net income = $480,000
EPS = $480,000/285,000
= $1.68
b) After deducting income tax expense to arrive at the income after tax, then add the dividends of preferred stockholders before arriving at the adjusted net income for computing the earnings per share.
Interest rates can be measured more accurately and quickly than reserve aggregates; hence an interest rate is preferred to the reserve aggregates as a policy instrument.
a. True
b. False
Answer:
False
Explanation:
This is false.
In reporting reserves aggregate there are lags interest rate such as the federal interest rate are quite easy to measure and easily observable. Such short term interest rate are nominal values and they do not measure the real cost of borrowing well. It does not show accurately what happens to Gross domestic product. Real interest rate equals nominal interest rate as a ratio of reduced inflation gives a representation of true cost of borrowing.
We cannot say with certainty that interests rate is a better policy instrument based on the ground of measurability.
rancis Inc.'s stock has a required rate of return of 10.25%, and it sells for $87.50 per share. The dividend is expected to grow at a constant rate of 6.00% per year. What is the expected year-end dividend, D1
Answer:
$3.72
Explanation:
Francis incorporation stock has a required rate of return of 10.25%
The stock is sold at $87.50 per share
The growth rate is 6% per year
Therefore, the expected dividend can be calculated as follows
= Po(rs-g)
= $87.50(10.25%-6%)
= $87.50×4.25
= $3.72
Hence the expected year end dividend is $3.72
Assume that your parents wanted to have a 170,000 saved for college by your 18th birthday and they started saving on your first birthday. They saved the same amount each year on your birthday and earned 6.5% per year on their investmenets.Required:a. How much would they have to save each year to reach their goal?b. If they think you will take five years instead of four to graduate to graduate and decide to have $140,000 saved just in case, how much more would they have to save each year to reach their new goal?
Answer:
a. They will have to save $5,245.28 each year to reach their goal of $170,000.
b. They will have to save $925.63 less to reach their new goal of $140,000.
Note: The answer to part b is based on the information in the question. Therefore, the correct answer is "they will have to save $925.63 less" not "save more" as suggested in the question. Kindly confirm this from your teacher.
Explanation:
a. How much would they have to save each year to reach their goal?
Since the saving started on your first birthday to have $170,000 saved, it implies the saving will be on your every birthday for 18 years. Therefore, the relevant formula to use to determine this is the formula for calculating the Future Value (FV) of an Ordinary Annuity as follows:
FV = M * {[(1 + r)^n - 1] / r} ................................. (1)
Where,
FV = Future value of the amount after your 18th birthday = $170,000
M = Yearly saving to have $170,000 = ?
r = interest rate = 6.5%, 0.065
n = number of years this savings will be made = 18
Substituting the values into equation (1) and solve for M, we have:
$170,000 = M * {[(1 + 0.065)^18 - 1] / 0.065}
$170,000 = M * 32.4100673759666
M = $170,000 / 32.4100673759666
M = $5,245.28
Therefore, they will have to save $5,245.28 each year to reach their goal of $170,000.
b. If they think you will take five years instead of four to graduate to graduate and decide to have $140,000 saved just in case, how much more would they have to save each year to reach their new goal?
First, we have to calculate how much they will save each year, by also using the Future Value (FV) for calculating an Ordinary Annuity as follows:
FVn = Mn * {[(1 + r)^n - 1] / r} ................................. (1)
Where,
FV1 = New future value of the amount after your 18th birthday = $140,000
M1 = New yearly saving to have $140,000 = ?
r = interest rate = 6.5%, 0.065
n = number of years this savings will be made = 18
Substituting the values into equation (1) and solve for M1, we have:
$140,000 = M1 * {[(1 + 0.065)^18 - 1] / 0.065}
$140,000 = M1 * 32.4100673759666
M1 = $140,000 / 32.4100673759666
M1 = $4,319.65
Therefore, they will have to save $4,319.65 each year to reach their goal of $140,000.
To obtain difference in yearly savings, we have:
Difference in yealy saving = M - M1 = $5,245.28 - $4,319.65 = $925.63
Since $5,245.28 each year to reach their goal of $170,000 is greater than $4,319.65 each year to reach their goal of $140,000, it therefore implies that they will have to save $925.63 less to reach their new goal of $140,000.
