The bank can make a maximum loan of $45,000. Therefore, the correct answer is $3,000.
The required reserve ratio is given as 10 percent. This means that the bank is required to hold 10 percent of its deposits as reserves. In this case, the bank's total deposits are $50,000.
Required reserves = Reserve ratio * Deposits
Required reserves = 0.10 * $50,000
Required reserves = $5,000
The bank's reserves are already given as $3,000. Therefore, the excess reserves are calculated as follows:
Excess reserves = Reserves - Required reserves
Excess reserves = $3,000 - $5,000
Excess reserves = -$2,000
Since the bank has negative excess reserves, it cannot make any additional loans beyond its existing reserves. The maximum loan it can make is limited to its existing reserves, which is $3,000.
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describe a current trend in corporate governance, providing a real example.
Answer: The current trend in corporate governance is:
ESG is here to stayHuman Capital concernsHybrid & virtual board and shareholder meetingsData privacy regulations etc.,Examples:
Reducing the cost of capital by implementing good corporate governance practices.
Explanation:
Corporate governance is the system of rules, practices, and processes by which a company is directed and controlled.
It refers to having the appropriate people, processes, and structures to direct and manage the business and affairs of the company to enhance long-term shareholder value, whilst taking into account the interests of other stakeholders.
Which of the following is an advantage associated with the use of current versus long-term liabilities? (Select the best choice below.) d A. The interest cost of current liabilities is generally higher than long-term debt. B. The use of current liabilities subjects the firm to greater risk of illiquidity. C. The firm's interest costs can vary from year to year. D. All of the above. E. None of the above
The correct answer is E. None of the above. There is no inherent advantage associated with the use of current liabilities over long-term debt.
What is the reason?Each type of financing has its own benefits and drawbacks, and the decision of which to use depends on the specific needs and circumstances of the company.
Current liabilities, such as accounts payable and short-term loans, may be more easily accessible and have lower interest rates, but they also come with the risk of illiquidity if the company cannot meet its obligations. Long-term debt, on the other hand, may have higher interest rates but provides more stability and predictability in terms of payments.
Ultimately, the choice between the two should be made based on the company's financial goals and objectives.
Hence, option e. is correct.
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which of the following accounts decrease retained earnings when closing entries are prepared?
The accounts that decrease retained earnings when closing entries are prepared are the revenue accounts and the expense accounts.
During the closing process, the revenue accounts are closed by transferring their balances to the retained earnings account. This transfer decreases the retained earnings account because revenue increases retained earnings, and closing the revenue accounts means that this increase is no longer present.
Similarly, the expense accounts are closed by transferring their balances to the retained earnings account. This transfer increases the retained earnings account because expenses decrease retained earnings, and closing the expense accounts means that this decrease is no longer present.
When closing entries are prepared, all temporary accounts (revenues, expenses, and dividends) are closed into the retained earnings account. Revenues increase retained earnings, while expenses and dividends decrease it. Therefore, at the end of the accounting period, when closing entries are made, dividends and expense accounts will cause a decrease in retained earnings.
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Why does cash require some specific internal controls?
a. Most transactions ultimately affect cash.
b. Cash is relatively easy to steal.
c. Cash is easy to convert to other forms of wealth.
d. all of the above
Cash requires specific internal controls for a number of reasons. First and foremost, cash is a highly liquid asset, which means that it can be easily stolen or misplaced. The correct option is d.
In addition, cash is often the most vulnerable to fraud and embezzlement. To prevent these issues, companies must have strict controls in place to ensure that cash is properly secured, recorded, and reconciled.
This may involve measures such as limiting access to cash, using safes and cash registers, conducting regular audits, and implementing systems to monitor and track cash transactions.
In summary, effective internal controls are essential for safeguarding a company's cash assets and protecting against fraud and theft.
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which of the following is a category of asp business A. functional/specialist B. vertical market. C. enterprise D. all of the above.
All of the options mentioned - functional/specialist, vertical market, and enterprise - are categories of ASP (Application Service Provider) businesses.
These categories represent different approaches and target markets for ASPs.
Functional/specialist ASPs focus on providing specific applications or services tailored to meet the unique needs of a particular business function or industry vertical.
They specialize in delivering solutions for specific functional areas like human resources, customer relationship management, or supply chain management.
Vertical market ASPs cater to specific industries or market segments, offering industry-specific solutions and services.
They understand the unique requirements and challenges of a particular vertical market, such as healthcare, finance, or retail, and provide tailored solutions to meet those needs.
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FILL IN THE BLANK. Low Tech Company has an expected ROE of 10%. The dividend growth rate will be ________ if the firm follows a policy of paying 40% of earnings in the form of dividends.
Group of answer choices
A. 3%
B. 4%
C. 4.8%
D. 6%
If Low Tech Company follows a policy of paying 40% of earnings in the form of dividends and has an expected ROE (Return on Equity) of 10%, the dividend growth rate will be 4%.The correct answer is D. 6%
The dividend growth rate can be calculated using the formula: Dividend Growth Rate = Retention Ratio × Return on Equity. The retention ratio is the portion of earnings retained by the company and not paid out as dividends. In this case, the retention ratio is 1 - Dividend Payout Ratio. Since the firm follows a policy of paying 40% of earnings in dividends, the dividend payout ratio is 40%, and the retention ratio is 1 - 0.40 = 0.60.
Given the expected ROE of 10%, we can calculate the dividend growth rate as follows: Dividend Growth Rate = 0.60 × 10% = 6%. However, this calculation assumes a plowback ratio of 60%, which represents the portion of earnings reinvested back into the company. Since the question states a dividend payout ratio of 40%, we need to subtract this from 100% to obtain the plowback ratio. Therefore, the dividend growth rate will be 100% - 40% = 60%, and 60% × 10% = 6%.
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Ceteris paribus,if imports increase in any given year,
A)Exports will increase.
B)GDP will increase.
C)GDP will decrease.
D)NDP will increase.
Ceteris paribus, if imports increase in any given year, option C) GDP will decrease. This is because more products and services are being purchased from foreign nations as a result of rising imports, which in turn causes domestic production and consumption to decline. As a result, the GDP, which measures the entire value of goods and services generated in a nation, declines.
Ceteris paribus is a Latin word that means "with other things being the same" in most contexts. The assumption of Ceteris Paribus is particularly important in the investigation of cause and effect relationships between two distinct variables since it makes other significant factors influencing these constant.
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Courts may award damages called "quantum meruit":
a. which means "as much as he deserved."
b. which is money the court believes the plaintiff morally ought to have.
c. even though there was no valid contract entitling the plaintiff to it.
d. All of the above.
Courts may award damages called "quantum meruit" for various reasons. The correct answer is d.
"Quantum meruit" is a Latin term that means "as much as he deserved." It refers to a legal doctrine that allows a party to recover the reasonable value of services or goods provided, even in the absence of a valid contract or when the terms of the contract are incomplete or unenforceable.
Courts may award quantum meruit damages based on the belief that the plaintiff morally ought to receive compensation for their efforts or contributions. This reflects an equitable principle where the court acknowledges the fairness of awarding compensation to a party who has provided valuable services or goods, regardless of the existence of a formal contract.
Furthermore, quantum meruit can apply even when there was no valid contract entitling the plaintiff to compensation. This means that if one party provides goods or services to another party with a reasonable expectation of payment, and the other party unjustly benefits from those goods or services, the court may award damages based on quantum meruit to prevent unjust enrichment.
In summary, quantum meruit allows courts to award damages based on what is deemed fair and reasonable under the circumstances, considering the value of the services or goods provided, moral considerations, and the absence of a valid contract. Therefore the correct answer is option d.
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Upper A television station asks its viewers to call in their opinion regarding the variety of sports programming.
The television station is seeking viewers' opinions on the variety of sports programming.
The television station's request for viewers to call in their opinions indicates that they are interested in gathering feedback and input from their audience regarding the variety of sports programming they offer. By encouraging viewers to call in, the station aims to engage with its audience and gain insights into their preferences, satisfaction levels, and suggestions for improving the sports programming content.
This approach allows the television station to directly interact with viewers and receive real-time feedback, enabling them to gauge the popularity of different sports programs, identify any gaps or areas for improvement, and make informed decisions about their programming lineup. It also shows that the television station values the opinions of its audience and seeks to cater to their preferences, ultimately aiming to enhance viewer satisfaction and loyalty. Additionally, by actively involving viewers in the decision-making process, the station can build a stronger relationship with its audience and foster a sense of community engagement. Overall, this initiative reflects the station's commitment to providing sports programming that aligns with viewers' interests and preferences.
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what does having 80/20 coverage mean quizlet
Having 80/20 coverage is a type of insurance plan where the insurance company pays 80% of the cost of covered services while the policyholder pays the remaining 20%.
This means that the policyholder is responsible for a smaller portion of the cost compared to the insurance company.
For example, if a medical procedure costs $1000 and is covered under an 80/20 plan, the insurance company would pay $800 while the policyholder would be responsible for paying the remaining $200. It's important to note that there may be limitations to what services are covered under this type of plan, so it's always important to read the policy details carefully.
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railway companies encouraged settlers to come to the west
Railway companies played a crucial role in encouraging settlers to move to the West during the expansion of the United States in the 19th century.
As railway networks expanded, they created easier access to previously unexplored territories, which offered vast areas of land for settlers to establish new communities and develop agriculture or businesses. To attract settlers, railway companies employed various promotional strategies, such as offering affordable land grants or discounted transportation fares. These incentives made the prospect of relocating to the West more appealing and economically viable for many individuals and families.
In addition, railway companies worked to disseminate information about the benefits of settling in the West, such as fertile soil for farming, abundant natural resources, and opportunities for trade and commerce. They often used brochures, advertisements, and even organized exhibitions showcasing the potential of these new lands.
These efforts by railway companies helped stimulate westward migration and facilitated the growth of new towns and cities along the railway lines. As a result, the development of the Western frontier was significantly accelerated, and the United States experienced rapid expansion and economic growth during this period.
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In monopolistic competition, an individual firm's market power stems from which of the following? (A) Economies of scale in production (B) The production of a differentiated product (C) The absence of perfectly competitive firms that produce similar products (D) Barriers to entry allowing firms to earn economic profit (E) The maintenance of excess capacity to meet unexpected increase in demand
The correct response is option b. In monopolistic competition, an individual firm's market power stems from the production of a differentiated product.
Monopolistic competition is characterized by a large number of firms in the market, each producing a differentiated product. This differentiation allows firms to have some control over the price they charge for their product. By offering unique features, branding, or marketing strategies, firms can create a perceived difference in their product, making it distinct from those offered by their competitors. This differentiation gives each firm some degree of market power, as consumers may have preferences for specific brands or variations of the product. As a result, firms in monopolistic competition can have some control over their pricing and are not price takers like in perfect competition. The other options listed (economies of scale, absence of perfectly competitive firms, barriers to entry, and excess capacity) are not necessarily characteristic of monopolistic competition and do not directly contribute to an individual firm's market power in this market structure.
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if this case ended up in court, what might the court most likely find to be the proper price of the flowers, according to the terms of the contract?
The court would likely find the proper price of the flowers to be the amount agreed upon in the terms of the contract. This is because contracts are legally binding agreements and both parties are expected to abide by the terms outlined in the contract.
However, if there is any ambiguity or dispute over the terms of the contract, the court may need to consider additional evidence and testimony to make a fair and just decision. The court's decision would be based on contract law principles, which prioritize upholding the intentions and agreements of the parties involved. Therefore, it is important for both parties to clearly define the terms of the contract and ensure that they are in agreement before signing.
This may include any written or verbal agreements, as well as any industry standards or customary practices that may be relevant. The court will consider factors such as the type of flowers, quantity, delivery terms, and payment terms to determine the proper price. By closely examining the contract, the court will be able to reach a fair and just decision on the proper price of the flowers in this case.
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how long do real estate brokers have to keep records
The length of time that real estate brokers are required to keep records can vary depending on jurisdiction and specific regulations.
In the United States, real estate brokers are subject to federal, state, and local laws, each of which may have its own record-keeping requirements. It's important for brokers to consult the laws and regulations specific to their jurisdiction for accurate and up-to-date information.
In general, real estate brokers are advised to retain records for a certain period to ensure compliance with legal, accounting, and tax requirements, as well as for potential future reference. Commonly recommended retention periods for real estate records range from three to seven years.
Records that real estate brokers may be required to retain include transaction documents, contracts, client files, financial records, advertising materials, correspondence, and any other relevant documentation related to their business operations.
To ensure compliance and minimize the risk of legal and regulatory issues, real estate brokers should consult with legal and accounting professionals or industry organizations in their jurisdiction to determine the specific record-keeping requirements applicable to them. These professionals can provide guidance on the recommended retention periods for different types of records and help ensure brokers fulfill their obligations while operating in accordance with the law.
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If you try different starting values for the changing cells and obtain different solutions: a. you can be confident there is no solution b. there must be a mistake in your objective function c. there must be a mistake in one of your constraints d. you can keep the best solution you have found and hope that it is indeed optimal
If you try different starting values for the changing cells and obtain different solutions, you can keep the best solution you have found and hope that it is indeed optimal.
This is because linear programming problems can have multiple optimal solutions, and the starting values can affect which solution is found. However, it is always important to check the feasibility of the solution and ensure that it satisfies all constraints. If there are any issues with feasibility, it may indicate a mistake in one of the constraints. In conclusion, it is important to try different starting values and compare solutions, but also to carefully examine the feasibility and accuracy of the solution to ensure its optimality.
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Which of the following statements with respect to floating-rate debt is incorrect?
Multiple Choice
If the market rate of interest increases, the investors benefit while the issuing corporation does not benefit.
If the market rate of interest decreases, both the issuing company and the investors benefit.
If the market rate of interest decreases, the cash interest payment required by the issuing company would decrease.
If the market rate of interest increases, the market value of the floating-rate debt will remain the same.
The statement that is incorrect with respect to floating-rate debt is: If the market rate of interest increases, the market value of the floating-rate debt will remain the same.
In reality, if the market rate of interest increases, the market value of floating-rate debt typically decreases. This is because floating-rate debt is structured to adjust its interest payments based on changes in the market rate. When the market rate increases, the interest payments on floating-rate debt also increase. As a result, the fixed cash flows generated by the debt become less attractive relative to other investments available in the market, causing the market value of the debt to decrease.
The other statements are correct:
If the market rate of interest decreases, both the issuing company and the investors benefit. A lower market rate leads to lower interest payments for the issuing company and potentially higher returns for investors.
If the market rate of interest decreases, the cash interest payment required by the issuing company would decrease. As the interest rate decreases, the cash interest payments made by the issuing company also decrease.
In summary, while the market value of floating-rate debt tends to decrease when the market interest rate increases, the other statements regarding the benefits to investors and the issuing company, as well as the decrease in cash interest payments with a decrease in the market rate, are correct.
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true or false the central nonprofit agencies nib and sourceamerica have sole responsibility
False.
While the National Industries for the Blind (NIB) and SourceAmerica are both central nonprofit agencies that provide employment opportunities for people with disabilities, they do not have sole responsibility for this work. There are many other organizations and agencies, both government and private, that are involved in providing employment and other services for people with disabilities.
NIB and SourceAmerica are specifically focused on providing employment opportunities through the federal government's AbilityOne Program, which requires federal agencies to purchase certain products and services from organizations that employ people with disabilities. However, they do not have sole responsibility for this program or for providing employment opportunities to people with disabilities in general.
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Henrietta transfers cash of $75,000 and equipment with a fair market value of $25,000 (basis to her as a sole proprietor, $10,000) in exchange for a 40% profit and loss interest worth $100,000.
1.How much are Henrietta’s realized and recognized gains?
2.What is the amount of Henrietta’s basis in her partnership interest?
3.What is the partnership’s basis in the contributed equipment?
Henrietta's realized gain is the fair market value of the assets she transferred minus her basis in those assets. In this case, her realized gain on the cash is $75,000 - $0 (assuming no basis in cash) = $75,000. Her realized gain on the equipment is $25,000 - $10,000 (her basis in the equipment) = $15,000. Therefore, her total realized gain is $75,000 + $15,000 = $90,000.
Henrietta's gain is the lesser of her realized gain or the amount of consideration received. In this case, she received a partnership interest worth $100,000. Since her realized gain is less than $100,000, her recognized gain is $90,000. Henrietta's basis in her partnership interest is equal to the amount of consideration she transferred, plus any gain recognized on the transfer. In this case, Henrietta transferred cash and equipment worth $100,000, and she recognized a gain of $90,000 on the transfer.
Therefore, her basis in her partnership interest is $190,000. The partnership's basis in the contributed equipment is equal to Henrietta's basis in the equipment at the time of the transfer. In this case, Henrietta's basis in the equipment was $10,000, so the partnership's basis in the equipment is also $10,000. How much are Henrietta’s realized and recognized gains? Henrietta's realized gain can be calculated as the difference between the fair market value of the equipment and her basis in it as a sole proprietor. Realized Gain = $25,000 (Fair Market Value) - $10,000 (Basis) = $15,000. Since this is a tax-free transaction under Section 721, there are no recognized gains. So, the recognized gain is $0. What is the amount of Henrietta’s basis in her partnership interest? To calculate Henrietta's basis in her partnership interest, we add the cash contributed and her basis in the equipment. Basis = $75,000 (Cash) + $10,000 (Basis in Equipment) = $85,000. Therefore, Henrietta's basis in her partnership interest is $85,000. What is the partnership’s basis in the contributed equipment? The partnership's basis in the contributed equipment is equal to Henrietta's basis in the equipment when she contributed it to the partnership. So, the partnership's basis in the contributed equipment is $10,000.
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Question You are in the sell-side analyst team working for a brokerage firm. The firm has asked your team to prepare a sell-side analyst report for the clients of the firm. The report is produced to help guide investment decisions. Sell-side analysts issue the often-heard recommendations of 'buy', 'hold', 'neutral', or 'sell' to help clients with their investment decisions. The company you are asked to analyze in the report is Qantas Airways Limited (QAN.AX). Qantas Airways Limited is the flag carrier of Australia and its largest airline by fleet size, international flights and international destinations. Your analyst report should address the following requirements (A-C).
Qantas Airways Limited (QAN.AX) is recommended as a 'buy' based on its market position, financial performance, and growth potential.
Title: Qantas Aviation routes Restricted (QAN.AX) Sell-Side Examiner Report, Chief Synopsis:
Qantas Aviation routes Restricted (QAN.AX) is the main aircraft in Australia, serving homegrown and global business sectors. This sell-side investigator report expects to give significant bits of knowledge and proposals to direct speculation choices for our clients.
A. Business Outline:
Qantas Aviation routes works a different armada, offering traveler and cargo administrations across a large number of homegrown and global objections.
The organization's solid market position, broad course organization, and spotlight on functional effectiveness give an upper hand. Furthermore, Qantas has executed brokerage firms of cost-saving drives and compelling armada the executives techniques.
B. Monetary Investigation:
Qantas has exhibited powerful monetary execution, with steady income development and solid productivity edges. The organization has really overseen costs, prompting worked on working efficiencies and expanded investor esteem.
Moreover, Qantas has a good arrangement sheet, upheld by reasonable monetary administration rehearses.
C. Venture Proposal:
In view of our examination, we suggest a 'purchase' rating for Qantas Aviation routes Restricted. Factors adding to this proposal incorporate the organization's predominant market position, productive tasks, solid monetary execution, and open doors for development.
Also, Qantas has shown flexibility during testing economic situations, accentuating its capacity to actually explore industry headwinds.
Disclaimer: Financial backers ought to direct their own reasonable level of effort and consider economic situations prior to settling on speculation choices. This report ought not be understood as monetary exhortation, and the business firm and its experts don't ensure venture results.
In general, Qantas Aviation routes Restricted presents an alluring venture an open door, upheld by its market administration, strong financials, and vital drives for development.
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true/false. the balanced scorecard framework rejects the notion that improving process-oriented measures automatically leads to financial success.
True. The balanced scorecard framework rejects the notion that improving process-oriented measures automatically leads to financial success.
The balanced scorecard framework recognizes that financial success is not solely determined by process-oriented measures. While improving processes can contribute to improved financial performance, it is not a guarantee. The framework emphasizes a holistic approach to performance measurement that considers multiple perspectives beyond just financial measures.
The balanced scorecard framework incorporates four key perspectives: financial, customer, internal processes, and learning and growth. It recognizes that these perspectives are interconnected and influence each other. Simply focusing on improving process-oriented measures without considering other aspects such as customer satisfaction, employee development, or innovation may not necessarily translate into financial success.
The framework encourages organizations to align their strategies and objectives across these perspectives to create a comprehensive and balanced approach to performance management. By considering multiple dimensions of performance, organizations can gain a more complete understanding of their overall success and make informed decisions to achieve their goals.
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critics of advertising argue that firms use advertising to manipulate consumers’ tastes. T/F
The statement "Critics of advertising argue that firms use advertising to manipulate consumers' tastes" is True because firms often employ advertising techniques to shape and influence consumer preferences and tastes.
What role does advertising play?
Advertising plays a powerful role in shaping consumer perceptions and creating desires for certain products or services. Through various persuasive techniques such as emotional appeals, celebrity endorsements, and exaggerated claims, firms attempt to manipulate consumer preferences in favor of their own products or brands.
By creating strong brand associations and influencing consumer perceptions, advertising can sway consumer decision-making and encourage them to purchase specific products.
Critics argue that advertising goes beyond providing information about products and instead seeks to manipulate consumer tastes by creating artificial needs and desires. They claim that firms use sophisticated marketing strategies to create a sense of urgency, exclusivity, or social status associated with their products, even if those products do not necessarily offer superior value or quality.
While advertising can inform and educate consumers, critics argue that its primary purpose is to shape and manipulate consumer tastes in favor of the advertised products, leading to potentially irrational consumer behavior and distorted market outcomes.
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The last section of the Sales Dialogue Planning Template is:
a.Earn Prospect Commitmentb.
b. Build Value through Follow-Up Actionc.
c. Handle Resistanced.
d. Assess Sales Call Performancee
e. None of the above
The last section of the Sales Dialogue Planning Template is: b. Build Value through Follow-Up Action.
This section focuses on the steps to be taken after the sales dialogue, including following up with the prospect to reinforce value propositions, address any remaining concerns or questions, and ultimately, secure their commitment to move forward with the sale.
It involves nurturing the relationship with the prospect and ensuring that they have all the information and support they need to make an informed decision. This follow-up action is crucial in building trust, reinforcing value, and ultimately closing the sale.
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a form of money that represents an alternative measure of value in primitive cultures such as compressed bricks of tea, fishhooks, or dogs teeth is called;
A form of money that represents an alternative measure of value in primitive cultures such as compressed bricks of tea, fishhooks, or dogs teeth is called Currency.
Currency is a form of money that represents an alternative measure of value in primitive cultures. In such cultures, commodities such as compressed bricks of tea, fishhooks, or dogs teeth were used as currency for trade and commerce.
These commodities were universally accepted as a medium of exchange for goods and services and their value was determined by the consensus of the society. With the evolution of civilization, currency took on more formal and regulated forms such as coins and banknotes, but the underlying principle of representing value remained the same.
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blastdale corp. is considering borrowing $15,000 for a 60day period. the firm will repay the $15,000 principal amount plus $200 in interest. what is the effective annual rate of interest?
To calculate the effective annual rate of interest, we need to first find the periodic interest rate. Since the loan is for 60 days, we can assume that the interest is charged on a monthly basis. The effective annual rate of interest for this loan is 17.79%.
Therefore, we need to find the monthly interest rate first. The interest charged on the loan is $200 for 60 days, so the monthly interest can be calculated as follows: Monthly interest = ($200 / $15,000) x (365 / 60)= 0.0278 or 2.78%
Next, we can use the following formula to calculate the effective annual rate of interest: Effective annual rate = (1 + periodic interest rate).n - 1 Where n is the number of periods in a year. Since the loan is for a 60-day period, there are 6 periods in a year (12 months/2), so we can substitute the values:
Effective annual rate = ([tex]1 + 0.0278)^6 - 1[/tex] = 0.1779 or 17.79%. Therefore, the effective annual rate of interest for this loan is 17.79%.
It's important to note that the effective annual rate of interest takes into account the effects of compounding. This means that if the interest is compounded more frequently, the effective annual rate of interest will be higher.
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The basic components of the real estate financing market are A) primary mortgage market and government influences, primarily the Federal Reserve System. B) primary mortgage market, secondary mortgage market, and government influences, primarily the Federal Reserve System. C) primary mortgage market and secondary mortgage market. D) principal mortgage market and secondary mortgage market.
The basic components of the real estate financing market are C) primary mortgage market and secondary mortgage market.
The primary mortgage market refers to the market where borrowers (homebuyers) obtain mortgage loans directly from lenders such as banks, credit unions, or mortgage companies. In the primary mortgage market, lenders evaluate borrowers' creditworthiness, determine loan terms, and provide funds for purchasing real estate.
On the other hand, the secondary mortgage market involves the buying and selling of existing mortgage loans. Lenders in the primary market often sell the mortgage loans they originate to investors or government-sponsored enterprises (GSEs) like Fannie Mae and Freddie Mac. This allows lenders to replenish their funds to make new loans, while investors and GSEs have opportunities to invest in mortgage-backed securities.
While government influences, primarily the Federal Reserve System, play a significant role in the real estate financing market, they are not included as a separate component. The Federal Reserve System influences interest rates and monetary policy, which in turn impact mortgage rates and overall financing conditions. However, the primary and secondary mortgage markets are the core components directly involved in originating and trading mortgage loans.
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"
7. At what monthly compounded interest rate does it take five years for an investment to double?
The monthly compounded interest rate that makes an investment double in five years is approximately 0.983%.
Let's suppose that an investment has principal
P, and the interest rate is r, compounded monthly.
The formula to calculate the future value of the investment is given by the following expression:
FV = P(1 + r/100)^n , where n is the number of compounding periods.
Now, we want to know the interest rate r that satisfies the following condition:
FV = 2P, and n = 5 x 12 = 60.
Thus, the expression becomes:
2P = P(1 + r/100)^60.
To solve for r, we can divide both sides by P,
then take the 60-th root of both sides, and
finally, subtract 1 from both sides, as follows:
2 = (1 + r/100)^60
=> (1 + r/100) = 2^(1/60)
=> r/100 = 2^(1/60) - 1
=> r = 100(2^(1/60) - 1) ≈ 0.983%
(rounded to three decimal places).
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TRUE/FALSE.Warren Buffet has recommended to his heirs (when he passes) that they buy & hold an index fund with the money they inherit.
TRUE, Warren Buffet has publicly stated that he believes low-cost index funds are a smart investment choice for most individuals. In fact, in his 2014 letter to shareholders of his company Berkshire Hathaway, Buffet wrote, "My advice to the trustee couldn’t be more simple.
Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund. (I suggest Vanguard’s.) I believe the trust’s long-term results from this policy will be superior to those attained by most investors — whether pension funds, institutions or individuals — who employ high-fee managers.
" Buffet has also been known to say that he plans to leave the vast majority of his wealth to his children in the form of index funds, rather than individual stocks or other investments. I believe the trust’s long-term results from this policy will be superior to those attained by most investors — whether pension funds, Warren Buffet has publicly stated that he believes low-cost index funds are a smart investment choice for most individuals True, Warren Buffet has recommended to his heirs (when he passes) that they buy & hold an index fund with the money they inherit. This recommendation is based on his belief in the long-term growth of the overall market and the simplicity of index funds for investors.
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1. A case study in the chapter analysed purchasing power parity for several countries using the price
of Big Macs. Here are the data for a few more countries:
Country Price of a
Big Mac
Predicted
Exchange Rate
Actual Exchange
Rate
Chile 2,050 pesos … 472 pesos/$
Hungary 830 forints … 217 forints/$
Czech Republic 70 korunas … 18. 9 korunas/$
Brazil 11. 25 real … 1. 99 real/$
Canada 5. 41 C$ … 1. 00 C$/$
a. For each country, compute the predicted exchange rate of the local currency per U. S dollar. (Recall that the U. S price of a Big Mac was $4. 37
b. According to purchasing-power parity, what is the predicted exchange rate between the
Hungarian forint and the Canadian dollar? What is the actual exchange rate?
The actual exchange rate between the Hungarian forint and the Canadian dollar needs to be obtained from current exchange rate data.
a. To compute the predicted exchange rate of the local currency per U.S dollar, we can use the concept of purchasing power parity (PPP) by dividing the price of a Big Mac in the local currency by the U.S. price of a Big Mac.
Country Price of a Big Mac Predicted Exchange Rate
Chile 2,050 pesos 2,050 pesos / $4.37 = 468.76 pesos/$
Hungary 830 forints 830 forints / $4.37 = 189.49 forints/$
Czech Republic 70 korunas 70 korunas / $4.37 = 16.02 korunas/$
Brazil 11.25 real 11.25 real / $4.37 = 2.57 real/$
Canada 5.41 C$ 5.41 C$ / $4.37 = 1.24 C$/$
b. To determine the predicted exchange rate between the Hungarian forint and the Canadian dollar, we can use the concept of purchasing power parity. We need to find the exchange rate between the Hungarian forint and the U.S. dollar and the exchange rate between the Canadian dollar and the U.S. dollar.
According to the data given:
Predicted exchange rate between the Hungarian forint and the U.S. dollar = 217 forints/$
Predicted exchange rate between the Canadian dollar and the U.S. dollar = 1.00 C$/$
Using these predicted exchange rates, we can calculate the predicted exchange rate between the Hungarian forint and the Canadian dollar:
Predicted exchange rate between the Hungarian forint and the Canadian dollar = (Predicted exchange rate forints/$) / (Predicted exchange rate C$/$)
Predicted exchange rate between the Hungarian forint and the Canadian dollar = 217 forints/$ / 1.00 C$/$ = 217 forints/C$
The actual exchange rate between the Hungarian forint and the Canadian dollar needs to be obtained from current exchange rate data.
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if a firm has a high degree of leverage then a small change in sales results in
If a firm has a high degree of leverage, then a small change in sales can result in a significant change in profits.
This is because a firm with high operating leverage has a high amount of debt compared to equity. As a result, the firm has higher fixed costs such as interest payments on loans. Therefore, even a small decrease in sales can reduce the firm's revenue, resulting in a bigger impact on profits due to the high fixed costs. On the other hand, if sales increase, the firm will benefit from higher revenue, resulting in a higher profit margin. Overall, high leverage increases the sensitivity of a firm's profits to changes in sales.
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An investor has the opportunity to invest in four new retail stores. The amount that can be invested in each store, along with the expected cash flow at the end of the first year, the growth rate of concern, and the cost of capital is shown for each case. It is assumed the investment will operate in perpetuity after the initial investment. Which investment should the investor choose?
a. Init Invest: $100,000, CF year 1: $12,000, Growth rate: 1.25%, Cost of capital: 9%
b. Init Invest: $90,000, CF year 1: $10,000, Growth rate: 1.50%, Cost of capital: 9%
c. Init Invest: $80,000, CF year 1: $8,000, Growth rate: 1.75%, Cost of capital: 8%
d. Init Invest: $60,000, CF year 1: $6,000, Growth rate: 2.50%, Cost of capital: 7.5%
Investor should choose investment D which is Init Invest: $60,000, CF year 1: $6,000, Growth rate: 2.50%, Cost of capital: 7.5% because it has the highest value of 60,000.
What is investment?
Making a current financial commitment with the expectation of future gain is what it means to invest. An investment is the use of capital such as time, money, effort, etc. The unrealized capital gains, investment income like dividends, interest, or rental income, realised capital gains, a mix of realised and unrealized profits, and gains realised from the sale of a home or investment are all possible inclusions in the return.
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