Consider the following independent situations:
1. Mike Finley wishes to become a millionaire. His money market fund has a balance of $289,664 and has a guaranteed interest rate of 10% per year.
How many years must Mike leave that balance in the fund in order to get his desired $1,000,000?
2. Assume that Sally Williams desires to accumulate $1 million in 18 years using her money market fund balance of $250,249.
At what interest rate must Sally's investment compound annually?

Answers

Answer 1

Answer:

a. Number of years = 13 years

b. Interest rate = 8%

Explanation:

a. Present value = $289664

Interest rate = 10%

Future value = $1000000

Future Value = Present Value (1 + r)^n

1000000 = 289664 (1 + 10%)^n

(1 + 10%)^n = 1000000 / 289664

(1 + 10%)^n = 3.45227

(1.10)^n = 3.45227

Now solve for the n by taking ln both side.

So, n = 13

Thus, number of years = 13 years

b. Future value = 1000000

   Present value = 250249

   Time = 18 years

   Future Value = Present Value (1 + r)^n

   1000000 = 250249 (1 + r)^18

   (1 + r)^18 = 1000000 / 250249

   (1 + r)^18 = 3.99602

   Now solve for the value of r.

   Thus, r = 8%

  Interest rate = 8%


Related Questions

Kathy plans to move to Maryland and take a job at McCormick as the Assistant Director of HR. She and her husband Stan plan to buy a house in Garrison, MD and their budget is $500,000. They have $100,000 for the down payment and McCormick will pay for closing costs. They are considering either a 30-year mortgage at 4.5 percent annual rate or a 15 year mortgage at 4 percent.

Required:
Calculate the monthly payment for each using the PMT function.

Answers

Answer:

Total budget = $500,000

Down payment = $100,000

Loan amount = $400,000

Case 1

Annual rate = 4.5%

Number of payment = (30*12 month) 360

Loan amount = $400,000

Monthly payment = PMT(Rate, Nper, Value of loan)

Monthly payment = PMT(4.5%, 360, 400,000)

Monthly payment = $2,026.74

Case 2

Annual rate = 4%

Number of payment = (15*12 month)180

Loan amount = $400,000

Monthly payment = PMT(Rate, Nper, Value of loan)

Monthly payment = PMT(4%, 180, 400,000)

Monthly payment = $2,958.75

Which strategies is suggested to help build strong interpersonal business relationships?

Answers

Answer and Explanation:

Gain trust: Business relationship is sealed with trust. If you are able to make a business partner trust you, you are sure to keep doing business with them. Do not try to take advantage of them and be sure they ate not thinking in that direction.

Show interest in people: keeping up with people and always showing that you actually care, and want to assist in any way you can is a sure way to seal a client for life. Be family.

Work hard: you can not build business relationships if you are not a person that delivers. It doesn't matter if you are a nice person that always cares, if you cannot bring results and be trusted to deliver you cannot have any useful business relationship. This is the most important strategy.

Networking: networking is a popular form of building business relationships. Formal occasions, conferences, informal hangout spots, the gym are all places where you can meet new people and start a business relationship.

s).  Marty has been offered an injury settlement of ​$15 comma 000 payable in 5 years. He wants to know what the present value of the injury settlement is if his opportunity cost is 3.5 ​%. ​ (The opportunity cost is the interest rate in this​ problem.) What if the opportunity cost is 7.5 ​%? What if it is 11.5 ​%?

Answers

Answer and Explanation:

The computation of the present value in each situation is as follows:

As we know that

Present value = Future value ÷ (1 + rate of interest)^time period

When the rate is 3.5%, the present value is

= $15,000 ÷ (1 + 3.5%)^5

= $12,630

When the rate is 7.5%, the present value is

= $15,000 ÷ (1 + 7.5%)^5

= $10,448.38

And, When the rate is 11.5%, the present value is

= $15,000 ÷ (1 + 11.5%)^5

= $8,703.96

The following information pertains to Trenton Glass Works for the year just ended.
Budgeted direct-labor cost: 70,000 hours (practical capacity) at $16 per hour
Actual direct-labor cost: 80,000 hours at $17.50 per hour
Budgeted manufacturing overhead: $997,500
Actual selling and administrative expenses: 439,000
Actual manufacturing overhead:
Depreciation $ 233,000
Property taxes 23,000
Indirect labor 80,000
Supervisory salaries 202,000
Utilities 58,000
Insurance 32,000
Rental of space 301,000
Indirect material (see data below) 79,000
Indirect material:
Beginning inventory, January 1 48,000
Purchases during the year 95,000
Ending inventory, December 31 64,000
Calculate the overapplied or underapplied overhead for the year. (Round your intermediate calculations to 2 decimal places.)

Answers

Answer:

Over-applied Overhead  $134,000

Explanation:

The computation of the overhead applied or under applied overhead is given below:

Depreciation $233,000  

Property tax $21,000  

indirect labor $80,000  

Supervisory salaries $202,000  

utilities    $58,000  

Insurance  $32,000  

Rental of space $301,000  

Indirect material $79,000  

Total OH incurred   $1,006,000  

OH applied       $1,140,000  

(80000 hours at 14.25 per hour) ($997,500 ÷ 70,000)  

Over-applied Overhead  $134,000

Since its formation, Roof Corporation has incurred the following net Section 1231 gains and losses. Year 1$(12,000)Net Section 1231 loss Year 2 10,500 Net Section 1231 gain Year 3 (14,000)Net Section 1231 loss In year 5, Roof sold one asset and recognized a $9,000 net Section 1231 gain. How much of this gain is treated as capital, and how much is ordinary

Answers

Answer:

a. $0 will be reported as capital gain, while $7,500 will be reported as ordinary gain.

b. $1,000 will be reported as capital gain, while $8,000 will be reported as ordinary gain.

Explanation:

Note: This question is not complete as part 'a' of the requirement is omitted. The complete question with the part 'a' of the requirement is therefore provided before answering the question as follows:

Since its formation, Roof Corporation has incurred the following net Section 1231 gains and losses.

Year 1  $ (12,000)    Net Section 1231 loss

Year 2      10,500      Net Section 1231 gain

Year 3    (14,000)     Net Section 1231 loss

a. In year 4, Roof sold one asset and recognized a $7,500 net Section 1231 gain. How much of this gain is treated as capital, and how much is ordinary?

b. In year 5, Roof sold one asset and recognized a $9,000 net Section 1231 gain. How much of this gain is treated as capital, and how much is ordinary?

Explanation of the answer is now provided as follows:

When section 1231 losses exceed section 1231 profits in the prior five years, the excess loss (unapplied loss) is applied against the current year's section 1231 gain.

The amount that is reported as ordinary income is the amount of the loss that is applied against the current year's section 1231 gain.

Long-term capital gain is the excess of the current year's section 1231 gain over the the recaptured section 1231 loss from the prior five years.

You have to start with the earliest year to apply section 1231 losses from the previous five years to the current year's section 1231 gain.

Therefore, we have:

a. In year 4, Roof sold one asset and recognized a $7,500 net Section 1231 gain. How much of this gain is treated as capital, and how much is ordinary?

As a result of the loss from the previous year that is applied to the extent of $7,500, the whole of the $7,500 net Section 1231 gain will be recorded as ordinary gain.

Therefore, $0 will be reported as capital gain, while $7,500 will be reported as ordinary gain.

b. In year 5, Roof sold one asset and recognized a $9,000 net Section 1231 gain. How much of this gain is treated as capital, and how much is ordinary?

Unapplied losses in previous years can be calculated as follows:

Details                                                       Amount ($)  

Net Section 1231 loss in Year 3                  (14,000)    

Net Section 1231 gain in Year 4                   7,500

Net Section 1231 loss in Year 1                  (12,000)

Net Section 1231 gain in Year 2                 10,500  

Unapplied losses in previous years        (8,000)  

Because there are unapplied losses of $8,000 from previous years, $8,000 will be reported as ordinary gain.

Therefore, the amount to be reported as capital gain can be calculated as follows:

Amount to be reported as capital gain = Gain in Year 5 – Amount to be reported as ordinary gain = $9,000 - $8,000 = $1,000

Therefore, $1,000 will be reported as capital gain, while $8,000 will be reported as ordinary gain.

You are bullish on Telecom stock. The current market price is $62 per share, and you have $6,200 of your own to invest. You borrow an additional $6,200 from your broker at an interest rate of 7.6% per year and invest $12,400 in the stock. a. What will be your rate of return if the price of Telecom stock goes up by 9% during the next year? (Ignore the expected dividend.) (Round your answer to 2 decimal places.)

Answers

Answer:

Telecom Stock

If the price of the Telecom stock goes up by 9% during the next year, your rate of return will be:

= 10.4%

Explanation:

a) Data and Calculations:

Current market price = $62 per share

Investment in stock = $12,400

Margin account =        $6,200

Loan =                         $6,200 ($12,400 - $6,200)

Units of stock bought on margin = 200 ($12,400/$62)

Margin account interest rate = 7.6%

Growth rate of stock price = 9%

Expected market price of the stock = $67.58 ($62 * 1.09)

Expected value of stock = $13,516 (200 * $67.58)

Interest on loan =                  $471.20 ($6,200 * 7.6%)

Principal & loan amount  $12,400

Return on the stock =          $644.80

Rate of return = 10.4% ($644.80/$6,200 * 100)

According to the Level-5 leadership pyramid, managers can become executives who are capable of building lasting greatness into the organization through a combination of willpower and humility. At what level of the pyramid does this occur

Answers

Answer:

Level 5

Explanation:

pyramid organizational structure is structure usually from 1 to 5 having , one leader at the top, along with

small executive leadership team which is at below level with tiers of managers that have their leading down to the bottom level of team of employees.

Level 5 leaders always shows

powerful mixture of personal humility as well as indomitable will. These set of people that fall under this heirachy are incredibly ambitious, though

their ambition comes as first and foremost as regards the cause, for the organization as well as its purpose and not themselves. It should be noted that According to the Level-5 leadership pyramid, managers can become executives who are capable of building lasting greatness into the organization through a combination of willpower and humility. This occur At

level 5 of the pyramid.

Answer:

Level 5

Explanation:

Leadership pyramid is a depiction of the control structure at different levels of management in an organic.

The five levels of leadership are:

Level 1 - Self awareness

Level 2 - Relationship

Level 3 - Vision

Level 4 - Strategy

Level 5 - Action.

When a manager can become executives who are capable of building lasting greatness into the organization through a combination of willpower and humility, they have attained the final level of the pyramid where they can influence the actions of their employees

list three steps you will take before granting credit to customers

Answers

Step 1: Ask the Customer to Submit a Credit Application.

Step 2: Check Business Credit Rating.

Step 3: Set Credit Limit and Repayment Terms.

Answer:

1. Credit Application from Your Customer. Your credit application doesn’t need to be complicated, but …

2. Bank and Trade References. Checking bank and trade references is a very common practice, and …

3. Check Business Credit Using Credit Bureaus. There are a number of commercial credit bureaus that …

Explanation:

Establishing ________ pertaining to apprenticeship standards, union member tasks, and which job duties union members would be required to do was one of the most important activities of the AFL.

Answers

Answer:

work rules.

Explanation:

In the United States of America, the American Federation of Labor (AFL) was established by union members as an association or umbrella body for trade unions on the 8th of December, 1886 in Columbus, Ohio. It was formed due to the dispute that arose with craft unions while they were still part of the Knights of labour.

Establishing work rules pertaining to apprenticeship standards, union member tasks, and which job duties union members would be required to do was one of the most important activities of the AFL.

An open-end fund has a net asset value of $12.70 per share. It is sold with a front-end load of 8%. What is the offering price? (Round your answer to 2 decimal places.)

Answers

Answer:

$13.80

Explanation:

Calculation to determine the offering price

Using this formula

Offering Price = NAV/1-load

Let plug in the formula

Offering Price = $12.70/1-0.08

Offering Price =$12.70/0.92

Offering Price = $13.80

Therefore the offering price is $13.80

A production process consists of a three step operation. The scrap rate is 10% for the first step and 6 percent for each of the other two steps.
a. If the desired daily output is 450 units, how many units must be started to allow for loss due to scrap?
b. If the scrap rate for each step could be cut in half, how many units would this save in terms of the scrap allowance?c. If the scrap represents a cost of $10 per unit, how much is it costing the company per day for the original scrap rate?

Answers

Answer:

a. The number of units that must be started to allow for loss due to scrap is 566 units.

b. The number of units that this would save in terms of the scrap allowance is 63 units.

c. The scrap is costing the company $1,160 per day.

Explanation:

a. If the desired daily output is 450 units, how many units must be started to allow for loss due to scrap?

Let x represent the original quantity.

Therefore, we have:

Scrap from the first step operation = 0.10x

Remaining quantity after the first step operation = Original quantity - Scrap of the first step operation = x – 0.10x = (1 – 0.10)x = 0.90x

Scrap from the second step operation = Remaining quantity after the first step operation * 0.06 = 0.90x * 0.06 = 0.054x

Remaining quantity after the second step operation = Remaining quantity after the first step operation - Scrap from the second step operation = 0.90x - 0.054x = (0.90 - 0.054)x = 0.846x

Scrap from the third step operation = Remaining quantity after the second step operation * 0.06 = 0.846x * 0.06 = 0.05076x

Remaining quantity after the third step operation = Remaining quantity after the second step operation - Scrap from the third step operation = 0.846x - 0.05076x = (0.846 - 0.05076)x = 0.79524x

Since the desired daily output is 450 units, we can solve for x as follows:

0.79524x = 450

x = 450 / 0.79524 = 565.866908103214, or 566 units

Therefore, the number of units that must be started to allow for loss due to scrap is 566 units.

b. If the scrap rate for each step could be cut in half, how many units would this save in terms of the scrap allowance?

Scrap rate of first operation is = 10%/2 = 5%, or 0.05

Scrap rate of second and third operations = 6%/2 = 3%, or 0.03 each

Let x also represent the original quantity.

Therefore, we have:

Scrap from the first step operation = 0.05x

Remaining quantity after the first step operation = Original quantity - Scrap of the first step operation = x - 0.05x = (1 – 0.05)x = 0.95x

Scrap from the second step operation = Remaining quantity after the first step operation * 0.03 = 0.95x * 0.03 = 0.0285x

Remaining quantity after the second step operation = Remaining quantity after the first step operation - Scrap from the second step operation = 0.95x - 0.0285x = (0.95 - 0.0285)x = 0.9215x

Scrap from the third step operation = Remaining quantity after the second step operation * 0.03 = 0.9215x * 0.03 = 0.027645x

Remaining quantity after the third step operation = Remaining quantity after the second step operation - Scrap from the third step operation = 0.9215x - 0.027645x = (0.9215 - 0.027645)x = 0.893855x

Since the desired daily output is 450 units, we can solve for x as follows:

0.893855x = 450

x = 450 / 0.893855 = 503.437358408243, or 503 units

Number units to save = Calculated x from part a above - Calculated x in part 2 here = 566 – 503 = 63

Therefore, the number of units that this would save in terms of the scrap allowance is 63 units.

c. If the scrap represents a cost of $10 per unit, how much is it costing the company per day for the original scrap rate?

Quantity to be introduced at the original scrap rate = Calculated x from part a above = 566

Remaining quantity after the third step operation = 450

Scrap = Quantity to be introduced at the original scrap rate - Remaining quantity after the third step operation = 566 – 450 = 166 units

Total cost of scrap = Scrap * Cost of each unit of scrap = 166 * $10 = $1,160

Therefore, the scrap is costing the company $1,160 per day.

Steve borrowed $750 for a new dresser. He made 9 monthly payments to repay the loan. He paid $45 interest. What is his simple interest rate?

Answers

Answer:

222

Explanation:

In 20X4, Bosh Corporation had income of $60,000 using absorption costing. Beginning and ending inventories were 13,000 and 8,000 units, respectively. The fixed manufacturing overhead cost was $4.00 per unit. What was the net income using direct/variable costing

Answers

Answer:

Net income under variable costing $80,000

Explanation:

The computation of the net income using direct/variable costing is shown below:

Net income under absorption costing $60,000

Add fixed cost under applied $20,000

Net income under variable costing $80,000

Working

Beginning inventory 13000

Less ending inventory -8000

Decrease in inventory 5000

Now under applied inventory $20,000

Your Company is considering a new project that will require $100,000 of new equipment at the start of the project. The equipment will have a depreciable life of 10 years and will be depreciated to a book value of $5,000 using straight-line depreciation. The cost of capital is 14%, and the firm's tax rate is 30%. Estimate the present value of the tax benefits from depreciation.

Answers

Answer:

14865.93

Explanation:

Calculation to Estimate the present value of the tax benefits from depreciation.

First step is to calculate the Annual depreciation expense

Annual depreciation expense = [100000 - 5000]/10

Annual depreciation expense = 9500

Second step is to calculate the Tax benefit

Tax benefit = 9500(.30)

Tax benefit = 2850

Now let calculate the PV of tax benefit

Using financial calculator

PMT = 2850

FV = 0

N = 10

i = 14

PV=?

Hence

PV = 14865.93

Therefore the present value of the tax benefits from depreciation is 14865.93

The ending retained earnings balance of Juan's Mexican Restaurant chain increased by $6.9 million from the beginning of the year. The company declared a dividend of $2.4 million during the year. What was the amount of net income during the year

Answers

Answer:

the amount of net income during the year is $9.3 million

Explanation:

The computation of the net income is shown below:

= Increased in the retained earnings + dividend declared

= $6.9 million + $2.4 million

= $9.3 million

Hence, the amount of net income during the year is $9.3 million

The same should be considered and relevant

A more efficient means of processing algae to produce an anticancer drug is discovered. As a result, the supply curve for the drug will: __________

a. shift to the right, increasing the price of the drug.
b. shift to the left, increasing the price of the drug.
c. shift to the right, decreasing the price of the drug
d. shift to the left, decreasing the price of the drug.

Answers

Answer:

c

Explanation:

As a result of an increase in efficiency in production, there would be an increase in supply. As a result, there would be an outward shift of the supply curve. When the supply curve shifts outward, supply increases and prices of drugs fall.

On the other hand, if there is an inward shift of the supply curve, the supply of drugs would fall and the price of drugs would increase

Please check the attached image showing a graph of a decrease in supply

Midyear on July 31st, the Digby Corporation's balance sheet reported: Total Liabilities of $102.335 million Cash of $8.040 million Total Assets of $165.097 million Retained Earnings of $35.132 million. What was the Digby Corporation's common stock

Answers

Answer:

$27.63 million

Explanation:

Total equity = Common stock + Retained earnings

Common stock = Total equity - Retained earnings

Common stock = (Total assets - Total liabilities) - Retained earnings

Common stock = ($165.097 million - $102.335 million) - $35.132 million

Common stock = $62.762 million - $35.132 million

Common stock = $27.63 million

define economic development​

Answers

Answer:

developing the economy

Mendez Company is considering a capital project that costs $16,000. The project will deliver the following cash flows: Year 1 Year 2 Year 3 Year 4 Year 5 $8,000 $6,000 $5,000 $6,000 $5,000 Using the incremental approach, the payback period for the investment is:

Answers

Answer:

2.4 years

Explanation:

Years  Cash   Cumulative Cashflow

1          8000         8000

2         6000         14000

3          5000        19000

4          4000        25000

5          5000        30000

           30000

Payback period = 2 years + (16,000 - 14,000) / 5,000

Payback period = 2 years + 0.4 years

Payback period = 2.4 years

The primary purpose of finance is to __________. a.) pay off debt as quickly as possible b.) keep track of a business's cash flow c.) study the effects of the economy on businesses d.) manage assets in a way that maximizes returns

Answers

Answer: d.) manage assets in a way that maximizes returns

Explanation:

Finance refers to the activities which are associated with debt, credit, investment, banking, capital markets, etc.

Finance has to do with the management of money and the acquisition of needed funds. The primary purpose of finance is to manage assets in a way that maximizes returns.

1.8 Advise businesses on FIVE ways in which professional, responsible, ethical and
effective business practice should be conducted.

Answers

Answer:

Explanation:

There are various ways in which professional, responsible, ethical and

effective business practice should be conducted. Five of them are:

1. Payment of fair wages and salaries to employees

2. Equal treatment among workers

3. Accountability and responsibility on business decisions made from top to bottom or managers to workers

4. Provision of quality goods and services to the masses

5. Transparency, including adequate internal controls, monitoring, and evaluation.

Managers in international businesses will need to evaluate the attractiveness of a country as a market or location for a facility or investment.

a. True
b. False

Answers

Answer:

a. True

Explanation:

A manager can be defined as an individual who is saddled with the responsibility of providing guidance, support, supervision, administrative control, as well as acting as a role model or example to the employees working in an organization by being morally upright. Thus, he or she supervises and ensures his subordinates (employees) are working effectively and efficiently with the organization's goals and objectives.

Generally, managers working in international businesses are expected to evaluate the attractiveness of a country as a market or location for a facility or investment before going ahead to the endorse and approve it for any business having long-term plan, goals and objectives in mind.

Some examples of the factors a manager should look out for in determining the attractiveness of a country includes freedom of expression, government policies, power supply, taxation, ease of doing business, climate, etc.

A manager of a perfectly competitive firm observes that the marginal product of labor is 5 units per hour, the marginal product of capital is 40 units per machine, the wage is $20 per hour, the rental price of capital is $120 per machine, and the price of output is $5 per unit. Please complete the following statement.

To maximize profit, the manager should hire _________and __________

Answers

Answer:

The manager should hire more labor and rent less capital.

Explanation:

Given:

MPL = Marginal product of labor units per hour = 5

MPC = marginal product of capital units per machine = 40

PL = Wage per hour = $20, or 20

PC = Rental price of capital per machine = $120, or120

Po = Price of output per unit = $5

The condition for the profit maximization for a firm is as follows:

MPL / PL = MPC / PC ……………………………. (1)

From equation (1), we have:

MPL / PL = 5 / 20 = 0.25

MPC / PC = 40 / 120 = 0.33

Since 0.25 = MPL / PL < MPC / PC = 0.33, it implies that these conditions are NOT consistent with equation (1).

In order to maximize profit, more labor should be hired while less capital should be rented until these conditions are consistent with equation (1).

Therefore, we have:

To maximize profit, the manager should hire more labor and rent less capital.

Sunland Company reported a net profit of $8.15 per share and a dividend of $3.50 per share. If you buy shares of the stock at $94.85 per share, what is your dividend yield

Answers

Answer:

The answer is "[tex]3.69\%[/tex]"

Explanation:

Dividend Share [tex]= \$3.50[/tex]

stock purchasing Price[tex]= 94.85[/tex]

[tex]\text{Dividend yield} = \frac{Dividend}{Purchase price}\\\\[/tex]

[tex]=\frac{3.50}{94.85}\\\\=0.036900369 \approx 3.69\%[/tex]

Recording the adopted budget Following is a summary of the operating budget adopted by Westchester County, New York for the calendar year 2017. The actual budget document is almost 750 pages, so the summary is highly condensed.
Prepare the journal entry to record the budget, assuming that the detail will be separately recorded. Estimated revenues and other sources:
Real property taxes $ 548,423,468
Sales tax 517,559,000
Federal and state aid 433,229,570
Departmental income 151,405,650
Other revenues 159,394,093
Total estimated revenues 1,810,011,781
Appropriated previously accumulated fund balance 15,000,000
Total estimated revenues and other sources $1,825,011,781
Appropriations: General government and support $ 49,275,122
Home and community services 614,816,681
Health services 149,224,687
Education 29,833,371
Public safety, corrections, courts 223,582,214
Roads, transportation, parks facilities 217,729,956
Miscellaneous and fixed 540,549,750
Total appropriations $1,825,011,781
Prepare the journal entry to record the budget, assuming that the detail will be separately recorded.

Answers

Answer:

Dr Real property taxes $548,423,468

Dr Sales tax $517,559,000

Dr Federal and state aid $433,229,570

Dr Departmental income $151,405,650

Dr Other revenues $159,394,093

Dr Budgetary fund balance $15,000,000

Cr General government and support $49,275,122

Cr Home and community services $614,816,681

Cr Health services $149,224,687

Cr Education $29,833,371

Cr Public safety, corrections, courts $223,582,214

Cr Roads, transportation, parks facilities $217,729,956

Cr Miscellaneous and fixed $540,549,750

Explanation:

Preparation of the journal entry to record the budget

Dr Real property taxes $548,423,468

Dr Sales tax $517,559,000

Dr Federal and state aid $433,229,570

Dr Departmental income $151,405,650

Dr Other revenues $159,394,093

Dr Budgetary fund balance $15,000,000

Cr General government and support $49,275,122

Cr Home and community services $614,816,681

Cr Health services $149,224,687

Cr Education $29,833,371

Cr Public safety, corrections, courts $223,582,214

Cr Roads, transportation, parks facilities $217,729,956

Cr Miscellaneous and fixed $540,549,750

(To record budget)

Suppose that an investor buys a 100-share call option for $250. It has an exercise price of $60. The underlying price per share of the stock at expiration is $66. What then is the amount of profit or loss, ignoring brokerage fees

Answers

Answer:

$350

Explanation:

Call option is profitable when Stock price expires above the Strike price of the option.

Strike price of call = $60

Stock price at expiration = $66

Total profit = Size*(Stock price-Strike price) - Premium paid

Total profit = 100*($66-$60) - $250

Total profit = 100*$6 - $250

Total profit = $600 - $250

Total profit = $350

Thus, the amount of profit (ignoring brokerage fees) is $350.

The Bell Weather Co. is a new firm in a rapidly growing industry. The company is planning on increasing its annual dividend by 21 percent a year for the next 4 years and then decreasing the growth rate to 5 percent per year. The company just paid its annual dividend in the amount of $2.80 per share. What is the current value of one share of this stock if the required rate of return is 8.30 percent?a. $153.71b. $138.82c. $193.77d. $156.51e. $190.97

Answers

Answer:

a. $153.71

Explanation:

First, calculate the yearly dividend

First-year dividend = $2.80 x ( 1 + 21% ) = $3.388

Second-year dividend = $3.388 x ( 1 + 21% ) = $4.099

Third-year dividend = $4.099 x ( 1 + 21% ) = $4.960

Fourth-year dividend = $4.960 x ( 1 + 21% ) = $6.002

Now calculate hte terminal value of the dividend payment after 4 years

Terminal value = Fourth year dividend x ( 1 + Growth rate after year 4 ) / ( Required rate of return - Growth rate after year 4 ) = $6.002 x ( 1 + 5% ) / ( 8.30% - 5% ) = $190.97

Now use the following fromula to calcula the value of the bond

Value of the bond = ( First-year dividend / ( 1 + Required rate of return )^1 ) + ( Second-year dividend / ( 1 + Required rate of return )^2 ) + ( Third-year dividend / ( 1 + Required rate of return )^3 ) + ( Fourth-year dividend / ( 1 + Required rate of return )^4 ) + ( Terminal Value / ( 1 + Required rate of return )^4 )

Value of the bond = ( $3.388 / ( 1 + 8.3% )^1 ) + ( $4.099 / ( 1 + 8.3% )^2 ) + ( $4.960 / ( 1 + 8.3% )^3 ) + ( $6.002 / ( 1 + 8.3% )^4 ) + ( $190.97 / ( 1 + 8.3% )^4 )

Value of the bond = $3.128 + $3.495 + $3.905 + $4.363 + $138.820

Value of the bond = $153.711

Value of the bond = $153.71

Suppose you purchase the winning lottery ticket after watching your favorite movie. From this experience, you believe that watching your favorite movie will help you win the lottery again. Which of the following concepts is most relevant?
a. exclusion of a relevant variable
b. scarcity the fallacy of composition
c. opportunity cost
d. post hoc ergo propter hoc fallacy
e. violation of ceteris paribus

Answers

Answer:

D

Explanation:

post hoc ergo propter hoc fallacy is a Latin word which means - after this, therefore because of this.

It is an example of a fallacy where if an event B occurs after an event A. So, people associate the occurrence of event B with A.

In this question, a person believes that because he watched his favourite movie (event A), he won the lottery (event B). He has come to associate watching his favourite movie as a prerequisite with winning the lottery. this is not necessarily true

You own a portfolio equally invested in a risk-free asset and two stocks. If one of the stocks has a beta of 1.27 and the total portfolio is equally as risky as the market, what must the beta be for the other stock in your portfolio

Answers

Answer:

the beta be for the other stock in your portfolio is 1.73

Explanation:

The computation of the beta be for the other stock in your portfolio is shown below:

Given that

risk free asset contains the beta of 0

And,  

market beta = 1

Now  

1 = 1 ÷ 3 × 0 + 1 ÷ 3 × 1.27 + 1 ÷ 3 × beta

The beta of other stock = 1.73

hence, the beta be for the other stock in your portfolio is 1.73

Here we assume that one-third should be invested in all 3 things each

The cash account for Feldman Company contains the following information for April:

Cash balance, 3/31 $14,685
Cash received during April 55,680
70,365
Cash disbursements during April:
Cheque 7164 $33,500
Cheque 7165 11,250
Cheque 7166 18,750
Cheque 7167 900 64,400
Cash balance, 4/30 $5,965
The bank statement for April contains the following information:

Bank balance, 3/31 $25,285
Add: Deposits during April 55,680
80,965
Less: Cheques paid during April:
Cheque 7162 $8,900
Cheque 7163 1,700
Cheque 7164 33,500
Cheque 7165 11,250 55,350
Bank balance, 4/30 $25,615

Answers

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