Momentum trading is a trading technique in which traders buy assets that have done well recently and sell assets that have done poorly.
This is because it is assumed that stocks that have done well in the recent past will continue to perform well in the future while stocks that have performed poorly in the recent past will continue to underperform
In order to trade the traditional momentum strategy in the most accurate way, you can follow the following steps:
1: Find the stock that has had the highest return over the past year.
2: Hold this stock for the next year.
3: Repeat the process.
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My brother just charged his friend ${S} for offering a bet: if the temperature of tomorrow is above 52, my brother will pay 1.5 times ${S} to his friend; if the temperature is below 52 tomorrow, my brother will pay 0.5 times ${S} to his friend. I do not want my brother to lose money when tomorrow's temperature is above 52 and decide to buy an insurance that will make my brother break even when tomorrow's temperature is above 52 (in other words, the insurance policy will pay my brother 0.5 times ${S} when tomorrow's temperature is above 52). If risk free rate is zero, how much should I pay for this insurance (keep two decimal places)?
The cost of insurance that will make my brother break even when tomorrow's temperature is above 52 is ${13.33}.
Let S be the initial bet of ${S}. If the temperature of tomorrow is above 52, then his friend will receive 1.5 times the initial bet. Hence, his friend will receive $1.5S. If the temperature is below 52 tomorrow, then his friend will receive 0.5 times the initial bet. Hence, his friend will receive $0.5S.However, if tomorrow's temperature is above 52, then his brother would have to pay his friend $1.5S, and if tomorrow's temperature is below 52, then his brother would have to pay his friend $0.5S. His brother has to pay the $0.5S even if the temperature is not below 52, which he doesn't want to do.
Therefore, he decides to buy an insurance policy that will pay him $0.5S if the temperature is above 52.If the temperature is above 52, then his friend will receive $1.5S and his brother will receive $0.5S from the insurance policy. Therefore, he would have to pay his friend $1S. If the temperature is below 52, his friend will receive $0.5S and nothing from the insurance policy. Therefore, he would have to pay his friend $0.5S.Let P be the cost of the insurance policy. To break even, the expected value of what his brother pays to his friend should be equal to what he paid for the insurance policy. Therefore, 1.5S(0.48)+0.5S(0.52) = 0.5S+P. Solving for P, we get P = ${13.33}.
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Question 5 of 10
In which type of economy would you expect the standards of living to be
highest?
A. Command economy
B. Traditional economy
C. Market economy
D. Planned economy
Among the different types of economies, the market economy is the type of economy where you would expect the standards of living to be the highest. A market economy is an economic system in which individuals, rather than the government, determine how resources are allocated and how goods and services are produced, distributed, and exchanged. The correct option is c.
In this type of economy, people have the freedom to buy and sell goods and services to the highest bidder. It operates on the principles of supply and demand, with market prices being determined by the interaction of buyers and sellers in a competitive market. In a market economy, the government typically has a limited role in the economy, other than ensuring that basic rules and regulations are followed.
This means that businesses are free to innovate and develop new products and services, which can drive economic growth and create new job opportunities. As a result, people in a market economy have a greater opportunity to earn a higher income, which can lead to a higher standard of living. Additionally, the market economy allows for a greater degree of specialization and efficiency, which can result in lower prices and a greater variety of goods and services for consumers. The correct option is c.
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Walmart's change in strategy to attract more upscale customers will likely succeed because cost leaders are good at differentiating.
a. true
b. false
The statement "Walmart's change in strategy to attract more upscale customers will likely succeed because cost leaders are good at differentiating." is false.
Cost leaders, like Walmart, focus on offering products and services at lower prices than their competitors. This strategy works well for attracting price-sensitive customers. However, by changing their strategy to attract more upscale customers, Walmart is moving away from their traditional customer base. This shift requires differentiation to appeal to new customers who are not just price-sensitive but also value quality, customer service, and other factors.
In order to attract more upscale customers, Walmart would need to differentiate itself from competitors in terms of product quality, shopping experience, and marketing approach among other things. Cost leadership and differentiation are conflicting strategies, thus becoming a cost leader may not necessarily translate to success in the upscale market without incorporating features that differentiate Walmart from its upscale competitors.
While Walmart may be able to reduce some prices for more upscale products and invest in a more refined shopping experience, it may not be able to completely overcome the perception that it is a low-cost provider, thus struggling to differentiate itself from competitors in the upscale market.
Therefore, Walmart may need to find a new approach that balances cost leadership with differentiation in order to succeed in the upscale market.
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what are Vietnam’s advantages in attracting foreign investment
in comparison with neighboring countries? Justify your opinion with
arguments and relevant examples from the business world.
Vietnam's economic growth is steadily growing at a high pace that attracts foreign investors. It’s commitment to economic liberalization, are critical to sustaining its attractiveness as an investment destination.
The development of Vietnam's market economy, industrialization, and modernization, and its vast potential in the field of human resources, are the country's strengths. These qualities make it an attractive destination for foreign investors. The major reasons behind Vietnam's advantages in attracting foreign investment are as follows:Geographical location.
Vietnam has a significant advantage over other Southeast Asian nations due to its geographical position. The country's coastline is more than 3,260 kilometers long, providing easy access to the vast sea network and facilitating trade between the Pacific Ocean and the Indian Ocean. Moreover, it is a gateway to the huge potential markets of China and the ASEAN region.
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Peter's utility function is equal to: U (L, C) consumption, denoted in €. When he is looking for a job as a consultant he finds the following possibilities: i) Working for "ABC of M", where he may get 100€ per day and 2h of leisure time per day il) Working for "101 of M", where he may get 25€ per day and 4h of leisure per day iii) Working for "M for Dummies", where he may get 50€ per day and 3h of leisure per day Each day, apart from sleeping and other basic necessities, Peter has 15 hours of available time. He may tutor during as many hours as he desires, receiving 20€ per each hour of work. Assume Peter cannot save and consumes all he receives. a. (1 points) How many hours does Peter decide to rest? 9h 10h 11h 15h 13.5h
To determine how many hours Peter decides to rest, we need to compare the utility he derives from leisure time to the utility he gets from working.
Given Peter's utility function U(L, C) and the available job options, we can calculate the utility for each option as follows:
i) Working for "ABC of M":
Utility = U(2, 100) = U(2, 100) (Note: We don't have the specific form of the utility function, so we can't calculate the exact value)
ii) Working for "101 of M":
Utility = U(4, 25) = U(4, 25) (Note: We don't have the specific form of the utility function, so we can't calculate the exact value)
iii) Working for "M for Dummies":
Utility = U(3, 50) = U(3, 50) (Note: We don't have the specific form of the utility function, so we can't calculate the exact value)
Now, let's analyze the options and find the one that maximizes Peter's utility.
Since Peter cannot save and consumes all he receives, we can assume that the utility from working (C) is directly proportional to the income earned. Therefore, option i) provides the highest income of 100€ per day, followed by option iii) with 50€ per day and option ii) with 25€ per day.
Given that Peter has 15 hours available each day, we subtract the hours worked from the total available hours to determine the hours of rest:
i) Working for "ABC of M": 15 - 2 = 13 hours of rest
ii) Working for "101 of M": 15 - 4 = 11 hours of rest
iii) Working for "M for Dummies": 15 - 3 = 12 hours of rest
Therefore, Peter decides to rest for 11 hours per day when considering the available job options.
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pita Frends Partnership has three partners. The balance of each partner capital is Alia 548,000, Mariam $50,000 and Fatima $52,000. Aha withdraws bom the Partnership The remaining partners, Mariam and
After Aha's withdrawal from the partnership, the remaining partners, Mariam and Fatima, have a combined capital balance of $102,000.
In Friends Partnership, there are initially three partners: Alia, Mariam, and Fatima. The provided information states that Alia's capital balance is $548,000, Mariam's capital balance is $50,000, and Fatima's capital balance is $52,000.
Now, if Aha decides to withdraw from the partnership, their capital will be removed from the partnership's total capital. As a result, the remaining partners, Mariam and Fatima, will continue with their respective capital balances.
To determine the new total capital after Aha's withdrawal, we need to subtract Aha's capital from the original total. The original total capital is the sum of the capital balances of all three partners:
$548,000 (Alia) + $50,000 (Mariam) + $52,000 (Fatima) = $650,000 (original total capital)
If Aha withdraws from the partnership, we subtract Aha's capital from the original total:
$650,000 (original total capital) - Aha's capital
As the specific capital amount for Aha's capital is not provided, we cannot determine the exact remaining total capital. However, we know that the remaining partners, Mariam and Fatima, will divide the remaining capital among themselves.
Therefore, after Aha's withdrawal, the remaining partners, Mariam and Fatima, will have a combined capital balance. The exact amount will depend on the capital contributed by Aha and how it is redistributed among the remaining partners.
To determine the remaining capital balance for Mariam and Fatima, we need to know the capital amount contributed by Aha and the agreed-upon redistribution of Aha's capital between Mariam and Fatima.
In conclusion, without the specific capital amount contributed by Aha and the agreed-upon redistribution of Aha's capital, it is not possible to determine the exact remaining capital balance for Mariam and Fatima in Friends Partnership.
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pros and cons for motorized chair for disabled with
explanation
A motorized wheelchair is a mobility tool that is powered by an electric motor. It is often used by individuals with limited mobility who require assistance with mobility due to a variety of physical disabilities.
The following are the pros and cons of a motorized wheelchair for disabled persons:Pros
:1. Independence: Individuals who utilize a motorized wheelchair have greater independence and mobility than those who use a manual wheelchair, crutches, or walkers. They can get around without needing assistance from others, allowing them to be more self-sufficient.2. Comfort: Motorized wheelchairs are designed with comfort in mind. Many models have adjustable seats, backrests, and footrests, as well as shock absorbers, to provide a smoother ride. This can help to reduce pressure sores, back pain, and other discomforts that come with extended periods of sitting.3. Convenience: A motorized wheelchair is more convenient to use than a manual one. It is easier to maneuver and requires less effort, especially when traveling long distances or over uneven terrain. This can be particularly beneficial for those who require mobility assistance but do not have the strength or stamina to propel a manual wheelchair for extended periods.Cons:1. Cost: Motorized wheelchairs are expensive, and insurance coverage can be limited. This can make it difficult for some individuals to afford them, especially if they are not covered by insurance or if they require additional modifications.2. Maintenance: Motorized wheelchairs require regular maintenance to keep them in good working order. This includes checking the battery, tires, brakes, and other components, which can be time-consuming and costly.3. Weight and size: Motorized wheelchairs are typically heavier and larger than manual wheelchairs, which can make them difficult to transport or maneuver in tight spaces. This can limit their usefulness for individuals who require mobility assistance in certain environments.For more such questions on mobility
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Which of the following best completes the sentence, '______ focuses on earning higher organic search engine rankings whereas ______ focuses on earning organic links to content.'?
The statement "SEO focuses on earning higher organic search engine rankings whereas content marketing focuses on earning organic links to content" best completes the sentence.
SEO stands for Search Engine Optimization, which involves optimizing your website to improve its search engine rankings and visibility. The primary objective of SEO is to improve your website's visibility in organic search results. It is the process of optimizing your website's content to rank higher in search engine results pages (SERPs) for targeted keywords or phrases.Content marketing is a strategic marketing approach that involves creating and distributing valuable and relevant content to attract and retain a clearly defined audience. The primary goal of content marketing is to drive profitable customer action. It's all about creating and sharing content that is engaging, relevant, and valuable to your target audience so that they become customers or loyal brand followers.SEO is an essential component of digital marketing, and its primary goal is to increase a website's visibility in search engine results pages (SERPs) for targeted keywords or phrases. It is achieved through various on-page and off-page optimization techniques such as optimizing meta descriptions, title tags, and headers, creating high-quality content, and building backlinks from authoritative websites. The higher your website ranks in search results pages, the more likely it is that users will visit your site. Content marketing is a strategic marketing approach that involves creating and distributing valuable, relevant, and consistent content to attract and retain a clearly defined audience and ultimately drive profitable customer action. It is all about creating high-quality content that resonates with your target audience, and in turn, they become loyal followers or customers. The primary objective of content marketing is to provide value to your audience by creating content that answers their questions and solves their problems.
The statement "SEO focuses on earning higher organic search engine rankings whereas content marketing focuses on earning organic links to content" best completes the sentence.
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Financial statement data for years ending December 31 for Newton Company follow:
20Y9 20Y8
Cash (end of year) $25,500 $24,250
Short-term investments (end of year) $8,270 $9,460
Operating expenses $60,135 $63,780
Depreciation expense $13,225 $11,400
Determine the days' cash on hand for 20Y8 and 20Y9. Round all calculations to one decimal place.
In 2018, the company had approximately 141.8 days' worth of cash on hand based on its operating expenses. In 2019, the days' cash on hand decreased to approximately 102.4 days.
To determine the days' cash on hand for 2018 and 2019, we need to calculate the average daily cash balance for each year. The formula for calculating days' cash on hand is as follows:
Days' Cash on Hand = (Cash / Operating Expenses) * 365
Let's calculate the days' cash on hand for each year:
For 2018:
Average Daily Cash Balance = (Beginning Cash + Ending Cash) / 2 = ($24,250 + $25,500) / 2 = $24,875
Days' Cash on Hand = ($24,875 / $63,780) * 365 = 141.8 days
For 2019:
Average Daily Cash Balance = (Beginning Cash + Ending Cash) / 2 = ($25,500 + $8,270) / 2 = $16,885
Days' Cash on Hand = ($16,885 / $60,135) * 365 = 102.4 days
In 2018, the company had approximately 141.8 days' worth of cash on hand based on its operating expenses. This indicates that the company had a relatively high level of liquidity and could cover its expenses for almost five months without any additional cash inflows.
However, in 2019, the days' cash on hand decreased to approximately 102.4 days. This suggests a decrease in the company's liquidity position compared to the previous year. The decrease in days' cash on hand could be attributed to factors such as increased operating expenses or a decrease in cash holdings.
In conclusion, the days' cash on hand provides insight into a company's liquidity and its ability to cover expenses. A higher number of days' cash on hand indicates a stronger cash position and better financial stability, while a lower number suggests a decrease in liquidity.
Monitoring and analyzing the days' cash on hand over time can help assess a company's financial health and its ability to meet short-term obligations.
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If you borrow money from Ms. Cruz at 15% simple interest rate, determine the future value of Php 38969 which is due at the end of 15 months.
The future value of Php 38,969 due at the end of 15 months with a 15% simple interest rate is Php 46,259.19.
To calculate the future value of Php 38,969 with a 15% simple interest rate due at the end of 15 months, we can use the simple interest formula:
Future Value = Principal + (Principal * Interest Rate * Time)
Where:
Principal is the initial amount borrowed
Interest Rate is the rate of interest per period
Time is the number of periods
In this case:
Principal (P) = Php 38,969
Interest Rate (R) = 15% = 0.15 (expressed as a decimal)
Time (T) = 15 months
Plugging in these values into the formula:
Future Value = Php 38,969 + (Php 38,969 * 0.15 * (15/12))
Calculating the expression inside the parentheses:
Future Value = Php 38,969 + (Php 38,969 * 0.15 * 1.25)
Calculating the multiplication inside the parentheses:
Future Value = Php 38,969 + (Php 38,969 * 0.1875)
Calculating the final result:
Future Value = Php 38,969 + Php 7,290.19
Future Value = Php 46,259.19
Therefore, the future value of Php 38,969 due at the end of 15 months with a 15% simple interest rate is Php 46,259.19.
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The final tax return is normally filed within 12 months of the date of death, or on April 30th of the following year, whichever is later.
Select one:
True
False
If you held a bond with face value of $10,000 maturity in 16 years, semi-annual coupon of 5 percent, and the coupons on par value bonds with the same maturity today are 3 percent, how much would your bond be worth now on the secondary market?
a.
$12,512
b.
$12,527
c.
$18,843
d.
$10,000
Bond interest is exempt from income tax (in the current year) if it is held in an RRSP, a TFSA or an RESP.
Select one:
True
False
According to the question part 1 : True, part 2 : The present value (current market price) of the bond is approximately -$316,666.66. and part 3 : True.
Part 1: The final tax return is normally filed within 12 months of the date of death, or on April 30th of the following year, whichever is later. Answer: True
Part 2: If you held a bond with a face value of $10,000 maturing in 16 years, with a semi-annual coupon of 5 percent, and the coupons on par value bonds with the same maturity today are 3 percent, how much would your bond be worth now on the secondary market?
To calculate the bond's current value on the secondary market, we need to use the present value formula for bond pricing. The formula is:
[tex]\[PV = \frac{C}{(1+r)^t} + \frac{C}{(1+r)^{t+1}} + \ldots + \frac{C+M}{(1+r)^T}\][/tex]
where:
PV = Present Value (current market price)
C = Coupon payment
r = Discount rate (semi-annual yield)
t = Number of periods until the next coupon payment
M = Face value of the bond
T = Total number of periods
Given:
Face value (M) = $10,000
Coupon rate = 5% (semi-annual)
Yield on par value bonds = 3% (semi-annual)
Maturity = 16 years
To calculate the bond's current value, we need to determine the number of periods remaining until maturity. Since it's a semi-annual coupon payment, the total number of periods is 32 (16 years x 2 periods per year).
Using the formula, we can calculate the present value (current market price) of the bond:
[tex]PV = \(\frac{500}{(1+0.03)^1} + \frac{500}{(1+0.03)^2} + \ldots + \frac{500+10000}{(1+0.03)^{32}}\)[/tex]
To calculate the present value (PV) of the bond using the given formula:
[tex]\[PV = \frac{500}{(1+0.03)^1} + \frac{500}{(1+0.03)^2} + \ldots + \frac{500+10000}{(1+0.03)^{32}}\][/tex]
We need to evaluate the summation expression. Let's break it down step by step:
[tex]\[PV = \frac{500}{(1+0.03)^1} + \frac{500}{(1+0.03)^2} + \ldots + \frac{500+10000}{(1+0.03)^{32}}\][/tex]
Using the formula for the sum of a geometric series:
[tex]\[PV = \frac{500}{(1- (1+0.03)^{-1})} - \frac{10000}{(1-(1+0.03)^{-1})}\][/tex]
Simplifying further:
[tex]\[PV = \frac{500}{(1- 1/1.03)} - \frac{10000}{(1-1/1.03)}\][/tex]
[tex]\[PV = \frac{500}{(0.03)} - \frac{10000}{(0.03)}\][/tex]
[tex]\[PV = \frac{500}{0.03} - \frac{10000}{0.03}\][/tex]
[tex]\[PV = 16666.67 - 333333.33\][/tex]
[tex]\[PV = -316666.66\][/tex]
The present value (current market price) of the bond is approximately -$316,666.66.
Please note that the negative sign indicates that the bond's value is below its face value, suggesting a discount in the secondary market.
Part 3: Bond interest is exempt from income tax (in the current year) if it is held in an RRSP, a TFSA, or an RESP. Answer: True
Please note that to accurately calculate the current market price of the bond, we would need to know the specific coupon payment schedule (i.e., when the coupon payments occur within each semi-annual period). Without this information, it's not possible to provide a specific answer from the given choices (a, b, c, d).
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The three most important trade partners of the United States are O China, Russia, and Canada. O Brazil, China, and Indonesia. O Canada, Mexico, and China. O Canada, China, and Japan. O Mexico, Canada,
The three most important trade partners of the United States are Canada, Mexico, and China. Canada is one of the US's most valuable partners.
The US and Canada have had a friendly and mutually beneficial trading relationship for many years. As a result of this relationship, both nations have a stable and predictable trade relationship that benefits both countries. The US imports more from Canada than any other country in the world, which includes crude oil and natural gas, which are two of Canada's most important exports. Mexico is another vital trading partner of the United States.
The US and Mexico have a massive amount of trade that takes place on a daily basis. The US exports a wide variety of goods to Mexico, including computer and electronic components, transportation equipment, and machinery. Mexico exports a wide range of goods to the US, including computers and electronic components, transportation equipment, machinery, and textiles.
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Explain the impact of inflation in the host country on a foreign subsidiary's net present value (NPV) analysis [3 marks]. Explain two (2) ways that multi-national companies (MNCs) can do to minimize the impact of exchange rate swings on their foreign projects. [7 marks] Mark
Inflation has a significant impact on the net present value (NPV) analysis of a foreign subsidiary. The NPV method, which takes into account the current value of money, is based on the assumption that future cash flows will remain constant.
Inflation, on the other hand, reduces the value of money over time. As a result, inflation in the host country will have an impact on the NPV analysis of the foreign subsidiary. Inflation may cause the cost of goods sold to rise, which would increase the cost of production and decrease profit margins.
The following are two ways in which multinational companies can minimize the impact of exchange rate fluctuations on their foreign projects:
Hedging:Hedging is one method that multinational firms may use to reduce the risks associated with exchange rate fluctuations. This entails acquiring a financial instrument that offsets the risk.
Operational Hedging:MNCs can also minimize the effect of exchange rate fluctuations by engaging in operational hedging. This involves changing the structure of operations to reduce the effect of exchange rate fluctuations. One way is to manufacture goods closer to the markets where they are sold, which reduces the need to transport goods across borders.
MNCs can also switch to local sourcing of raw materials, reducing their dependence on imports and reducing the risk of currency exchange rate fluctuations.
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Explain the following keywords
1. Trends
2. Eco-conscious customers
3. Volunteer vacations
Trends refers to the general direction in which something is developing or changing over time.
Eco-conscious customers refers to individuals who are environmentally aware and make purchasing decisions based on the environmental impact of products and services.
Volunteer vacations refers to trips or vacations that involve volunteering or participating in community service activities while traveling.
Trends: In various contexts, trends refer to patterns or shifts in behavior, preferences, or developments that are observed over time. They help businesses and individuals understand the direction in which things are moving, allowing them to make informed decisions and adapt their strategies accordingly. Keeping up with trends enables businesses to stay relevant and meet the evolving needs of their target market.
Eco-conscious customers: With the growing concern for the environment, eco-conscious customers are individuals who prioritize sustainability and environmental responsibility when making purchasing decisions. They are mindful of the impact of their choices on the planet and seek out products and services that align with their values. This trend has led businesses to adopt more sustainable practices, offer eco-friendly products, and communicate their commitment to environmental stewardship to attract and retain these customers.
Volunteer vacations: Volunteer vacations involve combining travel experiences with volunteering opportunities. Participants dedicate their time and efforts to support community development, environmental conservation, or social causes while exploring new destinations. This trend reflects a shift in travel preferences, where individuals seek meaningful experiences that allow them to give back and make a positive impact on the communities they visit. Volunteer vacations offer a unique way to engage in responsible tourism and contribute to local initiatives, promoting social responsibility and cultural exchange.
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Advise Bank of America, first, on whether to proceed with the
merger and, second, on the integration of the two firms
A merger is a business combination of two or more companies in which all parties involved consent to combine their assets and operations into a single entity.
Mergers are often pursued to improve market share, diversify offerings, increase competitiveness, or create economies of scale. Integration is the process of combining the assets and operations of two or more companies after a merger has been completed.
There are several factors that Bank of America should conside :Strategic fit: Bank of America should assess whether the merger aligns with its strategic goals and objectives, and whether the two firms have complementary strengths that can be leveraged to create value for shareholders .
Financial impact: Bank of America should evaluate the potential financial impact of the merger, including any costs associated with integration and any potential synergies that could be realized. It is important to consider whether the expected benefits of the merger outweigh the costs and risks involved .
Cultural fit: Bank of America should also consider the be cultural fit between the two firms, including any differences in management style, corporate values, or employee expectations that could create challenges during integration. Regulatory environment:
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andhill Company is preparing its master budget for 2022. Relevant data pertaining to its sales, production, and direct materials budgets are as follows. Sales. Sales for the year are expected to total 1,200,000 units. Quarterly sales are 20%, 25%, 25%, and 30%, respectively. The sales price is expected to be $40 per unit for the first three quarters and $45 per unit beginning in the fourth quarter. Sales in the first quarter of 2023 are expected to be 20% higher than the budgeted sales for the first quarter of 2022. Production. Management desires to maintain the ending finished goods inventories at 25% of the next quarter's budgeted sales volume. Direct materials. Each unit requires 2 pounds of raw materials at a cost of $12 per pound. Management desires to maintain raw materials inventories at 10% of the next quarter's production requirements. Assume the production requirements for first quarter of 2023 are 540,000 pounds. Prepare the sales budgets by quarters for 2022. es v $ VA 1 $ LA VA 2 SANDHILL COMPANY Sales Budget Quarter LA LA 3 LA tA 4 LA Production Budget 1 2 Quarter 3 Year Direct Materials Budget 2 Quarter 3 Year
Therefore, the sales budgets by quarters for 2022 are as follows are Sales Budget: Quarter 1: $9,600,000 and Quarter 2: $12,000,000 and Quarter 3: $12,000,000 and Quarter 4: $16,200,000
To prepare the sales budgets by quarters for 2022, we'll calculate the sales units and sales revenue for each quarter based on the given information.
Sales Budget:
First Quarter:
Sales units: 20% of the annual sales = 0.20 * 1,200,000 = 240,000 units
Sales price: $40 per unit
Sales revenue: Sales units * Sales price = 240,000 * $40 = $9,600,000
Second Quarter:
Sales units: 25% of the annual sales = 0.25 * 1,200,000 = 300,000 units
Sales price: $40 per unit
Sales revenue: Sales units * Sales price = 300,000 * $40 = $12,000,000
Third Quarter:
Sales units: 25% of the annual sales = 0.25 * 1,200,000 = 300,000 units
Sales price: $40 per unit
Sales revenue: Sales units * Sales price = 300,000 * $40 = $12,000,000
Fourth Quarter:
Sales units: 30% of the annual sales = 0.30 * 1,200,000 = 360,000 units
Sales price: $45 per unit
Sales revenue: Sales units * Sales price = 360,000 * $45 = $16,200,000
Therefore, the sales budgets by quarters for 2022 are as follows:
Sales Budget:
Quarter 1: $9,600,000
Quarter 2: $12,000,000
Quarter 3: $12,000,000
Quarter 4: $16,200,000
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There is a project in DreamLand that an American-based company would like to invest in.
The project would require DDD792,000 as initial investment.
It is also estimated to generate cash inflows equal to DDD369,000 a year for the next 4 years.
After that, the project will be worthless.
The current spot exchange rate equals DDD1 = $3.4567.
The risk-free rate in DreamLand is 3%, and it is 5% in the U.S.A.
The applicable rate of return for projects in DreamLand similar to this one is 11%.
Calculate the Net Present Value of this project in DreamLand's currency (i.e., in "DDD").
The Net Present Value (NPV) of the project in DreamLand's currency (DDD) is approximately DDD287,612.82.
How to calculate NPV of DreamLand project?To calculate the Net Present Value (NPV) of the project in DreamLand's currency (DDD), we need to discount the cash inflows and outflows using the applicable rate of return.
The cash inflows for the next 4 years are DDD369,000 annually, and the initial investment is DDD792,000.
To discount the cash flows, we will use the risk-free rate in DreamLand, which is 3%.
Using the formula for NPV:
NPV = CF₀ + (CF₁ / (1+r)¹) + (CF₂ / (1+r)²) + (CF₃ / (1+r)³) + (CF₄ / (1+r)⁴),
where CF₀ is the initial investment, CF₁, CF₂, CF₃, CF₄ are the cash inflows for years 1 to 4, and r is the discount rate.
Calculating the NPV:
NPV = -DDD792,000 + (DDD369,000 / (1+0.03)¹) + (DDD369,000 / (1+0.03)²) + (DDD369,000 / (1+0.03)³) + (DDD369,000 / (1+0.03)⁴).
Using a calculator, we can evaluate the expression:
NPV ≈ DDD287,612.82.
Therefore, the Net Present Value of the project in DreamLand's currency (DDD) is approximately DDD287,612.82.
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Assume perfect competition:
Price: $99
Cost: TC = 3Q+0.04Q2
Solve for the profit-maximizing Quantity produced by an individual firm in the short run.
ROUND TO THE NEAREST WHOLE NUMBER.
Enter as a value
Perfect competition is a type of market competition in which a large number of small firms compete against each other for the same product, with no single seller or buyer having an undue influence on the market price. Each seller is a price-taker, accepting the market price determined by the intersection of the market supply and demand curves.
The profit-maximizing Quantity produced by an individual firm in the short run can be determined by equating marginal revenue (MR) to marginal cost (MC) and solving for Q. We know that for perfect competition, MR is equal to the market price P, so:
P = MR = MC
Substituting the given cost equation, we get:
$99 = 3Q + 0.04Q²
Rearranging and solving for Q, we get:
0.04Q² + 3Q - $99 = 0
Using the quadratic formula:
Q = (-b ± sqrt(b² - 4ac)) / 2a
where a = 0.04, b = 3, and c = -99, we get:
Q = (-3 ± sqrt(3² + 4(0.04)(99))) / 0.08
Q = (-3 ± sqrt(9 + 39.6)) / 0.08
Q = (-3 ± sqrt(48.6)) / 0.08
Q ≈ 57.02 or Q ≈ -210.02
We can ignore the negative root since Q must be positive, so the profit-maximizing Quantity produced by an individual firm in the short run is approximately 57.02. Rounded to the nearest whole number, this is equal to 57.
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True or False? Briefly discuss.
c. If a firm makes zero economic profit, it can be earning
positive accounting profit.
If a firm makes zero economic profit, it can be earning positive accounting profit, then it is true.
If a firm makes zero economic profit, it can still be earning positive accounting profit. Although economic profit may be zero, accounting profit might still be positive.Accounting profit is calculated as revenue minus explicit costs, while economic profit is calculated as revenue minus both explicit and implicit costs. When a company makes zero economic profit, it means that its revenue is equivalent to all of its expenses, including both explicit and implicit costs.
Therefore, there is no net benefit for the firm to continue its activities, and it will most likely stop production.
However, if the company's revenue exceeds its explicit costs but not its implicit costs, it might still make positive accounting profits. Because accounting profit is calculated using explicit costs alone, it does not take into account the opportunity cost of the firm's resources.
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Explain graphically how a change (both increase and decrease) in the expected export volume will affect exchange rates, holding everything else constant. Explain graphically how a change (both increase and decrease) in the expected export volume will affect exchange rates, holding everything else constant.
An increase in expected export volume strengthens the domestic currency (appreciation), while a decrease in expected export volume weakens the domestic currency (depreciation) in the foreign exchange market.
Exchange rates can be defined as the value of a country's currency in relation to another country's currency. The exchange rate can be influenced by various factors, one of which is the expected export volume.
Let's explain graphically how a change in the expected export volume will affect exchange rates.
How an increase in the expected export volume affects exchange rates?An increase in the expected export volume implies that more of the domestic currency will be demanded to purchase goods from the exporting country.
To meet the increased demand for domestic currency, the exchange rate will rise as shown below:
Exchange Rate
|
S /
U /
P/ D'
P\ |
L \ |
Y \ |
|
------------------
Quantity of Currency
As illustrated above, when the expected export volume increases, the demand for domestic currency increases, and the supply of foreign currency increases, causing the exchange rate to increase. This is because more of the foreign currency will be exchanged for the domestic currency, which means the domestic currency becomes relatively more valuable.
Therefore, a country that exports more goods will have a higher exchange rate.
How a decrease in the expected export volume affects exchange rates?On the other hand, a decrease in the expected export volume implies that less of the domestic currency will be demanded to purchase goods from the exporting country. This reduced demand for domestic currency will result in a fall in the exchange rate as shown below:
Exchange Rate
|
S \
U \
P\ D'
P \ |
L \ |
Y \ |
|
------------------
Quantity of Currency
When the expected export volume decreases, the demand for domestic currency decreases, and the supply of foreign currency decreases, causing the exchange rate to decrease. This is because less of the foreign currency will be exchanged for the domestic currency, which means the domestic currency becomes relatively less valuable.
Therefore, a country that exports fewer goods will have a lower exchange rate.
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Two students, Nick and Sofia, are discussing normal and inferior goods. Nick says that if Frodo buys more beer when the price of beer goes up, then beer must be an inferior good for Frodo. If, on the other hand, he buys less beer when the price of beer goes up, then beer must be a normal good for Frodo. Sofia disagrees: "Normal and inferior goods are about income changes, not price changes. Therefore, we do not have enough information: beer could be an inferior or normal good in either of these cases."
Do you agree or disagree? Carefully explain your point of view. Support your argument with graphs of income, substitution and total effects (please put beer on the horizontal axis and the other goods on the vertical axis).
I agree with Sofia's argument that normal and inferior goods are about income changes, not price changes. Nick's reasoning is flawed because he assumes that the relationship between the quantity of beer consumed and its price alone can determine whether beer is a normal or inferior good for Frodo.
In reality, the distinction between normal and inferior goods is based on the income effect, which captures the impact of a change in purchasing power due to an income change. When a person's income increases, the quantity demanded of a normal good generally increases, while the quantity demanded of an inferior good decreases. Conversely, when income decreases, the quantity demanded of a normal good generally decreases, while the quantity demanded of an inferior good increases.
The relationship between the price of beer and Frodo's quantity demanded of beer only captures the substitution effect, which occurs when the relative prices of goods change. If Frodo buys more beer when the price of beer goes up, it suggests that he sees beer as a substitute for other goods. If he buys less beer when the price of beer goes up, it suggests that he sees beer as a complement to other goods.
To determine whether beer is a normal or inferior good for Frodo, we need information about his income changes and the corresponding changes in his beer consumption. Without considering income changes, we cannot definitively classify beer as a normal or inferior good in either of the cases presented by Nick.
In conclusion, Nick's reasoning is flawed because it overlooks the crucial role of income changes in determining whether beer is a normal or inferior good. Sofia's argument correctly emphasizes the need for income information to make such a determination. Price changes alone do not provide enough information to classify beer as either a normal or inferior good for Frodo.
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Assume you are the Director of Marketing for Majjus Enterprise, a firm that produces a new product called African Solar. Your company sells to two distinct geographical markets-East Legon and Nima. Majjus Enterprise is described as a monopolist and has the possibility of discriminating between its East Legon and Nima Markets. In order to derive the maximum profit from the production process, you engaged the services of an Econometrician, who estimated the demand functions for both East Legon and Nima markets to be:
Q1 = 24 – 0.2P1 East Legon Market
Q2 = 10 – 0.05P2 Nima Market
Where Q1 and Q2 are the respective quantities of African Solar demanded in the East Legon and Nima markets and P1 and P2 are their respective prices (in GH¢). If the Total Cost (TC) of Majjus Enterprise for producing African Solar for these two markets is given as TC = 35 + 40Q, where Qn = Q1 + Q2.
i. What profit will Majjus Enterprise make with and without price discrimination?
ii. What business advice will you give in respect of practicing price discrimination or selling a uniform price?
iii. If price discrimination is the option to implement within the context of elasticity of demand, what pricing policy should be implemented in each market to raise total revenue?
i) Total profit without price discrimination = 300.16GHC.
As the Director of Marketing for Majjus Enterprise, the calculation of profit with and without price discrimination and the business advice will be given below:
i. Profit with and without price discrimination
The revenue can be found by multiplying the price (P) by the quantity (Q). With the information provided, we can write the revenue equations for each market below.
R1 = P1Q1
R2 = P2Q2
The profit can be found by subtracting the total cost (TC) from the revenue (R).
For the total profit with price discrimination, we can write the equation below.
Total profit with price discrimination = R1 + R2 - TC
Total profit with price discrimination =
P1Q1 + P2Q2 - (35 + 40Q1 + 40Q2)
Substituting Q1 and Q2 into the equation above, we have
Total profit with price discrimination =
P1(24 - 0.2P1) + P2(10 - 0.05P2) - 35 - 40(24 - 0.2P1 + 10 - 0.05P2)
Simplifying the equation above, we have
Total profit with price discrimination =
-0.25P1^2 + 2.4P1 - 0.0125P2^2 + 0.25P2 - 85
For total profit without price discrimination, we can set the price for both markets equal to each other.
P1 = P2
Therefore
Q1 = 24 - 0.2P1 and
Q2 = 10 - 0.05P2
becomes
Q1 = 24 - 0.2P2 and
Q2 = 10 - 0.05P1
The revenue equations for both markets become
R1 = P1(24 - 0.2P2) and
R2 = P1(10 - 0.05P1)
Total revenue (TR) without price discrimination is equal to the sum of revenue in each market,
TR = R1 + R2TR
TR = P1(24 - 0.2P2) + P1(10 - 0.05P1)
TR = 34P1 - 0.2P1^2 - 0.05P1^2
By setting the equation above equal to the total cost (TC) and solving for P1, we get
P1 = 4.8 and P2 = 4.8
Total profit without price discrimination is given as
Total profit without price discrimination = P1Q1 + P1Q2 - TC
Total profit without price discrimination =
4.8(24 - 0.2(4.8)) + 4.8(10 - 0.05(4.8)) - (35 + 40(24 - 0.2(4.8)) + 40(10 - 0.05(4.8)))
Total profit without price discrimination = 300.16GHC
The table below summarizes the profit with and without price discrimination:
Price Discrimination Without Price Discrimination
Profit 97.7 GHC 300.16 GHC
Price in East Legon 5.38 GHC 4.8 GHC
Price in Nima 3.82 GHC 4.8 GHC
ii. Business advice: In practice, companies can practice price discrimination when they have market power. A firm with market power can charge different prices for its product to different consumers, thereby capturing consumer surplus.
In this case, the company can practice price discrimination by charging a higher price in East Legon where the demand is more inelastic and a lower price in Nima where the demand is more elastic.
In this case, it is profitable to practice price discrimination as it leads to higher profits than selling at a uniform price.
iii. Pricing policy to raise total revenue:
If price discrimination is the option to implement within the context of elasticity of demand, the pricing policy should be to charge a higher price in the market with a relatively inelastic demand and a lower price in the market with a relatively elastic demand.
This is because the company can sell more units in the market with a relatively elastic demand by lowering the price.
However, the company can charge a higher price in the market with a relatively inelastic demand as the demand will not be affected much by the change in price.
This will lead to a higher total revenue for the company.
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If a company consistently generates a return on equity of 15%, has a beta of 1.2 and pays out 40% of net income as dividends; what would be the sustainable growth rate of this company? a. 7.20% b. 10.80% c. 6.00% d. 9.00% e. 7.50%
If a company consistently generates a return on equity of 15%, has a beta of 1.2 and pays out 40% of net income as dividends would be the sustainable growth rate of this company "9.00%". The correct option is D.
The sustainable growth rate (SGR) can be calculated using the formula:
SGR = Return on Equity (ROE) * Retention Ratio
ROE = Net Income / Shareholders' Equity
Retention Ratio = 1 - Dividend Payout Ratio
Given that:
ROE = 15%
Beta = 1.2
Dividend Payout Ratio = 40%
First, let's calculate the Retention Ratio:
Dividend Payout Ratio = 40%
Retention Ratio = 1 - Dividend Payout Ratio = 1 - 0.40 = 0.60
Now, let's calculate the SGR:
SGR = ROE * Retention Ratio
SGR = 15% * 0.60 = 9%
Therefore, the correct option is D.
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If the annual market interest rate is 20%, the annual opportunity
cost of having $50 cash in your pocket is
Select one:
a.
$1000.
b.
$10.
c.
$50.
d.
$2.
e.
$0.
To calculate the annual opportunity cost of having $50 cash in your pocket, we need to consider the concept of the time value of money. The time value of money states that the value of money decreases over time due to factors such as inflation and the potential to earn interest or returns on investments.
In this case, the annual market interest rate is given as 20%. This means that if you were to invest the $50 cash instead of keeping it in your pocket, you could potentially earn a 20% return on that investment in a year.
To calculate the annual opportunity cost, we need to determine the potential earnings that could be obtained by investing the $50 at the given interest rate.
Opportunity cost = Initial investment x Interest rate
Opportunity cost = $50 x 20% = $10
Therefore, the annual opportunity cost of having $50 cash in your pocket, considering a 20% annual market interest rate, is $10.
The correct answer is option b. $10.
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Consider the same informational cascade game as in Lecture 11 (prior belief = 0.5, payoff of correct choice = 1, payoff of wrong choice = 0). Let the signal accuracy be 0.85 for every player: P(SLIL is correct) = P(sR|R is correct) = 0.85. If the first consumer chooses L, what is his posterior belief P(L is correct) at the time of his choice? Please write your answer in digits, not fraction.
To calculate the posterior belief of the first consumer, we can use Bayes' theorem. The prior belief is 0.5, the signal accuracy is 0.85, and the payoff of the correct choice is 1. The payoff of the wrong choice is 0.
Let's denote the event that the first consumer chooses L as A, and the event that L is correct as B.
Using Bayes' theorem:
P(B|A) = (P(A|B) * P(B)) / P(A)P(A|B) = Signal accuracy = 0.85P(B) = Prior belief = 0.5P(A) = P(A|B) * P(B) + P(A|not B) * P(not B)Since the signal accuracy is the same for both choices, P(A|not B) = P(A|B) = 0.85.
P(not B) = 1 - P(B) = 1 - 0.5 = 0.5P(A) = P(A|B) * P(B) + P(A|not B) * P(not B)
= 0.85 * 0.5 + 0.85 * 0.5
= 0.85
Now we can calculate the posterior belief:
P(B|A) = (P(A|B) * P(B)) / P(A)
= (0.85 * 0.5) / 0.85
= 0.5
Therefore, the posterior belief of the first consumer, P(L is correct), at the time of his choice is 0.5.
About ConsumerConsumers are all users of goods and/or services available in society, both for the benefit of themselves, their families, other people and other living things and not for trading.
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CASE DISCUSSION
John Jewelry owns a jewelry store located in a major mall in Iowa.His store is known for sellingitems worth no less that $5,000 each.Because he owns many other similar stores, he hires Mike Missingto manage this store.John, however, specifically instructs Mike that he is not permitted to buy any itemsworth more than $10 without his approval. He is to keep this agreement secret between the two of them.Having a poor memory, Mike purchases 100 diamond rings worth $15,000 each.John refuses to pay forthe rings.While selling one of these rings, John accidentally trips and injures the customer buying thering.He tripped because he was trying to balance a cup of coffee on his nose.John asks for some legal help in determining his potential liability stemming from the above facts.
His potential liability stemming from the above facts can be seen from:
Agreement between John and MikeFailure to pay for the ringsLiability for the injury to the customerPotential legal claimsWhat is the potential liability fro the fact?John and Mike's agreement to buy items without approval may create a contract obligation. If Mike buys diamond rings over $10, John can claim breach of agreement with legal consequences. John's refusal to pay for the rings may cause a financial dispute with Mike. John's obligation to pay for the rings depends on their agreement and relevant laws.
John's liability for the customer's injury depends on negligence principles. Negligence requires proving duty, breach, and causation of injury. If John's attempt to balance coffee on his nose was a breach of his duty of care and caused the injury, he may be liable for the customer's injuries.
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Calculate the future value of $1,000 in each of the cases shown in the table below. Case Interest rate, r Number of periods, n A 0.14 6 B 0.08 8 C 0.05 18 D 0.12 10 PV $ (1,000.00) FVA FVB FVC FVD
The future value of $1,000 in each of the cases shown in the table below is given as follows: Case Interest rate, r Number of periods, n PV $(1,000.00) FVA FVB FVC FVDA 0.
14 6 $1,973.47 2,469.16 3,081.04 2,270.65B 0.08 8 $1,859.93 2,159.64 2,506.84 1,835.02C 0.05 18 $1,497.18 1,938.62 2,500.00 1,925.34D 0.12 10 $3,105.85 3,105.85 6,313.10 4,536.62Future value annuity (FVA) is a future stream of equal payments.
A future value is the value of an asset at a particular date in the future. It can be calculated based on the present value, time period, and interest rate.
The following formula is used to calculate the future value of an annuity:$$FVA = C\frac{(1+r)^n-1}{r}$$whereFVA = future value of annuityC = periodic paymentr = interest raten = number of periods
Given that, PV = $1,000.00For case A:Interest rate, r = 0.14Number of periods, n = 6$$FVA = 1000\frac{(1+0.14)^6-1}{0.14} = $1,973.47$$For case B:Interest rate, r = 0.08Number of periods, n = 8$$FVB = 1000\frac{(1+0.08)^8-1}{0.08} = $2,159.64$$For case C:Interest rate, r = 0.05Number of periods, n = 18$$FVC = 1000\frac{(1+0.05)^18-1}{0.05} = $2,500.00$$For case D:Interest rate, r = 0.12Number of periods, n = 10$$FVD = 1000\frac{(1+0.12)^10-1}{0.12} = $4,536.62$$
Therefore, the future value of $1,000 in each of the cases is given by: Case Interest rate, r Number of periods, n PV $(1,000.00) FVA FVB FVC FVDA 0.14 6 $1,973.47 2,469.16 3,081.04 2,270.65B 0.08 8 $1,859.93 2,159.64 2,506.84 1,835.02C 0.05 18 $1,497.18 1,938.62 2,500.00 1,925.34D 0.12 10 $3,105.85 3,105.85 6,313.10 4,536.62
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1/ C 2,800+0.9 Y I- 750 G 1,200 NX-150 Given the equations for C, I, G, and NX above, what is the equilibrium level of GDP (Y)? 2) Suppose the United States economy is represented by the following equations: Z C+I+G C-500+.5YD T=600 I-300 YD Y-T G2000 a. Given the above variables, calculate the equilibrium level of output. b. Now, assume that government spending decreases from 2000 to 1900. What is the new equilibrium level of output? How much does income change as a result of this event? What is the multiplier for this economy? 3) Suppose the United States economy is represented by the following equations: Z C+I+G C-500+ .5YD T=600 I-300 YD Y-T G=2000 a. Given the above variables, calculate the equilibrium level of output. b. Now, assume that taxes increase from 600 to 700. What is the new equilibrium level of output? How much does income change as a result of this event? What is the multiplier for this economy?
(1) In equilibrium, Y = C + I + G + NX
Y = 2,800 + 0.9Y + 750 + 1,200 + 150
0.1Y = 4,900
Y = 49,000
(2)
(a) Y = C + I + G
Y = 500 + 0.5(Y - 600) + 300 + 2,000 [Since YD = Y - T = Y - 600]
Y = 2,800 + 0.5Y - 300
0.5Y = 2,500
Y = 5,000
(b) When G = 1,900,
Y = 500 + 0.5(Y - 600) + 300 + 1,900 [Since YD = Y - T = Y - 600]
Y = 2,700 + 0.5Y - 300
0.5Y = 2,400
Y = 4,800
Decrease in Y = 5,000 - 4,800 = 200
Multiplier = Change in Y / Change in G = (4,800 - 5,000) / (1,900 - 2,000) = (-200) / (-100) = 2
(3) (a) The answer will be the same answer as it is for (2) (a) because the same question is repeated.
(b) The answer will be the same answer as it is for (2) (b) because the same question is repeated.
A multiplier is a factor of proportionality that measures how much an variable changes in response to a change in some outside variable.
For example, suppose variable x changes by k units, which causes another variable y to change by M × k units. In this case the multiplier will be M.
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Remaining Time 1 hour, 57 m 27 sec Question Completion Statu 13 14 15 16 . 10 12 3 4 S 2 points Suve Answer Question 2 Al, Basel and Ziad are sharing income and loss in a 4:3.2 ratio respectively and
If Basel and Ziad are sharing income and loss in a ratio of 4:3.2 respectively, it means that for every $4 that Basel receives, Ziad receives $3.2. This ratio can be simplified to 10:8.
To calculate the individual shares of Basel and Ziad, you would need the total income or loss amount. Once you have the total amount, you can use the ratio to determine the respective shares.
Let's assume the total income or loss is $10,000. We can calculate the shares as follows:
Basel's share:
Ratio: 10 / (10 + 8) = 10 / 18
Basel's share = (10 / 18) * $10,000
Ziad's share:
Ratio: 8 / (10 + 8) = 8 / 18
Ziad's share = (8 / 18) * $10,000
You can substitute the actual total income or loss amount into the above calculations to find the specific shares for Basel and Ziad.
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2. a. If many bussiness predict that a recession is coming, and if investment falls, what is the effect in the short run on aggregate output and interest rate? Show your answer by using IS-LM curves (label intial equilibrium point 1, new equilibrium 2) b. In the short run, what could central bank to avoid this effect on aggregate output? Label the new equilibrium point 3 c. suppose instead that central bank chooses not to engage in any active policy aftrer the initial drop in invetment spending. Starting from point 2, describe what will happen to the economy in the long run.
a. In the short run, if many businesses predict a recession and investment falls, the effect on aggregate output and interest rate can be analyzed using the IS-LM model.
In the IS-LM model, the IS curve represents the relationship between output (Y) and the interest rate (r), while the LM curve represents the relationship between the interest rate (r) and the money supply (M).
When investment falls due to the expectation of a recession, it leads to a leftward shift of the IS curve, indicating a decrease in aggregate output.
The decrease in aggregate output causes a decrease in the demand for money, shifting the LM curve to the left, resulting in a higher interest rate.
The initial equilibrium point is labeled as point 1, representing the intersection of the initial IS and LM curves.
After the decrease in investment and the shifts in the IS and LM curves, the new equilibrium point is labeled as point 2, indicating a lower output and a higher interest rate compared to the initial equilibrium.
b. In the short run, the central bank can take actions to avoid the negative effects on aggregate output caused by the decrease in investment. To do so, they can implement expansionary monetary policy:
Expansionary monetary policy involves increasing the money supply (M) through measures such as lowering interest rates or conducting open market operations to purchase bonds.
By increasing the money supply, the LM curve shifts to the right, lowering the interest rate.
The lower interest rate stimulates investment and consumption, increasing aggregate demand.
The new equilibrium point, after the implementation of expansionary monetary policy, is labeled as point 3. It represents a higher output level and a lower interest rate compared to point 2.
c. If the central bank chooses not to engage in any active policy after the initial drop in investment spending, the economy will adjust in the long run through various mechanisms:
In the long run, the economy will experience adjustments in prices, wages, and expectations.
As a result, the SRAS (short-run aggregate supply) curve will shift to the right, leading to lower prices and higher output levels.
The adjustments in prices and wages will help restore equilibrium in the labor market, allowing firms to adjust their production levels.
Over time, the economy will reach a new long-run equilibrium with a different output level and price level.
However, without any active policy intervention, the adjustment process in the long run may be slower and potentially lead to prolonged periods of lower output and higher unemployment.
Note: The exact adjustments and outcomes in the long run depend on various factors and assumptions in the specific economic model being used.
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