One of the growers is excited by the price increase caused by the blight because he believes it will increase revenue in this market. As an economics student, you can use elasticities to determine whether this change in price will lead to an increase or decrease in total revenue in this market.Using the midpoint method, the price elasticity of demand for soybeans between the prices of
Answers
Full question attached
Answer:
Not elastic
Explanation:
The formula for demand elasticity= percentage change in quantity/percentage change in price
Therefore demand elasticity = Q2-Q1/Q2+Q1/2/P2-P1/P2+P1/2
Using graph of demand attached
= 12-15/12+15/2/21-15/21+15/2
= -3/27/2/6/36/2
=-2/9/1/3
=-2/3
=-0.67
Elasticity is less than one and so demand is inelastic
Related Questions
The management of Penfold Corporation is considering the purchase of a machine that would cost $360,000, would last for 10 years, and would have no salvage value. The machine would reduce labor and other costs by $50,000 per year. The company requires a minimum pretax return of 9% on all investment projects. Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using the tables provided. The net present value of the proposed project is closest to (Ignore income taxes.):
Answers
Answer:
the net present value is -$72,050
Explanation:
The computation of the net present value is shown below
= $50,000 per year ×PVIFA factor at 10 years for 9% - $360,000
= $50,000 ×5.7590 - $360,000
= $287,950 - $360,000
= -$72,050
hence, the net present value is -$72,050
So the same should be relevant and considered too
When computing equivalent units of production, the method that combines partially completed units in beginning inventory with current-period production is the
Answers
Answer: the weighted average method
Explanation:
When computing the equivalent units of production, the weighted average method can be used in the combination of partially completed units in the beginning inventory with the current-period production.
In Weighted Average Cost method, a weighted average is used in the determination of the amount which gives into the inventory and the cost of goods sold.
Marigold Company had the following operating data for the year for its computer division: sales, $650000; contribution margin, $147000; total fixed costs (controllable), $96000; and average total operating assets, $287000. What is the controllable margin for the year?
A. $51000.
B. $147000.
C. 15%.
D. 51%
Answers
Worldwide Manufacturing produces a unique valve and has the capacity to produce 50,000 valves annually. Currently Worldwide produces 40,000 valves and is thinking about increasing production to 45,000 valves next year. What is the most likely behavior of total manufacturing costs and unit manufacturing costs, given this change
Answers
Answer:
c) Total manufacturing costs will increase and unit manufacturing costs will also decrease.
Explanation:
Based on the information given the most likely behavior of total manufacturing costs and unit manufacturing costs, given this change is that TOTAL MANUFACTURING COSTS WILL INCREASE AND UNIT MANUFACTURING COSTS WILL DECREASE since Manufacturing cost consists of DIRECT MATERIALS, DIRECT LABOR, VARIABLE MANUFACTURING OVERHEAD and FIXED MANUFACTURING OVERHEAD in which direct materials, direct labor and variable manufacturing overhead are Variable expense which means that if the production increases from $40,000 to $45,000 the total manufacturing cost will as well INCREASE but due to the FIXED MANUFACTURING COST involved , the unit manufacturing cost will have to decrease.
Assume that you have been hired by a large international bank that is looking to develop a smartphone app to help college students with their finances, credit scores, and investments. The new product development process for the app is just beginning, and you are looking at ways that social media usage can be improved during each step of the process. Whatever new product type a firm plans to develop, it will likely follow a formal new-product development (NPD) process. Organizations increasingly use social media to evaluate potential new products. Social media are especially valuable for small businesses and nonprofit organizations, which typically have less money to spend on the NPD process. Match each social media marketing action with the appropriate step of the new-product development process.
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Answer:
Determining that smartphone apps and social media aps are important parts of a bank's future plans to reach young consumers. ⇒ New Product Strategy.
Tweeting out the availability of a new smartphone app that helps young professionals manage their financial lives better. ⇒ Product launch.
Inviting younger "fans" of the bank's social media sites to have a free trial of the new smartphone app. ⇒ Test marketing.
Having a Faceb-ook discussion with consumers on what they would ideally like to have from a bank smartphone app. ⇒ Idea generation.
Creating a prototype of the smartphone app. ⇒ Product development.
Using Tw-itter to ask followers what they are willing to pay for smartphone apps. ⇒ Business analysis.
Developing a social media site that allows college students to review and provide feedback on new product ideas. ⇒ Idea screening.
On December 31, there were 53 units remaining in ending inventory. These 53 units consisted of 9 from January, 10 from February, 14 from May, 8 from September, and 12 from November. Using the specific identification method, what is the cost of the ending inventory
Answers
Answer:
Cost of the ending inventory = $7,108
Explanation:
Note: This question is not complete. The complete question is therefore provided before answering the question as follows:
A company had the following purchases during the current year:
January 17 Units at $112
February 37 Units at $123
May 32 Units at $135
September 29 Units at $143
November 27 Units at $153
On December 31, there were 53 units remaining in ending inventory. These 53 units consisted of 9 from January, 10 from February, 14 from May, 8 from September, and 12 from November. Using the specific identification method, what is the cost of the ending inventory?
Explanation of the answer is now provided as follows:
Specific identification method is an inventory method under which costs of goods sold and the closing/ending inventory are calculated using the particular cost of each inventory batch at the moment they were received.
Therefore, cost of the ending inventory is calculated as sum of the product of the number of closing units from each month and the cost per unit of purchases in that month.
Therefore, we have:
Cost of the ending inventory = (Number of closing units from January * Cost per unit of January Purchases) + (Number of closing units from February * Cost per unit of February Purchases) + (Number of closing units from May * Cost per unit of May Purchases) + (Number of closing units from September * Cost per unit of September Purchases) + (Number of closing units from November * Cost per unit of November Purchases) ………… (1)
Substituting the relevant values into equation (1), we have:
Cost of the ending inventory = (9 * $112) + (10 * $123) + (14 * $135) + (8 * $143) + (12 * $153) = $7,108
Blart Corp. recently paid a dividend of $5.00 per share. Analysts forecast future dividends will increase by 2% forever. The required rate of return that investors demand to hold Blart Corp.'s stock is 8% What is its estimated price per share today
Answers
Answer: $85.0
Explanation:
The formula to calculate the estimated price per share today will be:
Po = Do (1 + g) / (r - g)
Where,
Po = Current price
Do = Current dividend = 5.00
g = Dividend growth = 2% = 0.02
r = Required rate of return = 8% = 0.08
Therefore, the estimated price per share today will be:
= 5.00(1 + 0.02) / (0.08 - 0.02)
= 5.00(1.02) / 0.06
= 5.10 / 0.06
= 85.00
Therefore, the answer is $85
We Are the World is an importing company that specializes in importing hand-made arts and crafts from crafters and artisans around the world. The company has about $4 million worth of stock outstanding. Due to its desire to avoid double taxation, it is structured so that its individual shareholders pay taxes on all of the company's income. The shareholders report the flow-through of income and losses on their personal tax returns and are assessed at their individual tax rates. We Are the World is a(n):_____.
a. limited liability company (LLC).
b. C corporation.
c. S corporation.
d. G corporation.
e. investment trust.
Answers
Answer:
c. S corporation.
Explanation:
S corporations that are elected for passing out the corporate income, losses, deductions and credits via to the shareholders for the federal tax motive. It is responsible for tax on specific gains and the passive income for the entity level
Also the shareholders could reported the flow via income and the losses on the personal income tax returns and can be assess at individual tax rates
So, the option c is correct
A shortcoming of real gross domestic product (GDP) is it does not include the underground economy. includes nonmarket goods. does not measure changes in employment. does not include the value obtained through purchases of stocks and bonds. does not account for changes in the prices of goods and services.
Answers
Answer:
it does not include the underground economy.
Explanation:
Gross domestic product is the total sum of final goods and services produced in an economy within a given period which is usually a year
Nominal GDP is GDP calculated using current year prices while Real GDP is GDP calculated using base year prices. Real GDP has been adjusted for inflation.
GDP calculated using the expenditure approach = Consumption spending by households + Investment spending by businesses + Government spending + Net export
Items not included in the calculation off GDP includes:
1. services not rendered to oneself
2. Activities not reported to the government
3. illegal activities
4. sale or purchase of used products
5. sale or purchase of intermediate products
Equilibrium in financial markets occurs at an interest rate where the quantity of loanable funds demanded is
Answers
Answer: c. equal to the quantity of loanable funds supplied.
Explanation:
Equilibrium in any market occurs when the quantity demanded is equal to the quantity supplied and the loanable funds market are no different except that the quantity that is demanded and supplied in this market is the loanable funds and the price is the interest rate.
When the interest rate being offered by the financial institutions lending money is the same as the one being demanded by the people and companies who want loanable funds, the market is said to be in equilibrium.
Hoi Chong Transport, Ltd., operates a fleet of delivery trucks in Singapore. The company has determined that if a truck is driven 177,000 kilometers during a year, the average operating cost is 12.3 cents per kilometer. If a truck is driven only 118,000 kilometers during a year, the average operating cost increases to 15.5 cents per kilometer.
Required:
a. Using the high-low method, estimate the variable and fixed cost elements of the annual cost of the truck operation.
b. Express the variable and fixed costs in the form Y = a + bX.
c. If a truck were driven 147,000 kilometers during a year, what total cost would you expect to be incurred?
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Bellevue Company has 26,000 units of inventory on hand at December 31. It sold 1,950 units which are in transit and were shipped FOB destination. Bellevue purchased 3,250 units which were shipped FOB shipping point by the seller and are still in transit. What is the total amount of inventory to which Bellevue has legal title at December 31
Answers
Answer:
24050
Explanation:
Calculation to determine the total amount of inventory to which Bellevue has legal title at December 31
Using this formula
Inventory=Inventory on hand at December 31- Units in Transit
Let plug in the formula
Inventory=26,000 units- 1,950 units
Inventory=24050
Therefore the total amount of inventory to which Bellevue has legal title at December 31 is 24050
Highest and best use would best be defined as:
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Answer:
The reasonable, probable and legal use of vacant land or an improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value.
Explanation:
An increase in the price of rubber coincides with an advance in the technology of tire production. As a result of these two events,a. the demand for tires decreases and the supply of tires increases.b. the demand for tires is unaffected and the supply of tires decreases.c. the demand for tires is unaffected and the supply of tires increases.d. None of the above is necessarily correct. What should be the demand and supply?
Answers
Answer:
d
the demand for tires is unaffected and effect on the supply of tires could increase, decrease, or stay the same.
Explanation:
An increase in the price of rubber would lead to an increase in the cost of producing tires. Rubber is an input required in the production of tires.
As a result of the increase in the cost of rubber, the supply of rubber would decrease. This would lead to a leftward shift of the supply curve. Equilibrium price would increase and quantity would decrease
As a result of the advance in technology, there would be an increase in the supply of tires. As a result, the supply curve shifts outward. Equilibrium price would decrease and quantity would increase
Taking these wo effects together, the demand for tires is unaffected and effect on the supply of tire is indeterminate
The controller of Oriole Industries has collected the following monthly expense data for use in analyzing the cost behavior of maintenance costs.
Month Total Total
Maintenance Costs Machine Hours
January $2,860 320
February 3,160 370
March 3,760 520
April 4,660 670
May 3,360 520
June 5,260 720
Determine the variable cost components using the high-low method. (Round answer to 2 decimal places e.g. 2.25.)
Variable cost per machine hour $
Determine the fixed cost components using the high-low method.
Total fixed costs $
Answers
Answer:
Results are below.
Explanation:
Giving the following information:
Maintenance Costs Machine Hours
January $2,860 320
February 3,160 370
March 3,760 520
April 4,660 670
May 3,360 520
June 5,260 720
To calculate the variable and fixed costs, we need to use the following formulas:
Variable cost per unit= (Highest activity cost - Lowest activity cost)/ (Highest activity units - Lowest activity units)
Variable cost per unit= (5,260 - 2,860) / (720 - 320)
Variable cost per unit= $6
Fixed costs= Highest activity cost - (Variable cost per unit * HAU)
Fixed costs= 5,260 - (6*720)
Fixed costs= $940
Fixed costs= LAC - (Variable cost per unit* LAU)
Fixed costs= 2,860 - (6*320)
Fixed costs= $940
In the Month of March, Digby received orders of 123 units at a price of $15.00 for their product Deal. Digby uses the accrual method of accounting and offers 30 day credit terms. Digby delivers 123 units in April. They received payment for 62 units in March, and 62 units in April. In the March income statement, how much revenue is recognized on the March income statement from this order
Answers
Answer:
The amount of revenue is recognized on the March income statement from this order is $1,845.00.
Explanation:
Accrual accounting can be described as a method of accounting in which revenue or expenses are recorded at the time of the transaction rather than when payment is received or made.
Since this transaction occurred in March, the total revenue of orders of 123 units received in the month of March will be recognized on the March income statement from this order. That is:
Amount of revenue to recognized in March = 123 * $15.00 = $1,845.00
Therefore, the amount of revenue is recognized on the March income statement from this order is $1,845.00.
Indicate whether the following instruments are examples of money market or capital market securities.
a. U.S. Treasury bills
b. Long-term corporate bonds
c. Common stocks
d. Preferred stocks
e. Dealer commercial paper
Answers
Answer and Explanation:
In the Money Market Securities, it is treated as the short-term securities that means they are traded for short-term period i.e. less than one year. It has the less risk also the return is also very less but the liquidity is very rich. Examples - treasury bills, commercial papers etc
While on the other hand, the capital market securties are traded for the long term i.e. more than one year. It contains the high risk also the return is very high. Examples - stocks, bonds, debentures
So based on the above explanation, the classification is as follows
a. Money market securities
b. capital market securities
c. capital market securities
d. capital market securities
e. money market securities
Rocky Guide Service provides guided 1–5 day hiking tours throughout the Rocky Mountains. Wilderness Tours hires Rocky to lead various tours that Wilderness sells. Rocky receives $1,600 per tour day, and shortly after the end of each month Rocky learns whether it will receive a $160 bonus per tour day it guided during the previous month if its service during that month received an average evaluation of "excellent" by Wilderness customers. The $1,600 per day and any bonus due are paid in one lump payment shortly after the end of each month.
On July 1, based on prior experience, Rocky estimated there is a 40% chance it will earn the bonus for July tours. It guided a total of 10 days from July 1–July 15.
On July 16, based on Rocky’s view that it had provided excellent service during the first part of the month, Rocky revised its estimate to an 90% chance it would earn the bonus for July tours. Rocky also guided customers for 15 days from July 16–July 31.
On August 5 Rocky learned it did not receive an average evaluation of "excellent" for its July tours, so it would not receive any bonus for July, and received all payment due for the July tours.
Rocky bases estimates of variable consideration on the expected value it expects to receive.
Required:
Prepare the journal entries to record the transactions above.
Answers
Answer:
Please find the complete question in the attached file.
Explanation:
Rocky believed there would be a [tex]30\%[/tex] possibility of a July bonus for touring, i.e [tex]< 50\%[/tex], from July 1-July 15 (10 days)-. Therefore no bonus can be calculated as [tex]\$2,400[/tex] / day trip \times 10 days =[tex]\$2,400[/tex] throughout this duration.
The expected 15-day revenues from 16th July – 31st July may well be calculated as [tex]\$2,400 \times 15 \ days = \$36.000.[/tex] Rocky calculated that it would get the bonus [tex]80\%[/tex] of the time. Estimates a [tex]\$240/day\ bonus \times (10\ days + 15\ days) = \$6,000[/tex]
Bethany needs to borrow $10,000. She can borrow the money at 6% simple interest for 5 yr or she can borrow at 5% with interest compounded continuously for 5 yr.
a. How much total interest would Bethany pay at 6% simple interest?
b. How much total interest would Bethany pay at 5% interest compounded continuously?
c. Which option results in less total interest?
Answers
Answer:
a. $3000
b. 2840.25
c. compounded continuously
Explanation:
a. principal amount, p = $10000
Interest rate in the case of simple interest = 6%
Time, t = 5 years
Interest amount = Prt
Interest amount = 10000 x 6% x 5 = $3000
b. principal amount, p = $10000
Interest rate, r = 5%
Time, t = 5 years
Interest amount = Pe^(rt) - P
Interest amount = 10000 (2.71)^(5% x 5) - 10000
Interest amount = 2840.25
c. Compounded continuously has a lower interest amount.
Each scenario below gives some information about price elasticity of demand for a firm. Use this information to answer the questions.
Honest Abe's Used Cars estimates the price elasticity of demand for their cars to be 5.10. Last month, Abe tried a new marketing scheme which decreased the number of cars sold by 57%.
Abe must have___prices. Abe's prices must have changed by___. Therefore, Abe's total revenue____.
At Webs-R-Us, a website design company, the new manager has decided to increase the price of Webs-R-Us services by 45%. If Webs-R-Us has a price elasticity of demand at 0.70, we can expected the number of websites designed to____. Therefore, Webs-R-Us's total revenue will The number of websites will change by_____.
Answers
Answer:
Increased
2.907%
decreased
decrease
increase
0.64
Explanation:
Price elasticity of demand measures the responsiveness of quantity demanded to changes in price of the good.
Price elasticity of demand = percentage change in quantity demanded / percentage change in price
Abe's elasticity of demand is elastic because it has a value greater than 1.
if quantity demanded decreases, it means that price must have been increased. this would lead to a decrease in total revenue
If the absolute value of price elasticity is greater than one, it means demand is elastic. Elastic demand means that quantity demanded is sensitive to price changes.
Demand is inelastic if a small change in price has little or no effect on quantity demanded. The absolute value of elasticity would be less than one
Demand is unit elastic if a small change in price has an equal and proportionate effect on quantity demanded.
Infinitely elastic demand is perfectly elastic demand. Demand falls to zero when price increases
Perfectly inelastic demand is demand where there is no change in the quantity demanded regardless of changes in price.
Presented below are three revenue recognition situations.
a. Groupo sells goods to MTN for $908,000, payment due at delivery.
b. Groupo sells goods on account to Grifols for $797,000, payment due in 30 days.
c. Groupo sells goods to Magnus for $499,000, payment due in two installments, the first installment payable in 18 months and the second payment due 6 months later. The present value of the future payments is $462,200.
Required:
Indicate the transaction price for each of these transactions and when revenue will be recognized.
Answers
Answer:
Groupo
Transaction Price When to recognize revenue
a. $908,000 Delivery Time
b. $797,000 30 days' time
c. $462,200 18 months and 24 months' time
Explanation:
a) Data and Analysis:
a. $908,000 Delivery Time
b. $797,000 30 days' time
c. $462,200 18 months and 24 months' time
b) For the goods sold on installment sales, the payments are also deferred. Therefore, the seller does not recognize any gain until installments are received. Since installment sales encompass much longer time periods compared to credit sales, there are no discounts offered for early payments. The seller in an installment sales maintains an ownership interest in the goods sold until the buyer pays the balance due in full.
Jake lives in Detroit and runs a business that sells boats. In an average year, he receives $722,000 from selling boats. Of this sales revenue, he must pay the manufacturer a wholesale cost of $422,000; he also pays wages and utility bills totaling $268,000. He owns his showroom; if he chooses to rent it out, he will receive $2,000 in rent per year. Assume that the value of this showroom does not depreciate over the year. Also, if Jake does not operate this boat business, he can work as a paralegal, receive an annual salary of $21,000 with no additional monetary costs, and rent out his showroom at the $2,000 per year rate. No other costs are incurred in running this boat business.
Identify each of Felix’s costs in the following table as either an implicit cost or an explicit cost of selling guitars.
Implicit Cost Explicit Cost
The wholesale cost for the guitars that Felix pays the manufacturer
The rental income Felix could receive if he chose to rent out his showroom
The salary Felix could earn if he worked as a paralegal
The wages and utility bills that Felix pays
Complete the following table by determining Felix’s accounting and economic profit of his guitar business. Profit (Dollars)Accounting Profit Economic Profit
Answers
Answer:
Explicit Cost
The wholesale cost for the guitars that Felix pays the manufacturerThe wages and utility bills that Felix paysImplicit Cost
The salary Felix could earn if he worked as a paralegal The wages and utility bills that Felix paysAccounting profit = $32,000
Economic profit = $9,000
Explanation:
Accounting profit= total revenue - explicit cost
Total revenue =price x quantity sold
Explicit cost includes the amount expended in running the business.
They include rent , salary and cost of raw materials
Economic profit = accounting profit - implicit cost
Implicit cost is the cost of the next best option forgone when one alternative is chosen over other alternatives
If the price of a good increases, _____________. The demand curve _________________ . If the number of buyers in the market increases, ________________. The demand curve ____________.
Answers
Answer:
1. Quantity demanded decreases
2. Shift to the left
3. Quantity demanded increases
4. Shift to the right
Explanation:
If the price of a good increases, QUANTITY DEMANDED DECREASES, The demand curve SHIFT TO THE LEFT.
If the number of buyers in the market increases, QUANTITY DEMANDED INCREASES. The demand curve SHIFT TO THE RIGHT.
This is based on the law of demand which states under normal circumstances, the lower the price, the higher the quantity demanded, and the higher the price, the lower the quantity demanded.
A demand curve moves to the right when there is an increase in quantity demanded, while the demand curve also moves to the left when there is a decrease in quantity demanded.
In a perpetual inventory system a.the inventory records cannot be computerized. b.the amount of inventory for sale and the amount sold are not listed in the inventory account. c.a count must be made in order to know the inventory amount. d.each purchase and sale of inventory is recorded in the inventory account.
Answers
Answer:
d. each purchase and sale of inventory is recorded in the inventory account.
Explanation:
In a perpetual inventory system we keep track of inventory balance and cost of sales whenever a sale or purchase transaction occurs. Under the perpetual inventory system, the firm always keeps updated inventory records.
Senator A agrees to vote for Senator K's state project in exchange for Senator K voting for Senator A's state project. This is an example of Group of answer choices logrolling. the median voter model. the paradox of voting. the principal-agent problem.
Answers
Answer: logrolling
Explanation:
Logrolling simply refers to the exchange of favors specifically. It is the practice of exchanging assistance which is fine usually in politics when each other's proposed legislation is voted for.
Since Senator A agrees to vote for Senator K's state project in exchange for Senator K voting for Senator A's state project, this is logrolling.
Do you think the licensing process for international medical graduates is an unnecessary hurdle meant to shield U.S. doctors from foreign competition?
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Answer:
No licensing is right. Doctors in U.S. are spending more on medical studies than any other country. It is necessary for other country medical students to gain license in order to do practice in the country.
Explanation:
In U.S. doctors are in deficiency so the country cannot completely cease employment for foreign doctors. The country needs to welcome foreign doctors but it is also necessary to safeguard home doctors. If U.S. will not safeguard rights of home country doctors then they will be demotivated and will not be patriotic for the country.
Vextra Corporation is considering the purchase of new equipment costing $38,000.The projected annual cash inflow is $11,600, to be received at the end of each year.The machine has a useful life of 4 years and no salvage value.Vextra requires a 12% return on its investments.The present value of an annuity of $1 for different periods follows:Periods 12 Percent1 0.89292 1.69013 2.40184 3.0373What is the net present value of the machine (rounded to the nearest whole dollar)?a. $(35,233).b. $(2,767).c. $38,000.d. $(3,700).e. $5,233.
Answers
Answer:
b. $(2,767).
Explanation:
The computation of the net present value is shown below:
= Present cash flows - initial investment
= ($11,600 × 3.0373) - $38,000
= $35,232.68 - $38,000
= -$2,767.32
= -$2,767
Hence, the option b is correct
We simply applied the above formula to determine the net present value
Kenner Company is considering two projects. Project A Project B Initial investment $85,000 $24,000 Annual cash flows $20,676 $ 6,011 Life of the project 6 years 5 years Depreciation per year $14,167 $ 4,800 Suppose that Kenner Company requires a minimum rate of return of 8%. Which project is better in terms of net present value
Answers
Answer: Project A is better as it has a higher NPV of $76,075.70
Explanation:
Annual cashflow of Project A = Annual cashflow + Depreciation
= 20,676 + 14,167
= $34,843
Project B cashflow = 6,011 + 4,800
= $10,811
As these are constant amounts, they are to be considered annuities.
Find the present value of these annuities and deduct the initial investment from them for the NPV.
Present value of annuity = Annuity * Present value interest factor of annuity, 8%, number of years
Project A NPV = (34,843 * Present value interest factor of annuity, 8%, 6 periods) - 85,000
= (34,843 * 4.6229) - 85,000
= $76,075.70
Project B NPV = (10,811 * Present value interest factor of annuity, 8%, 5 periods) - 24,000
= (10,811 * 3.9927) - 24,000
= $19,165.08
Project A is better as it has a higher NPV of $76,05.70
R(0,t) is the Spot Zero-Coupon (or Discount) Rate. It is the annualized rate on a pure Unit Discount bond B(0,t) - the bond that pays 1 dollar at time t. Assume that R(0,13) = 8.00 per cent. What is the price of B(0,13)? Answer with three decimal digits accuracy. Example: 0.728
Answers
Answer:
0.368
Explanation:
Price of B(0,13) = 1 / (1 + interest rate)^years
Price of B(0,13) = 1 / (1 + 8%)^13
Price of B(0,13) = 1 / (1+0.08)^13
Price of B(0,13) = 1 / (1.08)^13
Price of B(0,13) = 1 / 2.7196237
Price of B(0,13) = 0.3676979247
Price of B(0,13) = 0.368
You are to receive the following payments at the end of the following periods:
Year 1 : $250
Year 2: $300
Year 3: $450
The interest rate is 15% per year.
Required:
What is the future value of these cash flows 20 years from now?
Answers
Answer: $12,113.14
Explanation:
Find out the future value of each payment 20 years from now then sum up the values.
Year 1:
= 250 * ( 1 + 15%)¹⁹
= $3,557.94
Year 2:
= 300 * ( 1 + 15%)¹⁸
= $3,712.636
Year 3:
= 450 * ( 1 + 15%)¹⁷
= $4,842.5688
Future value of all:
= 3,557.94 + 3,712.636 + 4,842.5688
= $12,113.14
