Answer:
Calculate the true APR:
It is given that the compounding period is 12 as the payment is done monthly. The total loan amount is $1,000 with $100 monthly installments at an interest rate of 20%. Annuity is a stream of cash flows that continues for a given number of years. The interest rate is calculated by following method. Use the following formula to calculate the present value:
Where,
c —) Monthly payment
r —> Interest rate
t —> Compounding period
Now,
![1000 = 100[\frac{1}{r}-\frac{1}{r(1+r)^{12} }]](https://tex.z-dn.net/?f=1000%20%3D%20100%5B%5Cfrac%7B1%7D%7Br%7D-%5Cfrac%7B1%7D%7Br%281%2Br%29%5E%7B12%7D%20%7D%5D)
We cannot determine the exact value of interest of annuity. Using the trial and error method we can determine the interest rate. We can use the TVM (time value of money) keys in the financial calculator to calculate the value of 'r' as below:
Enter
N = 12
PV = -1000
PMT =100
FV = 0
Now press i and we should find that the monthly rate for this annuity(r) is 2.923% per month.
Effective interest rate is the annualized interest rate using compound interest. Multiply the monthly rate by 12 to obtain APR as below:
APR = Monthly rate x 12
Substitute the values in the formula:
APR = 2.923% x 12
APR = 35.076%
Hence, the APR is 35.076%.
Determine the effective annual rate (EAR):
It is the net annual return received. The monthly rate should be used to calculate the effective annual rate with the help of the formula below:



Effective annual rate = 0.41302 or 41.302 %
Hence, the effective annual rate is 41.302%.
Finally we may conclude that the true rate would be 20%, if $1,000 was borrowed today and $1,200 was paid back one year from today. It should be noted that the true rate must be greater than 20% because the twelve annual payment of $100 should be made before the end of the year.
Answer:
a. Accounting profit for the business = $3,500
b. Economic loss = $1,000
c. The two friends can open the business and incur economic loss of $1,000 in the first year of operation. In subsequent years, the revenue may increase to generate better economic profit. This is the labor, risk, and reward of entrepreneurship.
d. If the two friends do not go ahead with the business because of the economic loss they suffer in the first year of operation, then they cannot be regarded as entrepreneurs. They are merely laborers who cannot assume any risk for greater rewards tomorrow.
Explanation:
Cost of business per month:
Operating expenses = $4,000
Lease of building = 2,000
Total expenses = $6,000
Revenue = $10,000
Accounting profit $4,000
Economic profit:
Revenue = $10,000
Total expenses = $6,000
Opportunity costs:
Lost salaries 4,500
Lost Interest 500
Total costs $11,000
Economic loss = $1,000
Answer:
The cash accounting systems
Explanation:
The cash accounting systems recognize incomes and expenses when paid is received, or when payments are made. Revenue is recorded when customers make payments against an invoice, and expenses recorded when the business pays its payable. The cash accounting system is also called cash basis accounting.
The cash basis accounting system is mostly used by small business organizations. Gerald's manufacturing firm uses the cash accounting system because transactions are recorded when money goes in or out of business. The cash basis is not recommended for large business organizations.
Answer:
The correct answer is b. Grit.
Explanation:
On many occasions, the main enemies of our dreams inhabit ourselves: conformism, apathy, disappointment and resignation. Many dreams lack planning, money, time and personal conviction about one's own abilities. All this goes against the entrepreneurial mindset.
Answer: Save back for if something urgent happens. Put saving in one account and seperate that from your weekly paychecks because saving and paychecks need to be divided apart so you can live on your weekly income and take a little bit out of the main income and put it in the savings due to inflation it is becoming harder to do such a thing
Explanation: Great!