<span>A lemon drop shot contains vodka, ice, sugar, and lemon juice. The sugar is placed on the rim of an old-fashioned glass, and an ice cube is placed at the bottom. Vodka and lemon juice are mixed in a shaker over ice, and are then poured into the prepared glass before serving.</span>
Answer: If you tax something, you will get less of it; if you subsidize an activity, you will get more of it
Explanation:
Taxes are the levy that governments impose on people or firms. Subsidies are financial aid to companies in order to boost production and reduce price.
It should be noted that if you tax something, you will get less of it; if you subsidize an activity, you will get more of it. For example of an income is taxed, the owner of the income will geta lesser amount as tax will be removed.
Answer:
Risk and Return
1. Joe is an average investor. His financial advisor gave him options of investing in stock A, with a σ of 12%, and stock B, with a σ of 9%. Both stocks have the same expected return of 16%. Joe can pick only one stock and decides to invest in stock B.
Good Financial Decision?
Yes
No
2. Marcie works for an educational technology firm that recently launched its employee stock option plan (ESOP). Marcie allocated all her investments in the ESOP.
Good Financial Decision?
Yes
No
3. rin wants to invest in a hedge fund that has had a very strong performance track record. The hedge fund has given its investors a return of over 60% for the past five years. Although Erin is tempted to put her money in the fund, she decides to conduct due diligence on the hedge fund’s assets, because she is aware that past performance is no guarantee of future results.
Good Financial Decision?
Yes
No
Explanation:
1. Joe's decision to invest in stock B is a good financial decision. Since both investments have the same returns, the decision on which investment to take shifts to the standard deviation of the returns, which specifies the variability of the returns. Invariably, the investment with less standard deviation should win the vote. Therefore, Joe's decision is a good financial decision because investment in B has a standard deviation of 9% unlike A's 12%.
2. Putting all eggs in one market as Marcie had done by allocating all her investments in the ESOP is not a good financial decision, theoretically. It is always best to spread the risks, though higher-yielding investments (returns) bear higher risks.
3. The decision of Erin to conduct due diligence on the hedge fund's assets, despite its past performance is a good financial decision. Due diligence reveals some behind-the-scene information that are instrumental in making sound business decisions. Who are the present managers of the fund? What systems are in place in the entity to guarantee similar future performance, all things being equal? What market's sentiments and information are available for consideration? These questions, and many others can be answered through a due diligence. Surely, "past performance is no guarantee of future results."
Answer:
5.32%
Explanation:
The computation of the coupon rate on the bonds is shown below:
As we know that
Current price = Annual coupon × Present value of annuity factor(6.1%,8 ) + $1,000 × Present value of discounting factor(6.1%,8)
$952 = Annual coupon × 6.18529143 + $1,000 × 0.622697222
Annual coupon is
= ($952 - 622.697222) ÷ 6.18529143
= $53.24
Now
Coupon rate is
= Annual coupon ÷ Face value
= $53.24 ÷ $1,000
= 5.32%
Working notes:
1. Present value of annuity is
= Annuity × [1 - (1 + interest rate)^-time period] ÷ rate
= Annual coupon × [1 - (1.061)^-8] ÷ 0.061
= Annual coupon × 6.18529143
And,
2.Present value of discounting factor is
= $1,000 ÷ 1.061^8
= $1000 × 0.622697222
To destory monopolies that were using their power to harm society.
