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1 year ago

The real interest rate is the:____.

Business

1 answer:

disa [49]1 year ago

4 0

The real interest rate is the: nominal rate minus the inflation rate

Option B is correct.

What is the meaning of real interest rate?

A real interest rate is an interest rate that has been adjusted to remove the effects of inflation. Once adjusted, it reflects the real cost of funds to a borrower and the real yield to a lender or to an investor. A real interest rate reflects the rate of time preference for current goods over future goods.

What is the real rate of inflation?

But our real-world experience tells us the official inflation rate doesn't reflect the actual cost increases of everything from burritos to healthcare. The grim reality is that real inflation is 7+% per year.

Learn more about real interest rate:

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Dermot just learned that his company is closing, and all the employees will be laid off. He is distraught and anxious about how

77julia77 [94]

Answer:

Explanation:

because you want the employer to know that you learned from your last job

8 0

4 years ago

Find the amount to which $550 will grow under each of the following conditions. Do not round intermediate calculations. Round yo

Cloud [144]

Answer:

(A)Fv= $864.2

(B) Fv= $1302.05

(D) Fv= $96817.21

Explanation:

Giving the following information:

Initial investment= $550

We will use the final value formula:

FV=Present value*(1+i)^n

(A) 9% compounded annually for 5 years.

Fv= 550*(1.09)^5=$864.2

(B) 9% compounded semiannually for 5 years.

Fv= 550*(1.09)^10= $1302.05

Fv= 550*(1.09)^15= $2003.4

(D) 9% compounded monthly for 5 years.

Fv= 550*(1.09)^60=$96817.21

6 0

3 years ago

Global Services is considering a promotional campaign that will increase annual credit sales by $480,000. The company will requi

VladimirAG [237]

Answer:

For computation of total cost is $396400, Computation income after tax is $62,700, The After tax rate of return is 13.06%

Explanation:

Solution

Now,

Computation of total costs

Production and selling Cost=$369,600

Collection cost =$19,200

Inventory carrying cost =$1,600

Depreciation expense=$6,000

Total Cost =$396,400

Computation income after tax

Sales=$480,000

Less : Total Costs=$396,400

Income before tax=$83,600

Less : Tax at 25%= $20,900

Income after tax=$62,700

The After tax rate of return = Income after tax / Sales = $62700 / $480000 = 13.06%

Note: This is the complete question as stated below

Complete question: Global Services is considering a promotional campaign that will increase annual credit sales by $480,000. The company will require investments in accounts receivable, inventory, and plant and equipment. The turnover for each is as follows: Accounts receivable 6 times Inventory 12 times Plant and equipment 4 times All $480,000 of the sales will be collectible. However, collection costs will be 4 percent of sales, and production and selling costs will be 77 percent of sales. The cost to carry inventory will be 4 percent of inventory. Depreciation expense on plant and equipment will be 5 percent of plant and equipment. The tax rate is 25 percent.

(1)Compute the total of all costs

(2)Compute income after taxes.

(3)What is the after tax rate of return

6 0

3 years ago

Consider the following transactions for Huskies Insurance Company: Equipment costing $30,000 is purchased at the beginning of th

Reika [66]

Answer:

a. Dr Depreciation expense $5,000

Cr Accumulated depreciation $5,000

b. Dr Interest receivable 750

Cr Interest revenue 750

c. Dr Unearned revenue 2,000

Cr Service revenue 2,000

Explanation:

Preparation to record the necessary adjusting entry for Huskies Insurance at its year-end of December 31.

a. Dr Depreciation expense $5,000

Cr Accumulated depreciation $5,000

(Being to adjust for Depreciation of Equipment)

b. Dr Interest receivable 750

Cr Interest revenue 750

(30,000*5%*6/12)

(Being to adjust for accrued interest)

c. Dr Unearned revenue 2,000

Cr Service revenue 2,000

(8,000*3/12)

(Being to adjust for accrued rent revenue)

6 0

3 years ago

Braxton Enterprises currently has debt outstanding of million and an interest rate of . Braxton plans to reduce its debt by repa

Vika [28.1K]

Answer:

Interest tax shield in year 0 = $1.155 million

Interest tax shield in year 1 = $0.924 million

Interest tax shield in year 2 = $0.693 million

Interest tax shield in year 3 = $0.462 million

Interest tax shield in year 4 = $0.231 million

Interest tax shield in year 5 = 0

Explanation:

Here is the complete question :

Braxton Enterprises currently has debt outstanding of $55 million and an interest rate of 6%. Braxton plans to reduce its debt by repaying $11 million in principal at the end of each year for the next five years. If Braxton's marginal corporate tax rate is 35%, what is the interest tax shield from Braxton's debt in each of the next five years?

interest tax shield is a reduction in tax paid as a result of interest paid on debt

interest tax shield = (debt amount x interest rate x tax rate)

Interest tax shield in year 0 = $55 million x 0.06 x 0.35 = $1.155 million

Debt in year 1 = $55 million - 11million = $44 million

Interest tax shield in year 1 = $44 million x 0.06 x 0.35 = $0.924 million

Debt in year 2 = $44 million - 11million = $33 million

Interest tax shield in year 2 = $33 million x 0.06 x 0.35 = $0.693 million

Debt in year 3 = $33 million - 11million = $22 million

Interest tax shield in year 3 = $22 million x 0.06 x 0.35 = $0.462 million

Debt in year 4 = $22 million - $11 million = $11 million

Interest tax shield in year 4 = $11 million x 0.06 x 0.35 = $0.231 million

Debt in year 5 = $11 million - $11 million = 0

Interest tax shield in year 5 = 0 x 0.06 x 0.35 = 0

5 0

3 years ago