Answer:
(Sales volume * Price) – (Variable costs + Fixed costs)
Explanation:
Profit is equal to Total sales less Total costs .
Here, Total costs is the addition of Variable and Fixed costs
(Sales Volume x Price) - (Variable Costs + Fixed Costs).
Answer:
TRADE DEFICIT
FOREIGN CURRENCY RESERVE DEPLETION
LOCAL CURRENCY DEVALUATION
RECESSION
POTENTIAL UNEMPLOYMENT
Explanation:
The problem that could develop if the U.S. became too dependent on other nations for goods and services are:
1. Trade deficit because when a country imports more than it exports it runs a trade deficit.
2. Foreign Currency Reserve Depletion: If the U.S. has to import so much from other countries, it will need to increase its foreign reserve because that is how it will pay for such imports. Otherwise the foreign reserve will be hugely depleted
3. Local Currency Devaluation. Reliance on exports can devalue the worth of the local currency because the demand of the foreign currency will be high in relation to local currency and people will be willing to pay more to get foreign currency, which will devalue the local currency
4. Recession: If the United States is reliant on OPEC countries for Oil and an embargo is placed on oil export from those, the U.S. will suffer a recession.
5. Potential Unemployment: Imports of finished goods will cripple local industries who will be forced to compete with the international firms whose goods and services are being imported; and those employed in such industries might loose their jobs, if the small local enterprises are unable to survive such competition.
Answer:
Answer is option c.
Default Risk and Liquidity Risk
Explanation:
- Default risk - because AAA and BBB differ in credit quality
- Liquidity risk - because BBB could potentially have lower liquidity than AAA bond (more stable and could be more traded)
Answer:
The expected return on security with a beta of 0.8 is closest to 7.2%.
Explanation:
This can be determined as follows:
Since the return of security Z remains at 4% despite the change in the market, security Z is the risk-free asset.
Note that a risk free asset is an asset which its returns does not change with change in the market.
Using the Capital Asset Pricing Model (CAPM) formula, we have:
Er = Rf + (B * MPR) ............................................ (1)
Where;
ER = Expected return = ?
Rf = Risk-free rate = Rate of return of security z = 4%
B = Beta = 0.8
MPR = Market risk premium = Expected return on the market rate - Risk-free rate
Expected return on the market rate = (50% * 24%) + (50% *(-8%)) = 8%
Therefore, we have:
MPR = 8% - 4% = 4%
Substituting the values into equation (1), we have
Er = 4% + (0.8 * 4%)
Er = 0.072, or 7.2%
Therefore, the expected return on security with a beta of 0.8 is closest to 7.2%.
