Yao decides to place a $2,000 deposit at the end of each year into a bond fund that earns 6% annually. Find the amount of the in
1 answer:
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Answer:
Real return on investment: 22.9465%
Explanation:
Okay let's explain each concept we have given:
<em>Face Value</em> $1,000
This is the ammount Lambert will pay at maturity
Purchase Value $ 960
This is the Ammount we pay for the bond
<em>Market Value of the bond today $ ???</em>
This is what we need to determinate to see the return we got
Once we got the market Value we will do:
Market Value / Purchase Value - 1 = rate of return
Now the <em>market value today will be the present value of the bond,</em> and the bond has the following data:
- Mature in 14 year
- bond rate 7% annualy.
So each year we receive the 7% of the face value ($1,000) = $70
And at the end of the bond life we receive 1,000
We need to bring this numbers at present day using the real market rate, because the economy is having inflation:
market rate 8%
inflation rate 2.7%
real rate:
(1+rate)/(1+inflation) -1 = real rate
real rate = 5.16%
To know the present value of the bond we will have to consider:
- present value of an annuity of 70$ during 14 year at a rate of 5.16% =
- present value of the 1,000 that will be pay at maturity at a rate of 5.16%
<em>The annuity will be </em>
$685,87
<em>The present value of the 1,000 will be</em>
face value/(1+rate)^time
1,000/(1+0.0516)^14 = $494,42
for a total of $1.180,29
Now we will calculate the real return on the investment:
we receive 1.180,29 for 960 so the rate is
1.180,29 /960 - 1 = 0.229465 = 22.9465%
Answer:
If the Studio is the cost object, then all the costs that can be attributed to the studio itself will be direct and that includes all the costs except the <em>Planning and development materials sent from the home office, </em>because that comes from the home office not the studio in question.
As per the question, all the costs are also variable because there are different payment plans and the offers by the studio as well as materials needed are dependent on the number of students they have. Advertisements are a set price however and do not depend on the number of students and so are fixed .
If the Lessons were the cost objects, everything that cannot be linked directly to the lessons is an indirect cost. This includes all the costs excerpt the dancing instructors' salary as this is linked directly to the number of lessons they offer.
All costs will also be fixed because they are independent of the lessons offered and so are set amounts. The dancing instructors' salary is also fixed as the rates do not change in relation to lesson prices.
