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Lana71 [14]
3 years ago
8

Consider an investment with the returns over 4 years as shown​here:

Business
2 answers:
xeze [42]3 years ago
8 0

Answer:

Explanation:

Assume the initial invest at the beginning is $100.

The investment at end of year 4 is:

100 x 1.16 x 1.11 x 1.1 x 1.1 = 155.80

a) CAGR over the 4 years = (155.8 / 100 ) ^ (1/4) = 11.72%

b) Average annual return over 4 years = (16% +11% + 10% +10%) /4 = 11.75%

c) Since the returns over the 4 year period are not much volatile, average annual return is a better measure.

If the investment's returns are independent and identically distributed, Average annual return will be the better measure because there is no correlation between returns over the years and thus there is no point to take into consideration the compounding effect by using CAGR.

Vsevolod [243]3 years ago
3 0

Answer:

A) -0.111

B) 11.75%

C) Take the first year measures for next year investment, as it gave the highest returns.

Explanation:

A) The compound annual growth rate is calculated as

(EB÷BB)^1/n - 1

EB is the ending balance

BB is the beginning balance

n is the number of years

Therefore;

(10% ÷ 16%)^1/4 - 1

(0.625)^1/4 - 1 = (0.625)^0.25 - 1

0.88914 - 1 = -0.111

Because the growth rate is negative, that means the investment did not grow, but rather the growth dropped with -0.111

B) The average annual return for this investment is to calculate the mean value for the of the annual returns

(16% + 11% + 10% + 10%) ÷ 4 = 11.75%

That means the average returns for 4 years is 11.75%

C) The better measure for the next year investment, is the measures that was taken in the first year, as it gave the investment the highest return since 4 years ago.

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Answer:

The Elston's stockholders' equity on December 31, 2014 is $550,000

Explanation:

For computing the stockholder equity, first, we have to find out the ending retained earning balance which equals to

= Beginning retained earning balance + Net income - dividend paid

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= $400,000

where,

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Now the stockholder equity equals to

= Common stock + ending balance of retained earning

= $150,000 + $400,000

= $550,000

6 0
3 years ago
Alpha and Beta, two small economies, can produce cheese or butter with the same resource, raw milk. Assuming constant opportunit
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Answer:

C

Explanation:

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By choosing to produce one pound of butter, Alpha is forgoing the opportunity to produce one more pound of cheese

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6 0
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If you borrow $5,400 at $800 interest for one year, what is your effective interest rate for the following payment plans? (Input
asambeis [7]
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4 0
2 years ago
You enter into a short crude oil futures contract at $43 per barrel. The initial margin is $3,375 and the maintenence margin is
Wewaii [24]

Answer:

The correct answer is "43.875". A further explanation is provided below.

Explanation:

The given values are:

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Maintenance margin,

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⇒  1000P-43000+43000=875+43000

⇒                             1000P=43875

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8 0
3 years ago
Define monetize and adverts with examples?
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