Answer:
If an existing asset is sold at a gain, and the gain is taxable, then the after-tax proceeds from this transaction would be equal to:
Net proceeds from the sale less the taxes paid on the gain.
Explanation:
An illustration is given below. Company A received $70,000 from the sale of an Office Equipment with a tax basis of $40,000. The capital gains tax rate is 20%. How much would be the after-tax proceeds? The net proceeds minus the tax basis would result in the capital gains of $30,000. Then, the capital gains tax equals $6,000 ($30,000 * 20%). Therefore, the after-tax proceeds would be $70,000 minus $6,000, which is equal to $64,000.
Answer:
In a single index model:
ri - rf = α i + β i (r M - rf ) + e i
Equivalently, using excess returns:
R i = α i + β i R M + e i
The variance of the rate of return can be decomposed into the components:
The variance due to the common market factor
Bi^2stdvm^2
The variance due to firm specific unanticipated events
STDV^2(ei)
In this model
Cov(ri,rj) =BiBjSTDV
The number of parameter estimates is:
n = 60 estimates of the mean E(ri )
n = 60 estimates of the sensitivity coefficient β i
n = 60 estimates of the firm-specific variance σ2(ei )
1 estimate of the market mean E(rM )
1 estimate of the market variance
Therefore, in total, 182 estimates.
The single index model reduces the total number of required estimates from 1,890 to 182. In general, the number of parameter estimates is reduced from:
(n^2 +3n / 2) to (3n+2)
Answer:
Consider the following explanation
Explanation:
Context
Game theory involves two players. They have more than one option to decide. Pay off from each options adopted by two players are available. They have to select a strategy which will maximize their own return. But for optimizing their decision, they have to consider the action of his rival.
In this problem, two players are firm A and firm B. They have two strategies low output and high output. The strategies of firm a are measured in rows and for firm B in columns. They have to select a strategy which will maximize their payy off. Each cell has two pay offs. First one is for Firm A and second one is for firm B.
1. Dominant strategy is a strategy which will always give higher payoffs in comparison with pay off of other strategies. Consider first strategy of firm 1. If it adopts strategy of low output, then firm 2 can also adopt either strategy of low output or high output. In that case pay off of firm 1 will be 300 or 200.
Alteratively if firm 1 adopts high output then pay offs are 200 or 75. 200 is earned if firm B also go for low productivity. It is 75 if firm B adopts high productivity.
Now compare two payoffs side by side. Note that firm A has higher pay off in low output [300,200] in comparison with the pay off of high output [200,75]. So whatever strategy firm B adopts, Firm A will always go for low production. So low production strategy of firm A dominates high production strategy.
Same result is not observed for firm B. Pay off from low production strategy of firm B is [ 250,75]. Pay off from high production strategy are [100,100]. Now compare the two. If Firm A go for low production, then firm B will select low production. It will give pay off 250. Similarly when firm A decides for high production, then firm will also decide for high production. It will maximize its pay off. Amount is 100. Thus no strategy dominates for firm B.
Answer:
b) Expectations of higher short-term interest rates in the future
Explanation:
When the yield curve is normal (upward sloping) it is because investors expect longer-maturity bonds to have a higher yield than shorter-maturity bonds, since interest rates are expected to rise in the long term.
On the contrary, if the yield curve is flat, it is because short-maturity and long-maturity bonds are giving the same, or almost the same yield, indicating that investors expect short-term interest rates to rise so much, that they compensate the capital gains for short-maturity bonds in terms of interst.
