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Law Incorporation [45]
3 years ago
13

At an inflation rate of 7 percent, the purchasing power of $3 would be cut in half in 10.25 years. how long to the nearest year

would it take the purchasing power of $9 to be cut to one-fourth if the inflation rate were only 6.5 percent
Business
1 answer:
lyudmila [28]3 years ago
7 0
The applicable formula is;
A = P(1-r)^n

Where;
A = Final purchasing power
P = Current purchasing power
r = inflation
n = Number of years when P changes to A

Confirming the first claim:
A = 1/2P (to be confirmed)
P = $3
r = 7% = 0.07
n = 10.25 years

Using the formula;
A = 3(1-0.07)^10.25 = 3(0.475) ≈ 3(0.5) = $1.5
And therefore, A = 1/2P after 10.25 years.

Now, give;
P = $9
A = 1/4P = $9/4 = $2.25
r = 6.5% = 0.065
n = ? (nearest year).

Substituting;
2.25 = 9(1-0.065)^n
2.25/9 = (1-0.065)^n
0.25 = (1-0.065)^n
ln (0.25)= n ln(1-0.065)
-1.3863 = -0.0672n
n = (-1.3863)/(-0.0672) = 20.63 years

To nearest year;
n = 21 years

Therefore, it would take approximately 21 years fro purchasing power to reduce by 4. That is, from $9 to $2.25.
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Answer:

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Product markets are markets related to products, goods, tangible finished items.  This is where you'll get your product for sale and where people will buy it.

while

Factor markets are for the factors of production, mostly intangible, like labor, capital and entrepreneurial skills.  This is what you'll use (including raw materials) to make your product.

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A firm has determined its cost of each source of capital and its optimal capital structure which is comprised of the following s
barxatty [35]

Answer:

10.25%

Explanation:

Data provided in the question:

Long-term debt = 45%, after-tax cost = 7%

Preferred stock = 15%, after-tax cost = 10%

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Now,

The  weighted average cost of capital for this firm will be calculated as:

= Long term debt × after-tax cost + Preferred stock × after-tax cost + Common stock equity × after-tax cost

or

= 0.45 × 0.07 + 0.15 × 0.10 + 0.40 × 0.14

or

= 0.0315 + 0.015 + 0.056

= 0.1025

or

= 0.1025 × 100%

= 10.25%

5 0
3 years ago
U.S. publisher Robert de Graff copied the success of similar books in England when he founded ________ in 1939. This company pro
Kitty [74]

Answer:

Pocket books

Explanation:

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3 0
2 years ago
An agreement between two or more countries to remove all restrictions between them on the sales of goods and services, while imp
kaheart [24]

Answer:

FREE TRADE AREA

Explanation:

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Example : North America Free Trade Area NAFTA is an FTA agreement between USA, Mexico, Canada.

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3 years ago
Merchandise with a sales price of $3,500 is sold on account with terms 2/10, n/60. The journal entry to record the sale would in
alexdok [17]

Answer:

debit to Accounts Receivable for $3,500 credit to Sales for $3,430

Explanation:

Merchandise with a sales price of $3,500 is sold on account with terms 2/10, n/60. The journal entry to record the sale would include a debit to Accounts Receivable for $3,500 credit to Sales for $3,430.

Since the goods were sold on account, it means that it was sold on credit and an entry to cash will be a wrong entry. The right Journal entry will be a debit to accounts receivable for the total amount and a credit to sales for the total amount less the proposed discount amount of 2%

6 0
3 years ago
Read 2 more answers
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