The target audience, sustainability, trend influence, 'life-span' of the materials, aesthetics etc.
Given:
<span>5-year CD for $6800 with an APR of 2.8%, compounded quarterly,
Pretermination - 9 months early.
Pretermination fees - The early redemption fee for the CD is 3 months' interest on the original principal.
To get the periodic rate, APR must be divided by the number of days either 360 or 365 then multiplied by 30 for monthly rate.
2.8% / 360 = 0.0078%
0.0078% x 30 = 0.2333%
0.2333% x 3 = 0.70% PERIODIC RATE (QUARTERLY RATE)
5 years * 4 quarters = 20 quarters
9 months * 1 qtr/ 3mos = 3 quarters
20 quarters - 3 quarters = 17 quarters that Laurie kept her CD.
A = P(1+r/n)^nt
A = 6,800 (1+0.007)^17
A = 6,800 (1.1259)
A = 7,656.1408 - Value of Laurie's money before pretermination
Interest earned: 7,656.1408 - 6,800 = 856.1408
Early redemption fee: 6,800 x 0.7% = 47.60
Net interest earned: 856.1408 - 47.60 = 808.5408 or 808.54
</span>
Answer: B. Shut down her business
Explanation:
Lydia has a decision to make. In this scenario she is making less her costs and so is suffering a loss. She must make a decision to either SHUT DOWN or KEEP GOING.
In this case however it would seem as though her only decision is to Shut Down.
Why?
The Shut Down Rule states that, “in the short run a firm should continue to operate if price exceeds average variable costs...". Her Average Variable costs here exceed the market price so Shutting Down is her best option.
If the price exceeded her Variable Costs at least, she could stay in the market a bit longer as the Fixed Costs have already been committed to. But with her Variable Costs more than the Market Price, SHUTTING DOWN is her best option.
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