"One of your customers has decided to commit $10,000 to fixed income..."You could explain that the purchase of the ETF results in the greatest reduction of liquidity risk. This is further explained below.
<h3>What is
liquidity risk?</h3>
Generally, liquidity risk is simply defined as, to put it another way, liquidity risk is the possibility of experiencing losses as a consequence of not being able to make payments on time or doing so at an unaffordable price.
In conclusion, Fixed-income investments have been made by one of your clients for $10,000..." In other words, you might say buying the ETF lowers liquidity risk the most.
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"Whenever banks gain reserves and make new loans, the money supply <u>expands</u>; and whenever banks lose reserves and reduce their loans, the money supply <u>contracts</u>."
<h3>When does the money supply contract and expand?</h3>
By decreasing the reserve requirements for banks, which enables them to lend more money, the Fed can expand the money supply. The Fed can reduce the amount of money in circulation by increasing the reserve requirements for banks, on the other hand.
The total amount of reserves held by a bank rises with each dollar deposited into an account.
The bank will lend out the extra reserves while keeping some of the necessary reserves on hand. The money supply is increased when such a loan is made.
Banks "generate" money in this way to expand the available supply. A central bank's alteration of the money supply affects interest rates, which have an effect on aggregate demand and investment.
Therefore, expands is the answer for the first blank, and contracts are the answer for the second blank.
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Answer: 17.9%
Explanation:
From the question, a stock was bought one year ago for $48.28 per share and sold today for $55.92 per share and also paid a $1.38 per share dividend today.
The realized return will be calculated as:
Po = (P1 + D1) ÷ (1+Re)
48.28 = (55.92 + 1)/(1 + Re)
48.28 = 56.92/(1 + Re)
Cross multiply
48.28 + 48.28Re = 56.92
48.28Re = 56.92 - 48.28
48.28Re = 8.64
Re = 8.64/48.28
Re = 0.179 = 17.9%
Answer
D. A sunk cost is any cost that was expended in the past but can be recovered if the firm decides not to go forward with the project.
Explanation:
As per the data given in the question,
Option (D) is correct among the given statements. A sunk cost is that cost which was occurred and expended in the past and if firm decides to do not go ahead, it can not be recovered.
For illustration - Think about the cost incurred to find out the feasibility of the project. Though in past firm was agree with the project but now even if the firm decides not to the project, this cost can not be recovered.
