explain how the substitution effect in the income effect interact with changes in price to change the quantity of demand

A bond will sell at a premium when its coupon interest rate: is lower than the market interest rate on similar bonds. equals the

DiKsa [7]

A bond will sell at premium when its coupon interest rate <u>exceeds the market interest rate on similar bonds.</u>

Explanation:

Premium bonds are the bonds that are trading above par in the market. Further on the bond would trade on premium only when it offers a coupon rate exceeding the market rate that is being offered on similar bonds.

In simple lay man's language, the term premium and discount can be understood to carry a crude definition of high and low demand. When the demand would be high, the bonds would fetch a higher value and vice-versa.

Thus Bonds would highly be valued when it is paying interest that is greater than the interest prevailing in the market contemporarily.

8 0

3 years ago

A portfolio with a 30% standard deviation generated a return of 15% last year when T-bills were paying 6.0%. This portfolio had

jarptica [38.1K]

Answer: 0.3

Explanation:

The Sharpe ratio is simply used by organizations and investors in order to compare the return on an investment to its risk.

From the question, we are informed that a portfolio has a 30% standard deviation generated a return of 15% last year when T-bills were paying 6.0%.

The Sharpe ratio will be:

= (15% - 6.0%)/30%

= 9%/30%

= 0.09/0.3

= 0.3

4 0

3 years ago

Dexter Industries purchased packaging equipment on January 8 for $116,600. The equipment was expected to have a useful life of t

Luden [163]

Answer:

Straight-line method: $36,667 yearly depreciation expense for 3 years.
Unit-of-production method: Year 1 - $47,850, Year 2 - $40,590, Year 3 - $21,560
Double-declining method: Year 1 - $77,737, Year 2 - $25,910, Year 3 - $6,353

Total for 3 years is $110,000 for all the depreciation methods.

Explanation:

(A) Under straight-line method, depreciation expense is (cost - residual value) / Estimated useful life = ($116,600 - $6,600) / 3 years = $36,667 yearly depreciation expense.

Accumulated depreciation for 3 years is $36,667 x 3 years is $110,000.

(B) The unit-of-production method is used when the asset value closely relates to the units of output it is able to produce. It is expressed with the formula below:

(Original Cost - Salvage value) / Estimated production capacity x Units/year

At Year 1, depreciation expense (DE) is: ($116,600 - $6,600) / 20,000 operating hours x 8,700 hours = $47,850

At Year 2, depreciation expense (DE) is: ($116,600 - $6,600) / 20,000 operating hours x 7,380 hours = $40,590

At Year 3, depreciation expense (DE) is: ($116,600 - $6,600) / 20,000 operating hours x 3,920 hours = $21,560

Accumulated depreciation for 3 years is $47,850 +$40,590 + $21,560 = $110,000.

Note that this depreciation method results in higher depreciation charge when the asset is heavily used, at this time, it was in Year 1.

(C) The double-declining method is otherwise known as the reducing balance method and is given by the formula below:

Double declining method = 2 X SLDP X BV

SLDP = straight-line depreciation percentage

BV = Book value

SLDP is 100%/3 years = 33.33%, then 33.33% multiplied by 2 to give 66.67% or 2/3

At Year 1, 66.67% X $116,600 = $77,737

At Year 2, 66.67% X $38,863 ($116,600 - $77,737) = $25,910

At Year 3, 66.67% X $12,953 ($38,863 - $25,910) = $8,636. This depreciation will decrease the book value of the asset below its salvage value $12,953 - $8,636 = $4,317 < $6,600. Depreciation will only be allowed up to the point where the book value = salvage value. Consequently the depreciation for Year 3 will be $6,353.

Accumulated depreciation for 3 years is $77,737 + $25,910 + $6,353 = $110,000.

6 0

3 years ago

Hannah Ortega is considering expanding her business. She plans to hire a salesperson to cover trade shows. Because of compensati

Allushta [10]

Answer:

Hannah Ortega

Product lines ProOffice EZRecords

1a. Total costs $10,000 $13,000

b. Cost per unit $200.00 $162.50

2a. Total costs $17,500 $25,000

b. Cost per unit $175.00 $125.00

c) The total costs under the two requirements were different because of the larger units sold in requirement two. These larger units shared the total costs, reducing the cost per unit drastically.

Explanation:

a) Data and Calculations:

Fixed costs for trade show = $7,500

Fixed cost per hour = $250 ($7,500/30)

Product lines ProOffice EZRecords

Cost per package $150 $100

Units sold 50 80

Hours spent 10 hrs 20 hrs

Fixed costs $2,500 $5,000

Variable costs 7,500 8,000

Total costs $10,000 $13,000

Cost per unit $200.00 $162.50

Total cost

Product lines ProOffice EZRecords

Units sold 100 200

Variable costs $15,000 $20,000

Fixed costs 2,500 5,000

Total costs $17,500 $25,000

Cost per unit $175.00 $125.00

c) The total costs under the two requirements were different because of the larger units sold in requirement two. These larger units shared the total costs, reducing the cost per unit drastically.

3 0

3 years ago

the market interest rate is often called the group of answer choices effective rate. stated rate. contractual rate. coupon rate.

fredd [130]

The market interest rate is often called the effective interest rate. It is also known as the yearly equivalent rate, the effective interest rate, and the effective rate (AER).

The true return on a savings account or any other interest-paying investment is known as the effective annual interest rate when the advantages of compounding over time are taken into consideration. Additionally, it shows the precise percentage rate of interest on all unpaid debts, such as credit card balances and loans.

The effective yearly interest rate serves as a proxy for the actual interest rate on a loan or investment. The most important feature of the effective yearly interest rate is the fact that it takes into account the fact that greater effective interest rates will arise from more frequent compounding periods.

To know more about interest rates click here,

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5 0

1 year ago

explain how the substitution effect in the income effect interact with changes in price to change the quantity of demand￼

explain how the substitution effect in the income effect interact with changes in price to change the quantity of demand