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Y_Kistochka [10]
3 years ago
12

The chapter opener noted that in​ mid-2016 you could earn an interest rate of​ 0.25% by buying a​ 3-month Treasury bill or an in

terest rate of​ 2.6% by buying​ 30-year Treasury bond. How is the Treasury able to find buyers for​ 3-month Treasury bills when investors could earn an interest rate 10 times as high by buying​ 30-year Treasury​ bonds? A. Treasury discounts the price of​ 3-month Treasury bills to increase yield and demand. B. The​ interest-carry-trade strategy drives the sale of​ 3-month Treasury bills. C. Investors see bonds of different maturities as being perfect substitutes for each other. D. The markets for bonds of different maturities are separate or segmented.
Business
1 answer:
ruslelena [56]3 years ago
5 0

Answer:

The correct option is D,the markets for bonds of different maturities are separate or segmented

Explanation:

Market segmentation theory is of the view that market for short-term and long-term bonds are segmented from each other,wherein investors with different preferences investing in different markets.

Banks for instance are short-term position takers due to their preference for liquidity and would favor investing short-term instruments like the 3-month Treasury bill such that at every point in time, there is enough cash liquidity to meet customers' request for withdrawal of funds.

On the flip side, pension fund administrators take a long-term position on investment, hence would prefer the 30-year Treasury bill since their payment of retirement benefits is usually a low portion of their total contributions received from contributors to their pension funds.

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Last year Lowell Inc. had a total assets turnover of 1.40 and an equity multiplier of 1.75. Its sales were $295,000 and its net
katrin [286]

Answer:

ROE would have changed by 8.52%

Explanation:

First we calculate the current ROE using Dupont Equation which gives ROE as,

ROE = Net Income/Sales * Sales/Total Assets * Total Assets/Equity

or

ROE = Net Profit Margin * Total Assets Turnover * Equity Multiplier

  • Current ROE = 10600/295000 * 1.4 * 1.75 = 0.0880 or 8.8%

The condition says that the net income could have increased to 20850 but other factors will remain constant. Thus, to calculate new ROE, we will calculate the new Net Profit margin but the total assets turnover and the equity multiplier will remain constant as sales assets and capital structure is not changing.

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  • The ROE would have changed by 17.32 - 8.80 = 8.52%
7 0
3 years ago
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3 years ago
Brainstorm Company purchased office furniture and equipment for $20,000 and agreed to pay for the purchase by making six annual
Studentka2010 [4]

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"Citizens for a Greener America" acts as a watchdog group that tries to discover and make public undesirable activities carried out by government, public or private organizations.

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