In economics, the Fisher equation is used to determine the
relationship of the nominal interest rate and the real interest rate. This
equation takes into account the effect of inflation. Mathematically this is
expressed as:
Real rate = -1
The values given are:
Nominal rate= 10% =
0.1
Inflation=5%=0.05
Substituting known
values and by calculation:
<span>Real rate=0.0476 =
4.76%</span>
Answer:
Traditional IRA
Explanation:
Traditional IRA is an individual retirement account that is held at a custodian institution such as a bank. The funds can be invested in various assets such as certificate of deposit, stocks and mutual funds to generate interest.
It is simpler to enroll with than the Roth IRA and the only requirement is the fund to be invested. Transactions in the account are not subject to taxation. Taxes only apply at withdrawal.
The traditional IRA will be the best option for this person because of the ease of enrollment and freedom from taxes on transactions.
Answer:
Incremental .
Explanation:
A redesign of an automobile tire to make it more resistant to punctures would be an incremental innovation.
Innovation can be defined as a quality possessed by an individual or group of people such as an entrepreneur and typically involves the process of improving on an existing product or ideas.
Generally, an incremental innovation refers to the process of upgrading and strategic improvement made to an organization's product or services, so as to enhance its effectiveness and efficiency.
Answer:
Unsought goods are goods that are not in demand either because consumers are not aware of them, or because they do not see an immediate need for them.
Explanation:
There are certain goods that <em>consumers are not aware of and as such, are not interested in purchasing</em>. These goods are called unsought goods. New products just entering the market are examples of unsought goods and awareness for such products can be generated through advertising and extensive marketing.
In some cases, <em>consumers are aware of unsought goods but are not interested in buying them at the moment as they do not have immediate benefits</em>. An example of such is accident insurance.
What could reduce potential conflicts of interest is the use of covenants in bond agreements that limit the firm's use of additional debt and constrain managers actions
Let understand that Shareholders are basically the “owners” of the company and they are entitled to dividend payments and stock price appreciation because they bought shares.
Let understand that Managers are the people or officers who manage the company (& shares) on a daily basis.
- Now, there can be conflicts of interest between stockholders and managers because of disagreement on what should be and not.
- The major actions that can help to reduce this conflict are covenants in bond agreements. By reason of this, the manager of limited on what to do with the funds of the shareholders and can be penalized if found defaulted by law.
Learn more about covenants in bond agreements
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