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Westkost [7]
3 years ago
8

A dealer forecasts that the discount rate on a 60-day bill will be 5.10%. The current discount rate on a 90-day bill is 5.30%. W

hat is the highest 30-day repo rate the dealer can afford to pay and still expect to break even on a repo? Explain.
Business
1 answer:
patriot [66]3 years ago
4 0

Answer:

The maximum rate is 5.65%.

Explanation:

The break-even 30-day repo rate is the rate at which an investor can make zero profit by carrying the following described trading:

Initially raise 30-day repo at x rate; invest in 90-day bill at 5.30%;

As the 30-day repo is matured, raise fund from 60-day bill at 5.10% to repay the 30-day repo;

Then as the 60-day bill matures, use the proceed from 90-day bill to repay the amount.

In other word, we have the below calculation to illustrate the trading:

Amount repay to 02 fund raising ( through 30-day repo and 60-day bill) = Amount receipt from 90-day bill investment

[1 + x*30/365] x [ 1 +  5.1% *60/365 ] = 1 + 5.30% * 90/365

<=> 1 + x*30/365 = 1.004646 <=> x = 5.65%.

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Cutler Petroleum, Inc., is trying to evaluate a generation project with the following cash flows:Year Cash Flow0 –$ 39,800,000 1
muminat

Answer:

The two IRRs are: - 76.49% and 36.79%

Explanation:

To simplify our "Hard work", let's denote the cash flow numbers in terms of '000 (To reduce the number of zeros).

IRR is that discount rate R, for which NPV = 0

NPV is the sum of discounted cash inflows and outflows. Therefore,

NPV ($'000) = - 39,800 + (63,800 / (1 + R) - [12,800 / (1 + R)2]

When NPV = 0 [If R is the IRR],

0 = - 39,800 + [(63,800 / (1 + R)] - [12,800 / (1 + R)2]

[12,800 / (1 + R)2] - [(63,800 / (1 + R)] + 39,800 = 0

To simplify further, let's put N = 1 + R. Also, let's divide both sides by 200 [Note: We're only doing arithmetical simplification to reduce the large numbers]]:

[64 / (N)2] - (319 / N) + 199 = 0

Multiplying all terms by (N2):

64 - 319N + 199 (N)2 = 0

that is,

199 (N)2 - 319N + 64 = 0

This is a quadratic equation with large coefficients. Solving quadratic equation is outside scope of this question (it belongs to Algebra), so I've used an Online Quadratic equation solver**, which returns following values of N:

N = 1.3679, and N = 0.2351

So:

1 + R = 1.3679, Or 1 + R = 0.2351

R = (1.3679 - 1) or R = (0.2351 - 1)

R = 0.3679 or R = - 0.7649

The two IRRs are: - 76.49% and 36.79%

4 0
3 years ago
Make or BuyBlasingham Company is currently manufacturing Part Q108, producing 35,000 units annually. The part is used in the pro
muminat

Explanation:

The computation is shown below:

Particulars                   Cost Per unit in ($)

Direct Materials           $6

Direct Labor                  $2  

Variable Overhead  $1.5

Fixed Cost  ($77000 ÷ 35,000 units) $2.2

Total Cost per unit                                 $11.7

So,

1. He will buy the product as it is a saving of $0.7 ($11.7 - $11)

2) The most price willing to pay is $11.7

3) And, There is increase in income by $24,500 by multiply the 35,000 units with the $0.7 per unit in case of buying the part

7 0
3 years ago
Suppose you purchased 500 shares of Jet-Electro Corporation stock at a price of $22.50 per share. One year later, the shares are
viva [34]

Answer:

C) 0.0 percent

Explanation:

The net return on any investment is what we receive from the investment in addition to the purchase price paid.

In the given instance the investor pays $22.50 per share as an investment cost, to acquire such shares. Number of shares purchased = 500

Now at the end of the period the shares are sold for $21 each

Also the dividend per share received is $1.50

Thus, total return = $21 + $1.50 = $22.50 per share.

This is exact same as that of the investment price.

Thus net return = Total benefits - Cost = $22.50 - $22.50 = $0

Since net return is $0 the value of return in percentage shall also be $0.

6 0
3 years ago
Suppose that the price of a money clip increases from $0.75 to $0.90 and quantity supplied rises from 8,000 units to 10,000 unit
Sloan [31]

Answer:

The price elasticity of supply is 1.22

Explanation:

Please refer to the attached file

8 0
3 years ago
A natural monopolya. exists when many sellers experience lower average total costs than potentialcompetitors do.b. exists when a
liq [111]

Answer:

e. exists when a single seller experiences lower average total costs than any potential competitor.

Explanation:

A monopoly is a market structure which is typically characterized by a single-seller who sells a unique product in the market by dominance. This ultimately implies that, it is a market structure wherein the seller has no competitor because he is solely responsible for the sale of unique products without close substitutes. Any individual that deals with the sales of unique products in a monopolistic market is generally referred to as a monopolist.

For example, a public water supply company is an example of a monopoly because they serve as the only source of water provider to the general public in a society.

A natural monopoly exists when a single seller experiences lower average total costs than any potential competitor because of the very high start-up or initial cost and economy of scale.

8 0
3 years ago
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