The status of this exchange of promises at this time is that it is a voidable contract.
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What is a voidable contract?</h3>
- A voidable contract, as opposed to a void contract, is a legitimate contract that can be confirmed or rejected at the discretion of one of the parties. The contract only binds one of the parties.
- The unbound party may disavow the contract, at which point it becomes null and invalid.
- Coercion, undue influence, mental incapacity, intoxication, deception, or fraud are common reasons for voiding a contract.
- A minor's contract is frequently voidable, however a minor can escape a contract only while his or her minority status and for a reasonable time after reaching the age of majority.
- The contract is regarded as ratified after a reasonable period of time and cannot be avoided.
- Other examples include real estate contracts, lawyer contracts, and so on.
Therefore, the status of this exchange of promises at this time is that it is a voidable contract.
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Answer: delaying collection of foreign currency receivables if that currency is expected to appreciate
Explanation:
A lag strategy involves the delay in collecting foreign currency receivables when an economic agent like the individuals, firms or the government believes that the currency will appreciate.
A lag strategy also involves the delay in payables when one is aware that the currency will soon depreciate.
Answer:
a.) The proportional up movement , u, for the currency can be calculated using the following formula:
u = eStd Dev * Square root of t
u = e0.06*square root of 0.25
u = 1.0305
b.) Probability of up movement, p , = (a - d) / (u - d)
where a = ert where r = 0.025, t = 0.25
a = e0.025*0.25 = 1.0063
d = 1 / u = 1 / 1.3050 = 0.7663
p = (1.0063-0.7663) / (1.3050-0.7663)
p = 0.46
1-p = 1-0.46 = 0.54
c) Price of an American Call Option on the currency : we use binomial tree for that , as follows: The amounts below line indicate the option price and figures above line indicate the underlying asset price which is 0.55555
Answer:
both goods until the marginal utility of the last CD purchased is four times the marginal utility of the last magazine purchased.
Explanation:
The marginal utility of goods and services is the additional satisfaction that a consumer derives from consuming or buying an additional unit of a good or service.
In Economics, the law of diminishing marginal utility states that as the unit of a good or service consumed by an individual increases, the additional satisfaction he or she derives from consuming additional units would start decreasing or diminishing as the units of good or service consumed increases.
In this scenario, Carolyn spends her income on popular magazines and music CDs. If the price of a CD is four times the price of a magazine and if Carolyn is maximizing her utility, she buys both goods until the marginal utility of the last CD purchased is four times the marginal utility of the last magazine purchased.
Answer:
A. $ 748,714
Explanation:
This 10-year bond with semiannual coupon payment will have 20 coupon payments plus 1 par payment at maturity. The bond price issuing price is the present value of all coupon payments as well as par value. Let formulate the bond price as below:
Bond price = [(Coupon rate/2) x (Par value)]/[1 + (Market interest rate/2)] + [(Coupon rate/2) x (Par value)]/[1 + (Market interest rate/2)]^2 + ...+ (Coupon rate/2) x (Par value) + Par value]/[1 + (Market interest rate/2)]^20
Putting all the number together, we have:
Bond price = [(10%/2) x (950,000)]/[1 + (14%/2)] + [(10%/2) x (950,000)]/[1 + (14%/2)]^2 + ...+ (10%/2) x (950,000) + 950,000]/[1 + (14%/2)]^20 = 748,714