Suppose manufacturers introduce a new model car to replace a car currently included in the CPI basket. The price of the new car
1 answer:
Answer:
The correct answer is option D.
Explanation:
The consumer price index is a tool to measure inflation in the economy. It measures the change in price level through a basket of goods generally purchased by the households. It does not include change in quality.
It is measured as
CPI =
In the given example, the price of the car is increasing but the quality is improving as well. Since the CPI does not include quality, the inflation rate will be overstated.
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Answer:
(a) 6.206%
(b) 6.54%
(c) 6.58%
Explanation:
Given that,
Commercial paper value = $3 million
Currently selling at 97.50 percent of its face value.
Days from maturity = 145
(a) Discount yield:
=
=
= 0.025 × 2.4827
= 0.06206 or 6.206%
(b) Bond equivalent yield:
=
=
= 0.026 × 2.52
= 0.0654 or 6.54%
(c) Effective annual return:
Future value = Present value ×
$100 = $97.50 ×
1.0658 = 1 + r
0.0658 or 6.58% = r
Answer:
The sales revenue would be 170,000 if Hammer Time implements the decrease in selling price.
This would generate a decrease of $10,000 in the sales revenue
Explanation:
Understanding the way sales revenue is generated:
If the selling price drops to $10
and units sold increase by 5,000
Comparing with the previous year:
This policy decrease the sales revenue which makes the business less profitable.