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3 years ago

What is the effective annual rate (EAR)?

2 answers:

7 0

Answer: The effective annual rate (EAR) is the interest rate that would earn the same interest with annual compounding.

The Effective Annual Rate (EAR) is know as the interest rate earned on a subject/asset or remunerated on a borrowing as a consequence of compounding interest over period of time.

The formula to compute effective annual rate is as follow:

$Effective Annual Rate = [1 + \frac{interest rate}{compounding periods}]^{time periods} - 1$

∴ Option (c) is correct.

Furkat [3]3 years ago

6 0

Answer:

The correct option here is C) .

Explanation:

The EAR (effective annual interest rate) which is also know as annual equivalent rate, is the interest rate which is either earned or it is paid on a loan or an investment or any financial product because of the compounding done over a defined period of time. This rate comes in very handy when one has to compare different products like loans or certificate of deposits.

FORMULA -

= ( 1 + i / n )^n - 1

where i = interest rate(NOMINAL ) and n = number of periods

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Which of these are fixed expenses?

AysviL [449]

Answer:

car insurance, rent, student loan payments

Explanation:

Fixed expenses or fixed costs remain constant throughout a financial period. In the year under consideration, fixed expenses will have the same figures regardless of the production level. Fixed costs contrast variable costs, which vary depending on the level of business activities.

From the list provided, car insurance, rent, student loan payments will likely remain the same in the financial period. The other expenses, such as pet needs, entertainment, public transportation costs, and gifts, are bound to be determined by production volumes.

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3 years ago

B Corporation, an accrual basis taxpayer, is owned 75 percent by Bonnie, a cash basis taxpayer. On December 31, 20X1, the corpor

Luda [366]

Answer:

c. $15,000

Explanation:

The explanation for this question is given in the attachment below.

3 0

3 years ago

An investment project has annual cash inflows of $4,400, $3,900, $5,100, and $4,300, for the next four years, respectively. The

RoseWind [281]

Answer:

Discounted payback period shall be as follows:

a. 1 year 7.36 months

b. 2 years 3.27 months

c. 3 years 2.9 months

Explanation:

a. Payback period in case of cash outflow = $5,700

For calculating the pay back period we shall firstly discount the cash flows to present value @14 %.

Year Cash Flow PV Factor PV of Cash Flow Cumulative

Cash Flow

0 - $5,700 1 - $5,700 -5,700

1 $4,400 0.877 $3,858.8 -$1,841.2

2 $3,900 0.770 $3,003 $1,161.8

Since the cumulative cash flows are positive in 2nd year payback period =

1 + $\frac{1,841.2}{3,003} \times 12$ = 1 year and 7.36 months

b. Payback period in case of cash outflow = $7,800

For calculating the pay back period we shall firstly discount the cash flows to present value @14 %.

Year Cash Flow PV Factor PV of Cash Flow Cumulative

Cash Flow

0 - $7,800 1 - $7,800 -7,800

1 $4,400 0.877 $3,858.8 -$3,941.2

2 $3,900 0.770 $3,003 -$938.2

3 $5,100 0.675 $3,442.5 $2,504.3

Since the cumulative cash flows are positive in 3rd year payback period =

2 + $\frac{938.2}{3,442.5} \times 12$ = 2 years and 3.27 months

b. Payback period in case of cash outflow = $10,800

For calculating the pay back period we shall firstly discount the cash flows to present value @14 %.

Year Cash Flow PV Factor PV of Cash Flow Cumulative

Cash Flow

0 - $10,800 1 - $10,800 -$10,800

1 $4,400 0.877 $3,858.8 -$6,941.2

2 $3,900 0.770 $3,003 -$3,938.2

3 $5,100 0.675 $3,442.5 -$495.7

4 $4,300 0.592 $2,545.6 $2,049.9

Since the cumulative cash flows are positive in 4th year payback period =

3 + $\frac{495.7}{2,049.9} \times 12$ = 3 years and 2.9 months

Final Answer

Discounted payback period shall be as follows:

a. 1 year 7.36 months

b. 2 years 3.27 months

c. 3 years 2.9 months

7 0

3 years ago

Kingston anticipates total sales for June and July of $370,000 and $318,000, respectively. Cash sales are normally 60% of total

Alex17521 [72]

Answer:

$117,600

Explanation:

Given that the company has Cash sales that are normally 60% of total sales and Of the credit sales, 25% are collected in the same month as the sale, 60% are collected during the first month after the sale, and the remaining 15% are collected in the second month after the sale

In June, total sales $370,000

Amount that would not have been collected from this sale at the end of July

= 40% * 15% * $370,000

= $22,200

In July, total sales is $318,000,

Amount that would not have been collected from this sale at the end of July

= 40% *75% * $318,000

= $95,400

Hence the amount of accounts receivable reported on the company’s budgeted balance sheet as of July 31

= $22,200 + $95,400

= $117,600

8 0

3 years ago

Suppose the economy is in long-run equilibrium. If there is a sharp increase in the minimum wage as well as an increase in taxes

sergiy2304 [10]

Suppose the economy is in the long run equilibrium. If there is a sharp increase in the minimum wage as well as an increase in taxes then in the short run, real GDP will

fall and the price level might rise, fall, or stay the same. In the long run, the price level might rise, fall, or stay the same but real GDP will be lower.

Given that this economy is in the long run equilibrium. Given a sharp increase in minimum wage and taxes, then real GDP will decrease in the short run as well as the price level.

In the long run it may stay the same. But the Real GDP will definitely be lower.

3 0

3 years ago

What is the effective annual rate​ (EAR)?

What is the effective annual rate (EAR)?