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2 years ago

The assumption of continuity says that:

Business

2 answers:

Lostsunrise [7]2 years ago

6 0

Answer:

The correct answer is potion (d) If bundle A is preferred to bundle B, there is a region around A such that any bundle C that lies in that region is preferred to B.

Explanation:

The assumption of continuity is all about the choice of different goods and service which the consumers exercise. When two goods are presented before a consumer, a choice can be made on either of them. He can either choose goods A or goods B.

Again, if goods A has been selected and goods B is left, there is a possibility that goods C which lies in that region will be preferred to B.

elena-s [515]2 years ago

5 0

Answer:

The answer is D. if bundle A is preferred to bundle B, there is a region around A such that any bundle C that lies in that region is preferred to B

Explanation:

Continuity is an assumption. These assumptions are abstractions as such in principle nothing to be found in reality (between the same is the case for distribution models like the famous normal distribution). The reults are reasonably interpretable when the assumptions are reasonable for the data used to fit the models.

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Shelly’s preferences for consumption and leisure can be expressed as U(C, L) = (C – 100) * (L – 40). This utility function impli

ludmilkaskok [199]

Answer:

Explanation:

U(C, L) = (C – 100) × (L – 40)

(a) C = (w - t)[110 - L] + 320

C = 10[110 - L] + 320

C + 10L = 1420

where,

C- consumption

w - wages

t - taxes

L - Leisure

(b) Given that,

L = 100 then,

C = 420

$MRS=\frac{MU_{L} }{MU_{C} }$

$MRS=\frac{C-100 }{L-40}$

$MRS=\frac{320}{60}$

= 5.33

C = 320

Reservation wage:

$MRS=\frac{C-100 }{L-40}$

$MRS=\frac{220}{70}$

= 3.14

(d) At optimal level,

$\frac{C-100}{L-40}=\frac{10}{1}$

C - 100 = 10L - 400

C - 10L = -300

C = 10L - 300

Using budget constraint:

C + 10L = 1420

10L - 300 + 10L = 1420

20L = 1720

L* = 86 and C* = 560

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3 years ago

Hilda and Hyatt paid $7,875 last year in mortgage interest, $4,200 in principal payments, $1,850 in property tax, $840 in mortga

olga55 [171]

Answer:

Mortgage interest of $7,875 and property taxes of $1,850.

Explanation:

A tax deduction can be defined as the total amount of money that one can deduct to lower their tax liability. More tax deductions always implies a reduced tax liability. In dealing with mortgage payments, tax deductions should be considered carefully to determine how much one tax one needs to pay. The following mortgage expenses are considered for deductions;

1. Mortgage interest

A mortgage interest deduction is a deduction that allows homeowners to subtract the interest on the loan they used to pay for the purchase, improvements or building of a home. In our case, Hilda and Hyatt are liable to a deduction of $7,875.

2. Property tax

In general, state and local property taxes are eligible to be deducted from the federal income taxes of a property owner. The only taxes that are deductible are state, local and foreign taxes levied for public welfare. They do not include services like home renovation and trash collection. The federal tax as of 2018 for property tax was capped at a total of $10,000. This means that any property tax value below $10,000 was eligible to a property tax deduction of that amount.

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3 years ago

ABC Corp. has just paid a dividend of $0.26. ABC has an annual required return of 12%.

Elis [28]

Answer:

a. If dividends are annual and expected to be constant, what is the intrinsic value (fair price) of ABC stock?

P₀ = $0.26 / 12% = $2.16667 = $2.17

b. What is ABC's dividend yield?

$0.26 / $2.17 = 12%

c. From now on, assume that the dividend of 0.26 was a quarterly dividend. What is the quarterly discount rate?

12% / 4 = 3%

d. What is the intrinsic value if dividends are constant and quarterly?

P₀ = $0.26 / 3% = $8.66667 = $8.67

e. We now think that dividends will grow by 0.3% from quarter to quarter. The firm just paid the quarterly dividend of 0.26. What is the intrinsic value of ABC stock?

P₀ = ($0.26 x 1.003) / (3% - 0.3%) = $9.6585 = $9.66

f. A different analyst thinks that ABC's dividends will grow by 5% for the next 4 quarters, and then grow by 0.3% thereafter. What is the intrinsic value?

Div₀ = $0.26

Div₁ = $0.273

Div₂ = $0.287

Div₃ = $0.301

Div₄ = $0.316

Div₅ = $0.317

terminal value in 4 quarters = $0.317 / (3% - 0.3%) = $11.74

P₀ = $0.273/1.03 + $0.287/1.03² + $0.301/1.03³ + $0.316/1.03⁴ + $11.74/1.03⁴ = $0.265 + $0.271 + $0.275 + $0.281 + $10.43 = $11.522

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