1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
Jobisdone [24]
3 years ago
7

You observe that the inflation rate in the United States is 1.0 percent per year and that T-bills currently yield 1.5 percent an

nually. Use the approximate international Fisher effect to answer the following questions.
a. What do you estimate the inflation rate to be in Australia, if short-term Australian government securities yield 5 percent per year?
b. What do you estimate the inflation rate to be in Canada, if short-term Canadian government securities yield 8 percent per year?
c. What do you estimate the inflation rate to be in Taiwan, if short-term Taiwanese government securities yield 10 percent per year?
Business
1 answer:
Vedmedyk [2.9K]3 years ago
8 0

Answer:

a) 4.5%

b) 7.5%

c) 9.5%

Explanation:

Given:

USA Inflation rate = 1.0%

T-bills current yield = 1.5%

a) What do you estimate the inflation rate to be in Australia, if short-term Australian government securities yield 5 percent per year?

To find the inflation rate in Australia, use the formula:

RUS - hUs = RFC - hFC

Where,

RUS = T-bills current yield = 1.5% = 0.015

hUs = USA Inflation rate = 1.0% = 0.01

RFC = short-term yield of Australian government securities = 5% = 0.05

Thus,

RUS - hUs = RFC - hFC

0.015 - 0.010 = 0.05 - hFC

0.005 = 0.05 - hFC

Solve for hFC:

hFC = 0.05 - 0.005

hFC = 0.045 = 4.50%

Inflation rate in Australia = 4.50%

b) What do you estimate the inflation rate to be in Canada, if short-term Canadian government securities yield 8 percent per year?

Use the same formula as in part A.

RUS - hUs = RFC - hFC

Here, RFC = 8% = 0.08

Thus,

0.015 - 0.010 = 0.08 - hFC

0.005 = 0.08 - hFC

Solve for hFC

hFC = 0.08 - 0.005

hFC = 0.075 = 7.50%

Inflation rate in Canada = 7.5%

c) What do you estimate the inflation rate to be in Taiwan, if short-term Taiwanese government securities yield 10 percent per year?

Use the same formula as in part A.

RUS - hUs = RFC - hFC

Here, RFC = 10% = 0.1

Thus,

0.015 - 0.010 = 0.10 - hFC

0.005 = 0.10 - hFC

Solve for hFC

hFC = 0.10 - 0.005

hFC = 0.095 = 9.50%

Inflation rate in Taiwan= 9.5%

You might be interested in
On June 30, 2018, Baird Company’s total current assets were $502,000 and its total current liabilities were $274,000. On July 1,
amm1812

Answer:

Before issuing the note

Current ratio

= <u>Current assets</u>

   Current liabilities

= <u>$502,000</u>

  $274,000

= 1.83: 1

After issuing the note

Current ratio

= <u>$538,400</u>

  $274,000

= 1.96:1

Explanation:

Current ratio is the ratio of current assets to current liabilities. Before issuing the note, current assets amounted to $502,000 while current liabilities were $274,000. After issuing the note, current assets increased to $538,400 as a result of $39,400 received on note issue. This increases the current ratio from 1.83 to 1.96.

7 0
3 years ago
On November 1, Alan Company signed a 120-day, 10% note payable, with a face value of $45,000. Alan made the appropriate year-end
shepuryov [24]

Answer:

Debit Notes Payable $45,000; debit Interest Payable $750; debit Interest Expense $750; credit Cash $46,500

Explanation:

The journal entry is given below:

Notes payable $45,000  

Interest payable ($45,000 × 10% × 60 ÷ 360) $750  

Interest expense ($45,000 × 10% × 60 ÷ 360) $750  

            To Cash $46,500

(Being payment of notes payable is recorded)

here note payable, interest payable, interest expense is debited as it increased the expenses and decreased the liabilities while on the other hand the cash is credited as it decreased the assets

8 0
3 years ago
Piechocki Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets
Mama L [17]

Answer:

$97,920

Explanation:

Budgeted direct material cost per unit $ 12.8

Actual level of activity 7,650

Direct material in the flexible budget $ 97,920

6 0
3 years ago
A multinational corporation has manufacturing facilities in many Asian countries due to cheaper labor. Which strategy is the cor
tatiyna

Answer:

acquisition of resources

Explanation:

The strategy that this corporation is using would be considered the acquisition of resources. This is what every multinational company does in order to cut down costs as much as possible. By pursuing and obtaining cheaper labor in a foreign country, the company is cutting down its overall costs. This can be done by also importing other resources from locations in which that resource is abundant meaning it is therefore much cheaper.

4 0
3 years ago
What is one advantage of buying a used car instead of a new car?
sukhopar [10]
Ok so one of the biggest advantages would be a lower price but not only that if it is a newer car you wont have to pay the newer car fees you basically avoid them.<span />
3 0
3 years ago
Other questions:
  • Which of the following is the best way to learn about a company culture?
    9·1 answer
  • The cost of goods for Mandy Manufacturing Company flow through an assembly and a finishing department before being transferred t
    8·1 answer
  • A company purchased $10,000 of merchandise on June 15 with terms of 3/10, n/45. On June 20, it returned $800 of that merchandise
    11·1 answer
  • Margaret has been invited to a fancy dinner party and wants to bring a good bottle of wine as a gift for the host. Since she doe
    13·1 answer
  • 3. In its most recent financial statements, Newhouse Inc. reported $50 million of net income and $810 million of retained earnin
    9·1 answer
  • he St. Augustine Corporation originally budgeted for $360,000 of fixed overhead at 100% normal production capacity. Production w
    9·1 answer
  • If fixed costs increase, the break-even point in units will
    8·1 answer
  • Huai takes out a $3,600 student loan at 6.6% to help him with 2 years of community college. After finishing the 2 years, he tran
    13·1 answer
  • Helen spent the last 85 days of 2020 in a nursing home. The cost of the services provided to her was $27,625 ($325 per day). Med
    7·1 answer
  • a realistic and cost-effective starting point for emergency services in low-income countries could be: a. major expansion of eme
    7·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!