Fernandez Corporation purchased a truck at the beginning of 2014 for $50,000. The truck is estimated to have a salvage value of
$2,000 and a useful life of 160,000 miles. It was driven 23,000 miles in 2014 and 31,000 miles in 2015.
Compute depreciation expense for 2014 and 2015 using units of production method.
Compute depreciation expense for 2014 and 2015 using units of production method.
1 answer:
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Answer: B. Corporate Bonds and T-Bills
Explanation:
As you want to be 95% certain, this would require a 95% confidence interval.
With the given returns and standard deviations, the range of returns expected will be computed by;
Upper limit = Return + 2*SD
Lower limit Return - 2*SD
Stocks
Upper Limit = 18.37% + 2 (38.79%)
= 96.0%
Lower Limit = 18.37% - 2 (38.79%)
= -59.2%
S&P 500
Upper Limit = 11.84% + 2(20.01%)
= 51.9%
Lower Limit = 11.84% - 2(20.01%)
= -28.2%
Corporate Bonds
Upper Limit = 6.47% + 2(6.98%)
= 20.4%
Lower Limit = 6.47% - 2(6.98%)
= -7.5%
T-Bills
Upper Limit = 3.46% + 2(3.14%)
= 9.7%
Lower Limit = 3.46% - 2(3.14%)
= -2.8%
The lower limit show the lowest return achievable given a 95% confidence level.
<em>Only </em><em>Corporate Bonds</em><em> and </em><em>T-Bills</em><em> will give a minimum that is above 8% so they should be chosen. </em>
