All categories

2 years ago

The two-year interest rate is 10% and the expected annual inflation rate is 5%.

1 answer:

7 0

In economics, the Fisher equation is used to determine the relationship of the nominal interest rate and the real interest rate. This equation takes into account the effect of inflation. Mathematically this is expressed as:

Real rate = $\frac{1+Nominal rate}{1+Inflation}$ -1

The values given are:

Nominal rate= 10% = 0.1

Inflation=5%=0.05

Substituting known values and by calculation:

You might be interested in

Lucas Laboratories' last dividend was $1.50. Its current equilibrium stock price is $15.75, and its expected growth rate is a co

Elis [28]

Answer:

Expected dividend yield = 10.0%

Expected capital gains yield = 5.0%

Explanation:

D0 = $1.50 (Given)

E(D1) = D0 * (1 + g) = $1.50 * (1.05) = $1.575

E(P0) = $15.75 (Given)

E(P1) = $15.75 * (1.05)1 = $16.5375

Expected dividend yield = E(D1) / E(P0)

= $1.575 / $15.75 = 0.100 = 10.0%

Expected capital gains yield = (E(P1) - E(P0)) / E(P0)

($16.5375 - $15.75) / $15.75 = 0.050 = 5.0%

4 0

3 years ago

Match each type of tax with an example of its use.

babunello [35]

Hey how you doing lollipop you doing hope answer 20%

6 0

2 years ago

Read 2 more answers

When a financial friction is added to the short-run model it: Group of answer choices shifts the MP curve up. shifts the IS curv

Alexeev081 [22]

Answer:

When a financial friction is added to the short-run model it: shifts the MP curve up.

Explanation:

The short-run model, IS/MP model, describes the Investment-Savings/Monetary Policy model used by the US Federal Reserve to decrease the real interest rate through the Federal Funds rate, i.

The Federal Funds rate is the interest rate that commercial banks with excess reserves lend to others in deficit. The resulting shift occasions a decrease in the real interest rate which triggers an increase in the inflation rate, and vice versa. With such short-run changes in the interest rate, inflation and output is influenced in desirable directions by the Federal Reserve as a foundation to achieve long-term shifts in the AD-AS model.

The AD-AS model is a long-term model that describes Aggregate Demand and Aggregate Supply which impact long-term inflation, interest rates, and output.

7 0

3 years ago

Finding the required interest rate: Your parents will retire in 18 years. They currently have $250,000, and they think they will

Salsk061 [2.6K]

Answer:

i= 8% annual compunded

Explanation:

Giving the following information:

Your parents will retire in 18 years. They currently have $250,000, and they think they will need $1,000,000 at retirement.

We need to calculate the interest rate required to reach the $1 million goal in 18 years without any additional deposit.

FV= PV*(1+i)^n

Isolating i:

i= [(FV/PV)^(1/n)] - 1

i= [(1,00,000/250,000)^(1/18)] - 1= 0.08

i= 8% annual compunded

7 0

3 years ago

Analysis of Accounts Receivable and Allowance for Doubtful Accounts Steelcase, Inc. reported the following amounts in its 2014 a

Naddika [18.5K]

Answer:

b. Gross Receivable = Net receivable +Allowance

2014 = $306.8 + $13 = $319.80

2013 = $287.3 + $14.5 = $301.8

Allowance as a % of Gross receivable = Allowance / Gross receivable

2014 = $13/319.80 = 0.041 = 4.1%

2013 = $14.5/301.8 = 0.015 = 1.5%

c. Average Net Accounts receivable = (Accounts receivable, net 2014 + Accounts receivable, net 2013) / 2 = ($306.8 + $287.3] / 2 = $297.05

Receivable Turnover = Net credit sales / Average Net Accounts receivable

Receivable Turnover = $2,989 / $297.05

Receivable Turnover = 10.06 Times

d) Cash received in 2014 = Beginning Gross receivables + Net sales - Ending Gross receivables-Adjustment in allowance (Write-off 2014)

Cash received in 2014 = $301.8 + $2,989 - $319.8 - $4.3

Cash received in 2014 = $2,966.7

Increase in customer deposits = $16 - 13.5 = $2.5

Total Cash received from customers in 2014 = Cash received in 2014 + Increase in customer deposits

Total Cash received from customers in 2014 = $2,966.7 + $2.5

Total Cash received from customers in 2014 = $2969.20

6 0

3 years ago