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irakobra [83]
3 years ago
7

If you have 1-year rate is 8%, 2-year rate is 9%, and 3-year rate is 10%. Assume that the pure expectations theory for the term

structure of interest rates holds, no liquidity or maturity premium exists. What is implied 1 year rate 2 year from now?
a. 9%
b. 10%
c. 11%
d. 12%
Business
1 answer:
e-lub [12.9K]3 years ago
3 0

Answer:

1 year rate 2 year from now = 12%  (Approx)

Explanation:

Given:

1-year rate = 8%

2-year rate = 9%

3-year rate = 10%

Computation:

According to Pure Expectations Hypothesis,

(1 + 3-year rate)³ = (1 + 2-year rate)² (1 + 1 year rate 2 year from now)

(1.10)³ = (1 + 1.09)²(1 + 1 year rate 2 year from now)

1.331 = 1.1881 (1 + 1 year rate 2 year from now)

(1 + 1 year rate 2 year from now)  = 1.12

1 year rate 2 year from now = 0.12

1 year rate 2 year from now = 12%  (Approx)

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Based on this income statement for Company ZYX for the year ending December 31, 2014, what adjustment would need to be made to N
Minchanka [31]

Answer:

Company ZYX cash flow from Operating Activities using the indirect method are given below.

<em>Cash flow from operating activities</em>

Net INCOME BEFORE TAXES                        $ 190,000

Adjustment For

Gain(Loss) on sale of Equipment                   $  30,000

Other Income/(Expense)                                 ($  46,000)

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3 0
3 years ago
The ABC Corporation decreases all of its inputs by 12 percent and finds that its output falls by only 8 percent. This means that
RoseWind [281]

Answer:

In the range of diseconomies of scale

Explanation:

Economies of scale refers to a concept whereby a firm accrues cost advantage owing to it's increased scale of production.

Economies of scale points towards efficient production.

Conversely, Diseconomies of scale refers to the phase wherein a firm experiences cost disadvantages owing to increase in organizational operations and output level.

Reasons for operation of this phase being, lack of motivation and proper coordination between employees since there are too many employees and management gets difficult.

In the given case, as the corporation decreased it's inputs, the output fell less proportionately which means the firm was earlier operating in the phase of diseconomies of scale.

6 0
3 years ago
The expected return and standard deviation of a portfolio that is 30 percent invested in 3 Doors, Inc., and 70 percent invested
kirill115 [55]

Answer:

For correlation 1 the standard deviation of portfolio is 0.433.

For correlation 0 the standard deviation of portfolio is 0.3191.

For correlation -1 the standard deviation of portfolio is 0.127.

Explanation:

The standard deviation of a portfolio is computed using the formula:

\sigma_{P}=\sqrt{w^{2}_{1}\sigma_{1}^{2}+w^{2}_{2}\sigma_{2}^{2}+2\times r\times w_{1}\sigma_{1}w_{2}\sigma_{2}}

(1)

For <em>r</em> = + 1 compute the standard deviation of portfolio as follows:

\sigma_{P}=\sqrt{w^{2}_{1}\sigma_{1}^{2}+w^{2}_{2}\sigma_{2}^{2}+2\times r\times w_{1}\sigma_{1}w_{2}\sigma_{2}}\\=\sqrt{(0.30^{2}\times 0.51^{2})+(0.70^{2}\times 0.40^{2})+(2\times1\times0.30\times 0.51\times0.70\times 0.40)}\\=\sqrt{0.187489}\\=0.433

Thus, for correlation 1 the standard deviation of portfolio is 0.433.

(2)

For <em>r</em> = 0 compute the standard deviation of portfolio as follows:

\sigma_{P}=\sqrt{w^{2}_{1}\sigma_{1}^{2}+w^{2}_{2}\sigma_{2}^{2}+2\times r\times w_{1}\sigma_{1}w_{2}\sigma_{2}}\\=\sqrt{(0.30^{2}\times 0.51^{2})+(0.70^{2}\times 0.40^{2})+(2\times0\times0.30\times 0.51\times0.70\times 0.40)}\\=\sqrt{0.101809}\\=0.3191

Thus, for correlation 0 the standard deviation of portfolio is 0.3191.

(3)

For <em>r</em> = -1 compute the standard deviation of portfolio as follows:

\sigma_{P}=\sqrt{w^{2}_{1}\sigma_{1}^{2}+w^{2}_{2}\sigma_{2}^{2}+2\times r\times w_{1}\sigma_{1}w_{2}\sigma_{2}}\\=\sqrt{(0.30^{2}\times 0.51^{2})+(0.70^{2}\times 0.40^{2})+(2\times-1\times0.30\times 0.51\times0.70\times 0.40)}\\=\sqrt{0.016129}\\=0.127

Thus, for correlation -1 the standard deviation of portfolio is 0.127.

3 0
3 years ago
a company saw a drop in sales after negative publicity around a scandal involving safetry reports. the strategic changes the com
Montano1993 [528]

Answer:

The question is not complete, below is the complete question:

A company saw a drop in sales after negative publicity around a scandal involving safety reports. the strategic changes the company makes to deal with this situation are reactive changes?

(A) True

(B) False

Correct answer is (A) True

Explanation:

This shows that a company external environment, as an impact on the company sales of goods and services.

5 0
3 years ago
g Jana just found out that she is going to receive an​ end-of-year bonus of ​$32,200. She is in the 35 percent marginal tax brac
maria [59]

Answer:

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Now assume that instead of receiving a​ bonus, Jana receives the ​$32,200 as a​ long-term capital gain. What will be her​ tax?

  • tax liability = $32,200 x 15% = $4,830

Which form of compensation offers Jana the best​ after-tax return?

  • if the bonus is taxed as a long term capital gain, she will páy less than half the taxes, so it is the best option for her

Would your calculation be different if the gain was​ short-term rather than​ long-term?

  • Short term capital gains are taxed at the same rate as ordinary income, so the difference between the bonus being a long vs short term capital gain is very significant to Jana.

8 0
3 years ago
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