John Taylor's thumb rule is based on the notion that in order to assist the economy, it is necessary to produce at potential output, central banks are willing to tolerate <u>Positive rate of inflation</u>.
<h3>The Taylor Rule define as:</h3>
The Taylor Rule is a rule that ties a central bank's policy rate to inflation and economic growth. It was developed in 1993 by economist John Taylor and posits an equilibrium federal funds rate 2% higher than the yearly inflation rate.
<h3>What is rates of inflation?</h3>
Inflation is defined as an increase in the prices of goods and services purchased by households. It is calculated as the rate of change of such prices. Prices usually rise over time, but they can also fall (a situation called deflation).
<h3>Describe central banks: </h3>
A central bank, reserve bank, or monetary authority is an institution that manages a state's or formal monetary union's currency and monetary policy as well as its commercial banking system. In contrast to a commercial bank, a central bank has a monopoly on raising the monetary base.
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Answer:
1. Monetary Unit Assumption: Items not easily quantified in dollar terms are not reported in the financial statements.
2. Faithful Representation: Accounting information must be complete, neutral, and free from error.
3. Economic Entity Assumption: Personal transactions are not mixed with the company's transactions.
4. Cost Constraint: The cost to provide information should be weighed against the benefit that users will gain from having the information available.
5. Consistency: A company's use of the same accounting principles from year to year.
6. Historical Cost Principle: Assets are recorded and reported at original purchase price.
7. Relevance: Accounting information should help users predict future events, and should confirm or correct prior expectations.
8. Periodicity Assumption: The life of a business can be divided into artificial segments of time.
9. Full Disclosure Principle: The reporting of all information that would make a difference to financial statement users.
10. Materiality: The judgment concerning whether an item's size makes it likely to influence a decision-maker.
11. Going Concern Assumption: Assumes a business will remain in operation for the foreseeable future.
12. Comparability: Different companies use the same accounting principles.
Answer:
Pam and Jon's dividend income = $80,000 each
[ ($100000 <em>Accumulated E&P </em>+ <em>$60000 current E&P </em>) / 2] = $80,000
Statement of distribution for shareholders for tax purpose
Pam Jon
Total distribution $100,000 $100,000
Less: Dividend income <u>$80,000 $80,000</u>
$20,000 $20,000
Less: Stock basis <u>$11,000 $26,000</u>
Capital gain <u>$9,000 $0
</u>
<u>
</u>
Therefore, Pam has a taxable gain of $9000 which reduces the stock basis to $0, whereas Jon has not any taxable gain but the stock basis has reduced to $6000 [$26000 - $20000]
Answer: 2.09
Explanation:
Given the following ;
Strike price (K) = $50
Price (c) = $6
Rate (r) = 6% = 0.06
Stock price (So) = $51
Time (T) = 1
Recall, relation for a put-call parity(p) is given by:
p + So = c + Ke^-(rT)
p = c + [Ke^-(rT)] - So
p = 6 + [50e^-(0.06 × 1)] - 51
p = 6 + [50×e^-0.06] - 51
p = 6 + (50 × 0.9417645) - 51
p = 6 + 47.0882267 - 51
p = 53.0882267 - 51
p = 2.0882267
p = 2.09
Answer:
A. seek information about loans from the banks.
Explanation:
A loan can be defined as an amount of money that is being borrowed from a lender and it is expected to be paid back at an agreed date with interest.
Generally, the financial institution such as a bank lending out the sum of money usually requires that borrower provides a collateral which would be taken over in the event that the borrower defaults (fails) in the repayment of the loan.
An auditor refers to an authorized individual who review, examine and verify the authenticity and accuracy of business financial records or transactions.
An auditor ordinarily sends a standard confirmation request to all banks with which the entity it is auditing has done business during the year under audit, regardless of the year-end balance. One purpose of this procedure is to seek information about loans from the banks so as to examine and verify the amount that was loaned by the bank to the business entity, as well as comparing the figures (values) to that on the balance sheet.
