The simple rate of return on the investment is closest to: <u>34.5%</u>
<u>Explanation</u>:
<em><u>Given</u></em>:
Current salvage value = $15,000
Cost of new machine = $408,000
Cash operating cost = $141,000
Simple Return on Investment is Calculated as follows:-
Simple rate of return on the investment = Net Operating Cost Saved/ Initial Investment X 100
So Simple Return = 141000/408000 X 100
= 34.5%
The simple rate of return on the investment is closest to: 34.5%
Answer:
<u>Real Property </u>
Explanation:
Capital markets refer to the market which trades in long term securities whose maturity is more than an year. The instruments traded in capital markets are usually stocks and bonds.
In private equity real estate, public and private investments are pooled together and invested in the real estate property markets. So here the underlying asset whose price fluctuates is property. If property prices soar, the investors stand to gain.
This kind of investment involves high risk but is also capable of generating a higher return as greater the risk involved, greater the return.
Answer:
d. substitution bias.
Explanation:
Price changes from year to year are not proportional, and consumers respond to these changes by altering their spending patterns. The problem this creates for inflation calculations is called substitution bias.
A problem with the Consumer Price Index (CPI) arises from the singular fact that, when the price level of a product becomes relatively less expensive or lower, consumers tend to buy more quantity of the product and consequently, a lesser quantity of goods that are relatively more expensive.
Hence, their spending pattern changes with respect to the prices but it's not completely adjusted with the Consumer Price Index (CPI), thus, making the inflation rate to differ because of the problem of substitution bias.
Answer:
b) Expectations of higher short-term interest rates in the future
Explanation:
When the yield curve is normal (upward sloping) it is because investors expect longer-maturity bonds to have a higher yield than shorter-maturity bonds, since interest rates are expected to rise in the long term.
On the contrary, if the yield curve is flat, it is because short-maturity and long-maturity bonds are giving the same, or almost the same yield, indicating that investors expect short-term interest rates to rise so much, that they compensate the capital gains for short-maturity bonds in terms of interst.
