All categories

3 years ago

The impact of interest rate changes in the PV of $100 due in 20 years compared to the PV of $100 due in one year are:

1 answer:

8 0

Answer: c. greater because interest rate changes have a greater impact on distant cash flows than near-term cash flows.

Explanation:

Interest rate changes have a greater impact on distant cashflows because those cashflows will be exposed to the interest rates for longer. This means that they will be subjected to more discounting than a cashflow that is due in one year which would be subject to only a single year of discounting.

For instance, assume the required rate of return for two investments is 10%. One investment yields $10,000 in 20 years and another yields $10,000 in 2 years .

The present value of both are:

= 10,000 / (1 + 10%)²⁰ = 10,000 / ( 1 + 10%)²

= $1,486.43 = $8,264.46

Notice the difference. The longer term investment was more exposed to interest rate effects.

You might be interested in

The amount you owe in state income tax is based on:

Vadim26 [7]

The best and most correct answer among the choices provided by the question is the first choice. The amount you owe in state income tax is based on: how much you spend each year. I hope my answer has come to your help. God bless and have a nice day ahead!

4 0

3 years ago

Russell Preston delivers parts for several local auto parts stores. He charges clients $1.30 per mile driven. Russell has determ

Lapatulllka [165]

Answer:

A. Determine how many miles Russell needs to drive to break even?

break even formula = total fixed costs / contribution margin

total fixed costs = $1,220
contribution margin = $1.30 - $0.29 = $1.01

break even formula = $1,220 / $1.01 = 1,207.9 ≈ 1,208 miles

B. Assume Russell drove 2,500 miles last month. Without making any additional calculations, determine whether he earned a profit or a loss last month.

if he drove 2,500 he made a profit because it is more than the break even point.

C. Determine how many miles Russell must drive to earn $2,135.00 in profit.

($1,220 + $2,135) / $1.01 = 3,321.7 ≈ 3,322 miles

D. Prepare a contribution margin income statement assuming Russell drove 2,500 miles last month.

total revenue $3,250

- variable costs ($725)

contribution margin $2,525

- fixed costs ($1,220)

net income $1,305

E. Use the above information to calculate Russell’s degree of operating leverage.

Degree of operating leverage = contribution margin / operating income = $2,525 / $3,250 = 0.7769 or 77.69%

8 0

3 years ago

Oriole Company sells goods to Danone Inc. by accepting a note receivable on January 2, 2020. The goods have a sales price of $65

labwork [276]

Answer:

Explanation:

The journal entries are shown below:

Using net method:

1. Notes receivable A/c Dr $650,000 ($659,900 - $9,900)

To Sales revenue A/c $650,000

(Being the sale is recorded)

2. Cost of goods sold A/c Dr $460,000

To Inventory A/c $460,000

(Being cost of goods sold is recorded)

3. Cash A/c Dr $659,900

To Notes receivable $650,000

To Discount forfeited $9,900

(Being received payment is recorded)

Using gross method:

1. Notes receivable A/c Dr $650,000 ($659,900 - $9,900)

To Sales revenue A/c $650,000

(Being the sale is recorded)

2. Cost of goods sold A/c Dr $460,000

To Inventory A/c $460,000

(Being cost of goods sold is recorded)

3. Cash A/c Dr $659,900

To Notes receivable $659,900

(Being received payment is recorded)

6 0

3 years ago

Discuss any four ways in which Specialization has

pishuonlain [190]

Answer:

Specialization has helped in these four ways:

1. Has created economics of scale in Nigeria, which improve economic efficiency and increase output while reducing average costs at the same time.

2. Has improved the agricultural sector, which continues to be very important for the Nigerian economy.

3. Has helped bring the electrification of the country.

4. Has helped raise the standard of living in the country, because in general terms, the larger the economy, the higher the standard of living.

4 0

2 years ago

In the market experiment with taxes, after the excise tax is imposed on the market A. the price paid by buyers decreases and th

aleksley [76]

Answer:

C. the price paid by buyers increases and the price received by sellers decreases

Explanation:

In the market experiment with taxes, after the excise tax is imposed on the market the price paid by buyers increases and the price received by sellers decreases

6 0

3 years ago