Which of the following is NOT a common feature of a

You have a choice among three options. Option 1: receive $900 immediately. Option 2: receive $1,200 one year from now. Option 3:

vovangra [49]

Answer:

Option 2

Option 3

Option 1

Explanation:

Present value is the sum of discounted cash flows.

Present value can be calculated using a financial calculator

Present value of option 1 = $900

For option 2 :

Cash flow in year 1 = $1200

I = 15%

Present value = $1,043.48

For option 3 :

Cash flow each year from year 1 to 4 = 0

Cash flow in year 5 = $2000

I = 15%

Present value =$ 994.35

From the above figures, option 2 has the highest present value, followed by option 3 and then option 1.

To find the PV using a financial calacutor:

1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.

2. After inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.

3. Press compute

I hope my answer helps you

8 0

3 years ago

In 2008, 1 in approximately every 200 cars in the United States was stolen. Beth owns a car worth $20,000 and is considering pur

rjkz [21]

Answer:

A) The amount of the premium in fair insurance policy that replaces Beths car, must be equal to the probability or expectation of claim of car theft.

Therefore, the Premium amount = 20000 x (1/200)

= 20000 (0.005)

= $100

B) If an Insurance company charges 0.6% for replacing a stolen car, then the policy will cost beth:

20000* 0.6%

= 12,000/100

= $ 120

C) To be risk-neutral means to be indifferent to the risk. This means that Beth would be indifferent. She most likely will be focused on maximizing value for money. In other words, she will NOT pay for the insurance policy in part b because part A provides her with the exact (or fair) premium for her insurance.

D) The moral hazard problem is this, people tend to become more careless with an insurance policy in place. This moral hazard arises form the knowledge that there is an insurance policy that caters to their risks.

As a matter of practice, therefore, insurance companies factor this increased risk into their premiums. Where the premium was supposed to be $100, they may charge $120.

In summary, it means that Beth most likely will move from becoming risk neutral to becoming (to a certain degree) more risk loving.

Cheers!

3 0

3 years ago

If married and unmarried women respond similarly to a sale on perfume, these hypothetical segments fail the ________ criterion f

vladimir1956 [14]

Answer: Differentiable criterion

Explanation: In simple words, differentiable criterion refers to the phenomenon of market segments in which the producing entity differentiates its product on the basis of different customer base. The base can be set on the criteria of any factor like gender , age group or religion etc.

Under this criterion the producing entity produces the product by taking special considerations to the preferences of that particular customer group. In the given case two separate groups are responding similarly to a single product, hence, it fails differentiable criteria.

4 0

4 years ago

Egan is very skilled at budgeting his money, he is very patient, he understands how to track his own financial records, and he k

Alika [10]

The Financial career in which Egan would be most successful is:

<span>A) </span>Business Finance Management

Explanation: The Business Finance Management requires a lot of skill in planning and budgeting money. This career requires patience knowledge and understanding in tracking financial transactions. And all of these skills and knowledge are possessed by Egan that is why he can be most successful in Business Finance Management career.

6 0

3 years ago

Read 2 more answers

Transactions that affect earnings do not necessarily affect cash. Identify the effect, if any, that each of the following transa

VLD [36.1K]

Answer:

(a) Cash reduction, no effect on net income

(b) Net income reduction, no effect on cash

(c) Net income increment, no effect on cash

(d) Cash increase, no effect on net income

(e) Cash reduction, no effect on net income

Explanation:

When items or services are exchanged for cash, these may be recognized as assets or expenses. While expenses reduce income, assets do not as it forms the exchange of one asset (cash) for another.

Considering the transactions in light of the above,

a) Purchased $100 of supplies for cash - Supplies are inventory (an asset) and would not reduce net income until it is used up

(b) Recorded an adjusting entry to record use of $20 of the above supplies. No effect on cash, entry is a reduction in supplies and recognition of cost of goods sold. As such net income reduces.

(c) Made sales of $1,200, all on account. - Sales on account are credit sales. This will be recognized as a credit to sales (increase in net income) and a debit to accounts receivable.

(d) Received $800 from customers in payment of their accounts. - To recognize this, we debit cash (increase in cash) and debit accounts receivable. This has no effect on net income.

(e) Purchased equipment for cash, $2,500 - Again, this is he exchange of cash for an asset. This has no effect on income.

3 0

3 years ago