Select the correct answer.

Suppose we have the following Treasury bill returns and inflation rates over an eight year period:Year Treasury Bills (%) Inflat

natali 33 [55]

Answer:

Year Treasury Bills Inflation Real return

1 7.82 9.42 -1.48

2 8.6 13.04 -3.93

3 6.44 7.55 -1.03

4 5.6 5.35 0.24

5 6.02 7.31 -1.20

6 8.25 9.67 -1.29

7 11.23 13.98 -2.41

8 12.85 13.37 -0.46

a. Average return for Treasury bill = (7.82 + 8.6 + 6.44 + 5.6 + 6.02 + 8.25 + 11.23 + 12.85) / 8

Average return for Treasury bill = 66.81 / 8

Average return for Treasury bill = 8.35125

Average return for Treasury bill = 8.35

Average annual inflation rate = (9.42 + 13.04 + 7.55 + 5.35 + 7.31 + 9.67 + 13.98 + 13.37) / 8

Average annual inflation rate = 79.69 / 8

Average annual inflation rate = 9.96125

Average annual inflation rate = 9.96

b. X bar = Average

Standard Deviation = (x-X)^2

For year 1 = (7.82 - 8.35)^2 = 0.2809. Hence, the Standard deviation of other years will be calculated and summed-up to give the Standard deviation of Treasury bill return and of Inflation over this period respectively.

Standard deviation of Treasury bill returns = 2.55

Standard deviation of inflation over this period = 3.20

c. Real return for Treasury bills = ((1+nominal return)/(1+inflation rate)-1)*100

For Year 1, Real return = (1 + 7.82%) / (1 + 9.42%) - 1) * 100

Real return = 1 + 0.078 / (1 + 0.0942) - 1 * 100

Real return = (1.078 / 1.0942) -1 * 100

Real return = 0.98519 - 1 * 100

Real return = -0.01480 * 100

Real return = -1.48

Hence, the average real return for Treasury bills over this period = (-1.48 + -3.93 + -1.03 + 0.24 + -1.20 + -1.29 + -2.41 + -0.46) / 8

Average real return for Treasury bills = -11.56 / 8

Average real return for Treasury bills = -1.445

4 0

4 years ago

Jovan's Movers rents out trucks with a crew of two on a daily basis, usually to homeowners who are moving or to companies with d

Tju [1.3M]

Answer:

Explanation:

In this problem business of Jovan is to rent out trucks and earn revenues. On a particular day there is a shortage of one truck. It can be taken on rent from other party. If a big truck is hired, then any load can be carried. But the rental cost is $200. Small truck cannot carry weight beyond a range. In that case two trips are needed. Rental of one trip of small truck is $130. Cost of two trip is $150 extra. So it is $130+$150=$280. Probability of two trips is 40%. So based on these data, following decision tree diagram is draw:

From this decision tree expected rental cost of small truck based on probability is-

Expected rental of small truck =0.6 x $130 + 0.4 x $280

=$78+\$112

=$190

Decision: Since expected rental of small truck is $190, it is lower than rental of big truck of $200. So small truck is recommended.

If probabilities of trips are 50:50, then expected rental of small truck is-

Expected rental of small truck =0.5 x $130 + 0.5 x $280

=$65 + $140

=$205

Now it is more than rental of big truck. So hiring of big truck is recommended.

b) Now Jovan wants to hire an outside consultant. He will assess and recommend whether to hire a big truck or a small truck. If he recommend for big truck, then big truck will be hired. Otherwise a small truck will be bought. As per current situation probability of two trip is 40%. If consultant approves this situation, then big truck will be hired. Thus probability of hiring big truck is 40% under recommended scenario. So probability of hiring small truck with one trip is 60%. On this basis decision chart is drawn below:

Based on this diagram, expected cost of hiring a truck is-

Expected rental =0.4 x $200 + 0.6 x $130

= $80 + $78

= $158

If you compare this expected cost with the expected cost of $190 in part (a), then it is lower by $190-$158=$32

Hence, maximum $32 can be paid to consultant for hiring and taking perfect decision.

c) Now Jovan has been taken as risk averser. His risk tolerance value is $1,000. Suppose utility function is exponential of following form-

U=e^{P} where p is the probability of two trips by small truck

As a risk averser he will undertake risk only when this U value is $1,000.

U=e^{P} = $1,000

Take log on both side to get-

Plog e = log1,000

{P}{log}2.71828 = log1,000 [ since e =2.71828]

{P}= 3 / 0.43429189

=6.929 percent

So the risk averse Jovan will go for small truck only when probability of two trips for small car is 6.929 percent. Here it is 40%. So big truck will be hired.

6 0

3 years ago

Which of these could be an option after high school for a person who wants to further his education but doesn't want to take out

motikmotik

Hi there,

I can not find the complete question to help choose an option. I wil list out a variety of answers and you would be able to choose any that suits your question.

Answer/Explanation:

As an high school leaver that wants to further his education but that doesn't want to take student loans to do it, there are a variety of option such high school leaver can choose from.

1. work and study: this simply means that the high school leaver can decide to work alongside college or university as use the money from the job to settle university bills.

2. Scholarships: Am high school leaver can try scholarship opportunities tourther his education. A scholarship can be said to be a philanthropic act by a body or individual to reward or help individuals with tuition and other things as stated in the terms and conditions.

3. Setup a funding site: an high school leaver can set up a funding site in which donations can be made to fund the higher education.

Cheers.

5 0

4 years ago

Nibbles Pet Food Corporation is in the process of developing its new market strategy. The marketing team has already established

Anon25 [30]

Answer:

A) Create a promotion strategy to increase customer awareness.

Explanation:

The company has already addressed 3 of the 4 marketing Ps, product, placement and price, so it is missing promotion.

Promotional strategies refers to how the company is going to make customers aware of their product and differentiate their product from the competition. Promotion ties up the other 3 Ps together into a promotional strategy, that may include: advertising, social media, email, public relations, etc.

8 0

4 years ago

ABO purchased a truck at the beginning of 2018 for

valentina_108 [34]

Answer:

B. Debit Loss $5,000.

Explanation:

depreciation per year under straigh-line method:

$\frac{cost- salvage}{useful \: life}$

$\frac{140,000 - 20,000}{6}$

depreciation per year: 20,000

book value at 2019 year-end:

140,000 - 20,000 x 2 = 100,000

disposal value: 95,000

loss for 5,000

loss at diposal: 5,000 debit

cash 95,000 debit

accumulated depreciation 40,000 debit

truck 140,000 credit

3 0

4 years ago