In Aggregate Demand, the biggest component is Consumption, or household spending on final goods and services, and it is generally determined by Disposable Income. At very low levels of Income, Autonomous Consumption Spending (not subject to income limits) exists. True False
Answers
The statement "At very low levels of Income, Autonomous Consumption Spending (not subject to income limits) exists" is true.
The statement, "At very low levels of Income, Autonomous Consumption Spending (not subject to income limits) exists," is a True statement. In Aggregate Demand, the biggest component is Consumption, or household spending on final goods and services, and it is generally determined by Disposable Income.
Consumption is often influenced by income levels, disposable income, and autonomous consumption spending.Income is a determinant of consumption in macroeconomics. It is commonly accepted that, ceteris paribus (all other things being equal), higher incomes result in higher consumption. However, at very low levels of Income, Autonomous Consumption Spending (not subject to income limits) exists.
There are two types of consumption in economics, namely autonomous consumption and induced consumption. Autonomous consumption is the level of consumption that takes place even when income is zero. In contrast, induced consumption is the level of consumption that changes as income changes.
Consumption that does not depend on income is known as autonomous consumption, while consumption that is affected by income is known as induced consumption. In general, autonomous consumption can occur when people have access to other sources of funding, such as savings, welfare payments, or financial support from family and friends, even if their income is low.
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Related Questions
What does strategic trade policy suggest a government should use to support promising firms?
Answers
Promising firms in recently emerging industries with significant scale economies should be protected by government subsidies.
Describe a firm.A firm is a business that provides expert services. This could be a corporation, a limited liability company (LLC), or a partnership. Most firms have just one location.
Which firms are examples?A single proprietorship, partner, a limited liability company, and corporation are examples of firms. A partnership is slightly more frequently linked to the phrase. The legal safeguards provided by a specific kind of legal organization cannot be specifically described by this phrase due to its broad definition.
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a surfboard manufacturer orders 100 units of fiberglass material and promises to pay the supplier at a later date. the surfboard manufacturer will record the amount to be paid as
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The manufacturer will record the amount to be paid as accounts payable.
Accounts payable are amounts that a company owes to its creditors for goods or services that it has received but has not yet paid for. These amounts are typically recorded on the balance sheet as a liability and are paid off over time, either through the issuance of additional debt or the use of cash on hand.
In general, accounts payable represent short-term obligations that a company expects to pay off within a year or operating cycle. In the given case the manufacturer has already ordered 100 units made of fibreglass material. He has promised to pay the amount at a later date, thus for the manufacturer, the amount will be recorded as an account payable as it is yet to be paid.
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Choose one of the laws that protect consumers' financial rights and find three articles describing instances of financial institutions breaking this law. Write a report (about 500 words) describing the circumstances of the violation and the penalties associated with the violation.
Answers
Answer:
Consumer protections sound like it should be a guarantee in Usa, but the government never intervened to protect citizens in the 1960s.
It began mostly with 1968 Consumer Credit Protection Act, when Congress stepped on from violence to defend consumers and their financial histories.
Many regulations expanded investor protections in the years that followed, detailing how the government can obtain records from bank clients, how banks manage lenders and how lenders manage deposit accounts.
During the Great Depression of 2008, it all reached a climax and with that, the financial stability oversight Bureau was created, a new federal department committed to defending customers.
Answer:
For this report I chose to use the Truth in Lending Act. The Truth in Lending Act protects you against inaccurate and unfair credit billing and credit card practices. It requires lenders to provide you with loan cost information so that you can comparison shop for certain types of loans. This protects you from loan overdraft and over billing. This allows the consumer ease to their day of anytime they run into finacial issues. As this makes better sense to consumers it helps others all over the world. People use it in hopes that this will help them in everyday.
Explanation:
Explain how you would apply any five pricing techniques to attract ccustomers
Answers
Answer:
1. Price skimming. Skimming involves setting high prices when a product is introduced and then gradually lowering the price as more competitors enter the market. 2. Market penetration pricing 3. Premium pricing. 4. Economy pricing. 5. Bundle pricing. (these are just some that I know)
Explanation:
a check received from the offeror may be held uncashed by the broker until acceptance of the offer, provided the:
Answers
When a broker receives a check from an offeror, they may hold it uncashed until acceptance of the offer is received. The offeror is the person making the offer, while the broker is the middleman who facilitates the transaction. The acceptance refers to the recipient of the offer agreeing to the terms of the offer.
This process is often used in real estate transactions, where the buyer makes an offer to purchase the property, and the broker holds the deposit check until the seller accepts the offer. This allows for a more secure transaction and ensures that the funds are available when needed.
However, it is important to note that the specific terms of holding the check may vary depending on the agreement between the offeror, broker, and acceptance. In any case, it is important to have a clear and concise agreement between all parties involved to avoid any confusion or legal issues.
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ACTIVITY 2.
Identify and explain briefly the question below
1 What are the 4P's in marketing plan?Explain each
А__________
B__________
С__________
D__________
Answers
Answer:
A. Product
B. Price.
C. Place.
D. Promotion.
Explanation:
Marketing plan can be defined as the choices about product attributes, pricing, distribution, and communication strategy that a company blends and offer its targeted markets (customers) so as to build and maintain a desired response.
Generally, a marketing plan is made up of the four (4) Ps and these includes;
1. Products: this is typically the goods and services that gives satisfaction to the customer's needs and wants. They are either tangible or intangible items.
2. Price: this represents the amount of money a customer buying goods and services are willing to pay for it.
3. Place: this represents the areas of distribution of these goods and services for easier access by the potential customers.
4. Promotions: for a good sales record or in order to increase the number of people buying a product and taking services, it is very important to have a good marketing communication such as advertising, sales promotion, direct marketing etc.
Paul is a student who works after school and weekends at a local fast-food restaurant. His total gross income from his job is $9,500. Using his standard deduction of $12,950 and the 2022 tax tables, how much in taxes would Paul have to pay?
US Tax Rates for 2022 separated by those filing as Single and those filing as Married Filing Jointly. The tax brackets are as follows for those filing as Single: the tax rate is 10% on taxable income between $0 and $10,275, the tax rate is 12% on taxable income between $10,276 and $41,775, the tax rate is 22% on taxable income between $41,776 and $89,075, the tax rate is 24% on taxable income between $89,076 and $170,050, the tax rate is 32% on taxable income between $170,051 and $215,950, the tax rate is 35% on taxable income between $215,951 and $539,900, and the tax rate is 37% on all taxable income over $539,901. The tax brackets are as follows for those filing as Married Filing Jointly: the tax rate is 10% on taxable income between $0 and $20,550, the tax rate is 12% on taxable income between $20,551 and $83,550, the tax rate is 22% on taxable income between $83,551 and $178,150, the tax rate is 24% on taxable income between $178,151 and $340,100, the tax rate is 32% on taxable income between $340,101 and $431,900, the tax rate is 35% on taxable income between $431,901 and $647,850, and the tax rate is 37% on all taxable income over $647,851.
A. 10%
B. 0%
C. 12%
D. 22%
8 of 10
Answers
Paul will pay 0% in taxes. Option B
How to calculate how much Paul will pay in taxesTo calculate the taxes Paul would have to pay, we need to determine his taxable income and then apply the corresponding tax rate.
Paul's total gross income is $9,500, and he has a standard deduction of $12,950. The taxable income is calculated by subtracting the standard deduction from the total gross income:
Taxable income = Total gross income - Standard deduction
Taxable income = $9,500 - $12,950
Taxable income = -$3,450
Since Paul's taxable income is negative, it means he doesn't have any taxable income. In this case, his tax liability would be $0.
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Look around your room or in your house and find five different objects and identify where they were made. In at least 100 words, discuss how you have personally benefited from trade and provide at least 2 examples. Identify 1 positive impact of trade on your life and 1 way that you have been negatively impacted also.
Answers
Answer:
As I look around my house I find a pocket watch that has helped me tell time, a handy knife that saved my but while camping, a flashlight that helps me see in the dark, and books that I read to allow my mind to wonder. I’ve even got a feather pen I use to write down important notes. Each of these items required trade in order to receive. I traded an old knife for the pocket watch, a few books for new books, and so on with the other items. Trading is a form of giving to receive and can be used to get someone you want from someone else who wants something you have. However trading isn’t that easy due to the fact of poor trades such as a trade I once did for a hammer, I traded a spool of wire for the hammer only to realize that I needed the wire more then the hammer. Not all trade is bad though because it can also benefit you by getting you something better and even someone else something they need. That is the importance of trade.
Explanation:
Suppose that there are three plots in Mountain resort, land available for sale in Park city and six potential buyers each interested in purchasing one plot assume that all of the plaes are basically indistinguishable, and at the minimum selling price of each is $745,000 the following table list, each potential buyers willingness and ability to purchase a plot of land
Which of these people will purchase one of the three Mountain resort plots check all that apply .
Now assume that the three Mountain plots have been sold to the people that you indicated in the previous session, suppose that a few weeks after the last of those mountain Plaza sold another basically identical mountain plot goes on the market for sale at a minimum price of $732,500. This fourth plot ___ be sold, because __ will purchase it from the seller for at least a minimum price
Answers
Developmental psychologist Jean Piaget from Switzerland created the Three Mountains Task. Based on his theories about cognitive development, Piaget developed a developmental psychology framework.
What is Three mountain problem?His hypothesis proposed four stages for cognitive growth. They were categorized as the sensorimotor, preoperational, concrete operational, and formal operational stages. The Three Mountain Problem was developed by Piaget to evaluate a kid's egocentric thinking, which was also a useful indicator of whether the child was in the preoperational stage or the concrete operational stage of cognitive development.To examine egocentrism in young children's reasoning, Piaget used the Three Mountain Problem. As the task was initially set up:A three-mountain model is displayed in front of the child sitting at a table. There were various-sized mountains, each of which was distinguished by a unique feature (one mountain had snow; one had a red cross on top; one had a hut on top). A 360-degree observation of the model was permitted by the child. The youngster is given 10 images after getting a good look at the model, during which a doll is positioned at various angles with respect to the child. Whichever one of the ten images best captures the doll's perspective is to be chosen by the youngster.To Learn more About Three Mountains Task Refer To:
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Alternative R has a first cost of $85,000, annual M&O costs of $58,000, and a $20,000 salvage value after 5 years. Alternative S has a first cost of $175,000 and a $46,000 salvage value after 5 years, but its annual M&O costs are not known. Determine the M&O costs for alternative S that would yield a required incremental rate of return of 22%.
The M&O cost for alternative S is $ ?
Answers
M&O cost for alternative S is $82,919.08.
To determine the M&O costs for alternative S that would yield a required incremental rate of return of 22%, we need to calculate the present worth of both alternatives.Using the Present Worth equation,
\(PW = PW_F + PW_A + PW_E\)
Here,PW_F is the present worth of the First Cost,\(PW_A\) is the present worth of the Annual Costs, and \(PW_E\) is the present worth of the End-of-Life Salvage Value.Assuming that "i" is the required incremental rate of return, then the equation becomes,
\(PW = -FC + (A / i) * (1 - 1 / (1 + i)^n) + (S / (1 + i)^n)\)
where A = Annual Costs, FC = First Cost, S = Salvage Value after n years, and n is the time period of analysis.
Now, for Alternative R, \(PW_R = -85000 - (58000 / i) * (1 - 1 / (1 + i)^5) + (20000 / (1 + i)^5)\)
For Alternative S, \(PW_S = -175000 - (A_S / i) * (1 - 1 / (1 + i)^5) + (46000 / (1 + i)^5)\)
We are given that for Alternative R,\(A_R\)= 58000. The value of i is not given. But we can use trial and error method to calculate it. Incrementing i by 1% for each iteration, we get the following values of PW_R for different values of i. i
PW_R 10% $27,689.98 11% $23,889.03 12% $20,849.79 13% $18,449.12 14% $16,570.31 15% $15,114.29 16% $14,007.98 17% $13,193.00 18% $12,622.14 19% $12,257.17 20% $12,072.00 21% $12,049.82 22% $12,180.23 (At i = 22%, PW_R = $12,180.23)
Therefore, for Alternative S,
PW_S = -175000 - (A_S / 22%) * (1 - 1 / (1 + 22%)^5) + (46000 / (1 + 22%)^5)
Equating\(PW_R\) and\(PW_S\), and solving for\(A_S\), we get\(A_S\) = $82,919.08
Therefore, the M&O cost for alternative S is $82,919.08.
The M&O cost for alternative S is $82,919.08.
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what difference would it make to the economy if there were no money? What commodities might serve as money instead? Provide reason for your answers.
Answers
Answer:
Well, we would simply be reduced to a barter economy. Therefore we would have to trade items for items.
Explanation:
This is the way it is because "Barter" is The exchange (goods or services) for other goods or services without using money. So if we needed beef, we would have to give the person trading the beef something of ours. As for countries who want to trade, if one needs wool, and one needs iron, and country A has Iron and country B has wool They'd barter the two items.
In parliamentary procedure, a meeting begins when the chair person says which of the following phrases?
a. We will now begin the meeting.
b. The meeting has been called.
C. The meeting will now come to order.
d. There shall be order and commencement.
Answers
Answer:
c
Explanation:
got it right on test
In parliamentary procedure, a meeting begins when the chairperson says The meeting will now come to order. Thus option A is correct.
What is parliamentary procedure?A parliamentary system, sometimes known as a parliamentarian system, is a method of democratic government whereby the executive branch obtains the backing of the legislative, usually a parliament, to whom it is answerable.
A really well agenda results in shorter sessions that go more smoothly. The topics that will be covered in what order should be listed on the agenda. Establish a priority list if there are multiple critical items.
Ahead-of-time preparation and the use of agendas is preferred by some boards. This was stating that there will be a commencement. Therefore, option A is the correct option.
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There commencement.
What is the basis of the law of demand?
Group of answer choices
Self-interested behavior
Marginal utility
Utility curves
Market timing
Answers
market timing
Explanation:
because that way u wont miss customers
QUESTION 1 of 10: According to the reading, this is the first step in market research:
a) Gathering information
b) Define the question
O c) Take action
O d) Evaluate results
Answers
Answer:
b) Define the question
Explanation:
The following are the steps of the market research:
1. Problem identification: It involves the problem for solving, obejectives of the problem, and the questions related to research
2. Creation of the research plan: It includes The information i.e. required, methods of research, the parties that are responsible
3. Research conducting: It includes The review of the secondary data, the collection of the primary data, and the methods and techniques applied
4. Analyze and report the findings: It includes Analyzing the data, results interpretation, and report & suggestions
5. Actions taken: It includes the Planning, evaluation, and execution
Therefore the option B is correct
Long Text (essay)
Journal: Please respond to the following:
Why do you think entrepreneurship is important to the economy?
Answers
Great entrepreneurs have the ability to change the way we live and work, on local and national bases. If successful, their innovations may improve standards of living, and in addition to creating wealth with entrepreneurial ventures, they also create jobs and contribute to a growing economy. The importance of entrepreneurship is not to be underappreciated
Entrepreneurship is important to the economy as they act as a support system in the growth of the economy.
What is entrepreneurship?A person who has a strong interest in conducting business based on creativity and technology and who is willing to take risks in order to improve the lives of others is referred to as an entrepreneur. This is the process that is known as entrepreneurship.
The ratio of annual production to annual consumption, as well as the analysis of an individual's purchasing power, serve as the primary indicators of a nation's economic health.
By developing new goods and services, businesses encourage the creation of new jobs, which lowers the nation's unemployment rate and raises people's spending power, both of which has the net effect of speeding up economic growth.
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3
Select the correct answer.
Which is true when you rent?
O A.
B.
C.
You build equity in your house.
You are responsible for any repairs.
You pay fewer up-front costs.
Answers
Answer:
A
Explanation: A because when you do repairs you give the goverment money
Which of the following is NOT true about the Free Application for Federal Student Aid (FAFSA)?
You can fill out the FAFSA if you are an independent or a dependent.
The earliest you can submit your FAFSA is January 1st of each year.
You can fill the form out online or on paper.
Each state may have a different deadline for state financial aid.
Answers
Answer:
A
Explanation:because its true
milk should ______ (keep) in a fridge.
Answers
The past tense of Keep is Kept
Click this link to view O*NET's Tasks section for Actors.
Note that common tasks are listed toward the top, and less common tasks are listed toward the bottom. According to
O*NET, what are common tasks performed by Actors? Check all that apply.
creating artwork for use in stage sets
collaborating with other actors
working closely with directors, other actors, and playwrights to find the interpretation suited to the role
studying and rehearsing roles from scripts
learning about characters in scripts and their relationships to each other
teaching college classes and training other people how to become actors
Answers
Answer: B C D E
Explanation:
Did the assignment
To find the interpretation suited to the role, studying and rehearsing roles from scripts, learning about characters in scripts and their relationships to each other and teaching college classes and training other people how to become actors are common tasks performed by Actors. Hence, options B, C, D and E are correct.
Who is a director of a movie?The directors are the movie's creative leaders. They uphold the artistic vision throughout pre-production and final editing. They are employed by the executive producer or producer, who is ultimately in control of a production.
A film director's responsibilities include reading and editing scripts, overseeing the cast and crew, and putting the final product together. The actors and other crew members will work with you to ensure that the movie ultimately reflects the aesthetic vision for the finished result.
Thus, options B, C, D and E are correct.
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Henry Ford paid his workers $5 a day in 1914 when the CPI was 10. Today with a price index at 177, the $5 a day is worth $88.50. True or false?
Answers
True. The statement "Henry Ford paid his workers $5 a day in 1914 when the CPI was 10. Today with a price index at 177, the $5 a day is worth $88.50" is true.
The calculation below shows that the statement is correct. Calculation: CPI today/CPI in 1914 * Dollar value in 1914= Dollar value today177/10 * $5= $88.50
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Which is true of an intrapreneur?
A. They operate in a business as a collaborator
B. They are a failed business person
C. They have no desire to branch out or move up in the business world
Answers
Answer:
I belive it would be A
Explanation:
This most matches the defenition
Which of the following is filling the role of a consumer?
Answers
Answer:
A consumer is someone who buys things, like at a supermarket. Lets say someone purchased ice cream, they are a consumer. hope this helps!! :)
A consumer is someone who buys things, like at a supermarket. Lets say someone purchased ice cream, they are a consumer. The consumer likewise assumes a part in the criticism gathering process after an organization's contribution raises a ruckus around town.
What is role of a Consumer?A client is just a purchaser, while a consumer is the person who both purchases and uses the item or administration.
Consumers assume a significant part in promoting research before an item or administration is delivered to general society. When you distinguish your objective consumers, you can welcome these individuals to partake in center gatherings or send them overviews to test them on key components of your promoting plan.
Interrogating them concerning the right cost to charge and what advertising message requests to them as a consumer can assist with directing your whole arrangement, especially while delivering another item or administration.
Therefore Consumer administrations is certainly not an expense yet a speculation. At the point when the organizations can offer sufficient types of assistance to their consumers.
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Please help. Atleast the top 2
Answers
Answer:
Number 1 is Pure Market. Number two is socialist, I'm pretty sure.
Explanation:
Please mark me brainliest if someone else answers :>
How does change in cost of energy and raw materials, borrowing and premises affect a house building company
Answers
Answer:
A shift in the cost of electricity and raw materials may have a major influence on a home construction firm. For example, if the cost of electricity and raw materials rises, the corporation may have to spend more on these items, resulting in higher production expenses. This rise in manufacturing costs may eventually result in lower profit margins or an increase in the final price of the houses, making them less competitive in the market.
Likewise, changes in borrowing costs might have an influence on the company's profitability. If interest rates rise, the cost of borrowing money to invest in the firm rises, resulting in greater debt-service expenses. This may limit the company's capacity to invest in growth possibilities, which can be negative on long term profitability impact.
Likewise, changes in borrowing costs might have an influence on the company's profitability. If interest rates rise, the cost of borrowing money to invest in the firm rises, resulting in greater debt-service expenses. This may limit the company's capacity to invest in growth possibilities, which might harm long-term profitability.
Changes in facility expenses might also have an impact on the company's profitability. For example, increasing the cost of rent or mortgage payments for the company's offices or facilities may result in increased overheads and lower profitability. Furthermore, if the firm decides to grow or relocate, it may incur considerable upfront expenses, which may have an impact on short-term profitability.
what is the limit of money the u.s. government is authorized to borrow called
Answers
The debt ceiling, also referred to as the borrowing limit, is the maximum amount of money that the United States government is permitted to borrow.
The debt ceiling, which is often referred to as the borrowing limit, is a statutory cap placed by the US Congress on the total amount of national debt that the federal government is permitted to incur. The debt ceiling instead sets a ceiling on how much money the government can borrow in order to pay its spending. When the government reaches the debt ceiling, it is unable to continue issuing Treasury bonds to fund operations and must either increase the debt ceiling or cut spending in order to stay current with its debt payments. Political parties have disagreed on whether to raise the cap or cut spending, making the debt ceiling a divisive topic in recent years.
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Economic stability is a benefit of technological advances. please select the best answer from the choices provided t f
Answers
Economic stability depends on financial health i.e Inflation & Output Growth where technology plays its part but it is not the sole factor.
The above statement is false.
What is Economic stability?Minor fluctuations in output growth with consistent low Inflation,stable banking system constitutes Economic stability.
Technological advances has palyed an important role in changing the Economy of any country but it is not the sole factor. Hence, The statement is False
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Answer:
false
Explanation:on edge
oil producing countries can operate as a cartel in all of the following ways except group of answer choices each country sets its profit maximizing price and quantity. they limit the international oil supply to keep prices elevated. they attempt to punish countries who cheat. make joint decisions.
Answers
Oil producing countries can operate as a cartel by limiting the international oil supply to keep prices elevated, attempting to punish countries who cheat, and making joint decisions. However, they cannot operate as a cartel by allowing each country to set its profit-maximizing price and quantity.
Cartels are formed when a group of producers collude to manipulate market conditions and maximize their collective profits. In the case of oil-producing countries, they can form a cartel by limiting the international oil supply to create scarcity and drive up prices. By restricting production, they can exert control over the market and increase their profits. Additionally, oil-producing countries that operate as a cartel often have mechanisms in place to punish countries that cheat or exceed their assigned production quotas. These penalties help to maintain discipline and ensure compliance among cartel members.
Furthermore, the cartel operates by making joint decisions regarding production levels, pricing strategies, and market actions. By coordinating their efforts, they can influence global oil prices and maintain their market power. However, allowing each country to independently set its profit-maximizing price and quantity would undermine the coordinated efforts of the cartel. In a cartel, member countries typically agree to abide by common rules and quotas to achieve collective objectives, rather than pursuing individual profit maximization strategies.
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IS THE BRAIN REAL? BRAINLIEST FOR BEST ANSWER
Answers
Answer:
yuh
Explanation:
21 100% right
Explanation:
which of the following statements is correct?question 7 options:senior debt is debt that has been more recently issued, and in bankruptcy it is paid off after junior debt because the junior debt was issued first.
Answers
The statement which is correct is Convertible bonds generally have lower coupon rates than non-convertible bonds of similar default risk because they offer the possibility of capital gains, option C.
With a plain vanilla convertible bond, the investor has the option of either holding the bond until it matures or converting it to stock. The investor can retain the bond to maturity and get the face value if the stock price has dropped since the bond's issuance date.
The investor can convert the bond into stock and choose whether to hold or sell the stock at a higher price if the stock price rises considerably. When the gain from the stock sale exceeds the bond's face value plus the sum of the outstanding interest payments, the investor seeks to convert the bond to stock.
The best method for handling your credit card responsibly is to pay it off completely. A zero balance can be achieved to avoid the interest charges associated with maintaining a balance. If you can, try to make more than the minimum payment each month since this will lower your interest payments to the credit card company and lower the total amount of debt that has to be paid off.
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Complete question:
Which of the following statements is CORRECT?
a. Senior debt is debt that has been more recently issued, and in bankruptcy it is paid off after junior debt because the junior debt was issued first.
b. A company's subordinated debt has less default risk than its senior debt.
c. Convertible bonds generally have lower coupon rates than non-convertible bonds of similar default risk because they offer the possibility of capital gains.
d. Junk bonds typically provide a lower yield to maturity than investment-grade bonds.
e. A debenture is a secured bond that is backed by some or all of the firm
1. Determine the swap, showing the cashflows, and the resultant benefit for each party from the situation described below:
a. Party A can borrow fixed at 14.95% and floating at BBSW + 4.55%
b. Party B can borrow fixed at 10.25% and floating at BBSW + 0.85%
c. An investment bank which facilitates the swap is paid 0.125% for each leg
2. . Determine the swap, showing the cashflows, and the resultant benefit for each party from the situation described below:
a. Party A can borrow fixed at 12.69% and floating at BBSW + 1.25%
b. Party B can borrow fixed at 14.95% and floating at BBSW + 1.25%
c. An investment bank which facilitates the swap is paid 0.085% for each leg
Answers
The investment bank facilitating the swap earns 0.125% and 0.085% for each leg, respectively.1. In the given situation, the parties A and B can benefit by entering into an interest rate swap, as shown below: A can borrow at Fixed rate of 14.95% and Floating rate of BBSW+4.55%. B can borrow at Fixed rate of 10.25% and Floating rate of BBSW+0.85%. Here, A is at a disadvantage due to the high fixed rate and thus prefers a floating rate, whereas B is at a disadvantage due to the high floating rate and thus prefers a fixed rate. Thus, a swap can benefit both parties.
The swap cash flows and benefits are as follows: 2. In the given situation, the parties A and B can benefit by entering into an interest rate swap, as shown below: A can borrow at Fixed rate of 12.69% and Floating rate of BBSW+1.25%.B can borrow at Fixed rate of 14.95% and Floating rate of BBSW+1.25%.
Here, A is at an advantage due to the low fixed rate and thus prefers a fixed rate, whereas B is at an advantage due to the low floating rate and thus prefers a floating rate. Thus, a swap can benefit both parties.The swap cash flows and benefits are as follows:
Thus, both parties benefit from the swap by obtaining their preferred fixed and floating rates. The investment bank facilitating the swap earns 0.125% and 0.085% for each leg, respectively.
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