Price elasticity of demand is closely related, but not the same as the slope of the demand curve. The more sensitive buyers are to changes in price the
O the more the demand curve will shift
O demand curve becomes more curved and less linear
O the flatter the demand curve. dhe
Answers
Price elasticity of demand measures the responsiveness of the quantity demanded to changes in price, while the slope of the demand curve represents the rate at which quantity demanded changes with a change in price. Although they are related, they are not the same concept.
Price elasticity of demand is a numerical value that quantifies the percentage change in quantity demanded resulting from a percentage change in price. It provides insights into the sensitivity of buyers to price changes. If the price elasticity of demand is greater than 1, demand is considered elastic, indicating that buyers are highly responsive to price changes. If the value is less than 1, demand is inelastic, suggesting that buyers are less sensitive to price changes.
On the other hand, the slope of the demand curve indicates the steepness or flatness of the curve. A steeper slope implies that a small change in price leads to a relatively larger change in quantity demanded, indicating inelastic demand. In contrast, a flatter slope indicates that a small change in price results in a relatively larger change in quantity demanded, indicating elastic demand.
In summary, while price elasticity of demand measures the responsiveness of quantity demanded to price changes, the slope of the demand curve reflects the rate at which quantity demanded changes with a change in price. The flatter the demand curve, the more sensitive buyers are to changes in price, indicating a higher price elasticity of demand.
To Learn more about elasticity Click this!
brainly.com/question/14333119
#SPJ11
Related Questions
What is the difference between a total and a subtotal?
Answers
Explanation:
SUB-TOTAL:
The total for a part of a list of numbers being summed.
TOTAL:
An amount obtained by addition of smaller amounts.
Answer:
subtotal is all the different parts being added together from different list.
total is the all items being added together plus tax.
Explanation:
Drag each option to the correct location.
Match the scenarios to the factors that affect the labor market.
foreign direct investment
outsourcing
immigration
Answers
Each scenario should be matched to the factors that affect the labor market as follows:
Immigration: Carlos is moving from Mexico to the United States because he got a job in a bank. He had his interview last month, and the bank agreed to hire him because he was willing to work for 10% less than most American workers, even though he has the same qualifications.Foreign direct investment: A US supermarket chain is going to open a few supermarkets in Europe because a recent survey showed that the chain has a huge potential for profits in Europe.Outsourcing: A renowned US information technology firm has recently signed a contract with a company based in the Philippines. The Filipino company will handle the accounts of the US firm. The US firm made this decision to reduce labor costs.What is immigration?Immigration can be defined as the movement of a group of people from one geographical region to another geographical destination such as a city, especially in search of any of the following:
Good governanceSecurityBetter living conditions.WorkJobsSocial amenitiesWhat is a foreign direct investment?A foreign direct investment (FDI) simply refers to a type of investment which is made by an individual or business organization (investor) into an investment market that is located in another country.
In conclusion, an example of foreign direct investment (FDI) is a US supermarket chain that is planning to open a few supermarkets in a country in Europe.
Read more on immigration here: brainly.com/question/9809956
#SPJ1
Answer:
Post Test: Free Market and Businesses
Unit: 2
Economics
Question #12
__________________________________________________________
This is 100% right because I took the test
Go to explanation for picture with answers
l
l
∨
Explanation:
Here's the picture and I hope this helped!
Have a nice day!
Explain two benefits to Walmart of setting up a joint venture to enter the Indian market
Answers
Answer:
Walmart will get more money. It will also expand their brand.
Explanation:
^
what bonds payable amount will denzel report on its june 30 balance sheet? (enter all amounts as positive values. round your intermediate calculations and final answers to whole dollars.)
Answers
The bond collectible quantity that Denzel can report on its record on June thirty supported the face price, and also the coupon rate is $ 756, 296.
It is calculated by multiplying the $11,246 (carrying price of the bonds) times 100% (market interest rate) × / (semiannual payment). the quantity of interest paid is $600 ($10,000 face price of bonds × twelve-tone system coupon rate × / period of time payments).
Usually, public utilities issue bonds to assist finance a replacement electrical power plant, hospitals issue bonds for brand-new buildings, and governments issue bonds to finance comes, in operation deficits, or to redeem older bonds that are maturing.
To learn more about bonds payable, visit here
https://brainly.com/question/24128914
#SPJ4
any initial direct costs incurred by the lessor for a sales-type lease resulting in a selling profit should be
Answers
Any initial direct costs incurred by the lessor for a sales-type lease resulting in a selling profit should be capitalized.
In a sales-type lease, the lessor is essentially selling the leased asset to the lessee and earning a profit on the sale. As part of the sales process, the lessor may incur direct costs, such as commissions, legal fees, or other expenses directly related to the lease transaction. To properly account for these costs, they should be capitalized, meaning they are added to the cost of the leased asset and amortized or depreciated over the lease term. By capitalizing the initial direct costs, the lessor can match the expenses with the revenue generated from the lease over time. This treatment ensures that the lessor recognizes the appropriate costs and profits associated with the sales-type lease transaction and reflects them accurately in the financial statements.
To know more about lease accounting, click here: brainly.com/question/28526126
#SPJ11
PLEASE HELP IVE TAKEN THIS TEST 5 TIMES.... 41 points
an investor purchased 50 shares of stock in a company for $600. one year later, the investor sold all 50 shares for $13 per share. what is the investors rate of return?
Answers
The rate of return for the investor is 8.33%.
First share price: The investor paid $600 for 50 shares, making the initial share price ($600 / 50 shares) $12.
Profit from the sale of shares: The investor made $650 after selling all 50 shares at a price of $13 each.
Compute the difference between the ending sum and the starting investment to determine the profit made:
$650 - $600 = $50
Rate of return: To represent the rate of return as a percentage, divide the profit by the initial investment and multiply the result by 100.
($50 / $600) * 100 = 8.33%
The rate of return for the investor is 8.33%.
Read more about investment here:
https://brainly.com/question/27717275
#SPJ1
What is another word excise tax?
Answers
An excise tax is called as a "hidden tax," as it is indirectly paid by consumers.
What does excise tax mean?An excise tax, also known as an excise duty, is a type of tax that is levied on goods produced within the nation, as opposed to customs duties, which are levied on goods imported into the nation. A tax on the production or sale of a good is what it is. The Central Value Added Tax is the new name for this tax.
What kind of tax is an excise tax like?An excise tax is typically a tax imposed on the sale of particular goods or services or on particular uses. The sale of fuel, airline tickets, heavy trucks and highway tractors, indoor tanning, tires, tobacco, and other goods and services are typically subject to the federal excise tax.
Learn more about exercise tax:
brainly.com/question/30107077
#SPJ4
Cain Inc. reports a net income of $15,000. Its comparative balance sheet shows the following changes: accounts receivable increased by $6,000; inventory decreased by $8,000; prepaid insurance decreased by $1,000: accounts payable increased by $3,000, and taxes payable decreased by $2,000.
Compute cash flows from operations using the indirect method.
Answers
The cash flows from operations using the indirect method is $19,000.
To compute cash flows from operations using the indirect method, we start with the net income and make adjustments for changes in non-cash current assets and liabilities.
Net Income: $15,000
Adjustments for Changes in Non-Cash Current Assets:
Increase in accounts receivable: -$6,000
Decrease in inventory: +$8,000
Decrease in prepaid insurance: +$1,000
Adjustments for Changes in Current Liabilities:
Increase in accounts payable: +$3,000
Decrease in taxes payable: +$2,000
Cash flows from operations can be calculated as follows:
Net Income
Decrease in accounts receivable
Increase in inventory
Increase in prepaid insurance
Increase in accounts payable
Decrease in taxes payable
$15,000 - $6,000 + $8,000 + $1,000 + $3,000 - $2,000 = $19,000
Know more about cash flows here:
https://brainly.com/question/27994727
#SPJ11
What is the highest percentage of income an individual may pay for health insurance under the Patient Protection and Affordable Care Act?
Answers
The highest percentage of income an individual may pay for health insurance under the Patient Protection and Affordable Care Act is 8%.
According to the terms of the Affordable Care Act (ACA), there is a maximum percentage of income that individuals and families who are eligible for premium tax credits through the Health Insurance Marketplace are required to pay towards health insurance premiums. Based on their income in relation to the federal poverty level (FPL), this cap is established.
It is significant to remember that the precise proportion may change based on elements like income level, household size, and geography. It is advised to check the official Health Insurance Marketplace or seek advice from a licensed healthcare expert to get the most accurate and recent information about health insurance affordability under the ACA.
Learn more about Affordable Care Act:
brainly.com/question/29398295
#SPJ4
The theory of the 8 centers of origin suggest that most of the economic crops come from regions evenly distributed throughout the world T/F.
Answers
False. The theory of the eight centers of origin suggests that most of the economic crops do not come from regions evenly distributed throughout the world. Instead, it proposes that these crops originated in specific regions known as centers of origin.
These centers are geographically concentrated areas where certain crops have been domesticated and cultivated for thousands of years. The theory was proposed by Russian botanist Nikolai Vavilov in the early 20th century and identifies eight primary centers of origin: Near East, Mediterranean, Ethiopia, Central Asia, Indo-Burma, China, Mesoamerica, and South America.
The theory of the eight centers of origin provides a framework for understanding the diversity and distribution of economic crops. Each center of origin is associated with a specific group of crops that have been selectively bred and developed by local farmers over generations. These crops include major staples such as wheat, barley, rice, maize, beans, and potatoes, among others.
The theory recognizes that these crops were not randomly distributed around the world but have distinct geographic origins. Understanding the centers of origin helps scientists and researchers study the genetic diversity of these crops and develop strategies for their conservation and improvement to ensure global food security.
Learn more about Economic:
brainly.com/question/31070638
#SPJ11
This farmer in Nebraska is feeding livestock and plans to have 100 heads of steers ready for market at the end of October. She estimates a final weight of 1,100 pounds, so the total quantity to be sold would amount to 110,000 pounds of cattle. She also estimates her break-even price at $1.42500/lb. This break-even price includes her cost of production plus extra funds she needs to pay bills.
She is now trying to decide whether she should:
sell everything now with futures contracts and/or forward contracts,
sell a portion now with futures contracts and/or forward contracts, and the remaining later, or
sell nothing now.
A packer (buyer) is offering to buy all 100 heads with a forward contract for October delivery at $1.360 00/lb. If she prefers to use the futures market, she can hedge her cattle with the live cattle futures contract for October 2022 delivery, which is trading at $1.39975/lb. The size of the futures contract is 40,000 pounds and initial margin is $1,760/contract (which is the same as the maintenance margin).
As a reference, the chart below shows the behavior of the live cattle futures price for October 2022 delivery since the beginning of the year until today (July 1). Besides, historically, the basis in her local cash market in October has ranged between +$0.0100/lb and +$0.0250/lb.
Answers
The farmer could consider selling a portion of the cattle now and hedging the rest with live cattle futures.
To make a decision, we need to compare the potential outcomes of each option. Here are some scenarios:
Scenario 1: Sell everything now with a forward contract
Revenue: 100 heads x 1,100 lbs/head x $1.36000/lb = $149,600
Profit or loss: ($1.42500 - $1.36000) x 100 heads x 1,100 lbs/head = $7,150 loss
Scenario 2: Sell a portion now with futures contracts and/or forward contracts, and the remaining later
Let's assume the farmer sells 50 heads now with a forward contract and hedges the other 50 heads with live cattle futures.
Revenue from forward contract: 50 heads x 1,100 lbs/head x $1.36000/lb = $74,800
Revenue from live cattle futures: 50 heads x 1,100 lbs/head x $1.39975/lb = $76,987.50
Total revenue: $74,800 + $76,987.50 = $151,787.50
Hedging cost: $1,760/contract x 3 contracts = $5,280
Profit or loss: (($1.42500 + $0.0250) - $1.39975) x 50 heads x 1,100 lbs/head - $5,280 = $4,497.50 profit
Scenario 3: Sell nothing now
The farmer takes the risk of prices dropping or increasing until October.
If prices drop below the break-even price, she may incur losses.
If prices increase above the break-even price, she may earn profits.
Based on these scenarios, the farmer could consider selling a portion of the cattle now and hedging the rest with live cattle futures. This strategy allows her to lock in a good price for some of the cattle while potentially taking advantage of higher prices in the future. However, she should also keep in mind that there is a cost to hedging with futures contracts and that basis, or the difference between the futures price and the local cash market price, can vary. If she decides to use futures contracts, she should monitor the market closely and be prepared to adjust her positions if necessary.
learn more about selling here
https://brainly.com/question/30615010
#SPJ11
The use of a backward L-shaped aggregate supply curve allows us to ________ in a way that other shapes would not.
Answers
Hello,
Answer:
The use of a backward L-shaped aggregate supply curve allows us to consider different/various macro points of view in a way that other shapes would not.
Medicares Inpatient Prospective Payment System has approximately ____ MS-DRGs
745
845
645.
Answers
The Medicare Inpatient Prospective Payment System (IPPS) is a payment system used by the Centers for Medicare and Medicaid Services (CMS) to reimburse hospitals for inpatient services provided to Medicare beneficiaries.
Here is correct answer 7,458 MS-DRGs
It uses a system of diagnosis-related groups (DRGs) to classify inpatient services into categories and determine the amount of reimbursement for each service.
There are currently 7,458 MS-DRGs in the IPPS system. Each MS-DRG is assigned a weight, which is used to determine the amount of reimbursement from CMS. The weight is based on the costs associated with treating the condition, taking into account the intensity of resources used, the length of stay and the severity of the illness. In addition, the IPPS system includes an outlier payment system, which provides additional reimbursement for cases that are unusually costly.
Overall, the IPPS system ensures that hospitals are reimbursed for the costs associated with providing care to Medicare beneficiaries. The system also helps to ensure that all hospitals are paid fairly by taking into account the costs associated with treating various patients with different conditions and lengths of stay.
Know more about reimburse here
https://brainly.com/question/28198103#
#SPJ11
Maria, a single taxpayer, had losses totaling $30,000 from a rental real estate activity in which she actively participated. Maria also had $15,000 of income from another rental real estate activity in which she actively participated. She acquired both investments in the current year. If Maria has no other passive income and adjusted gross income before passive losses of $70,000, how much loss from rental activities can she use to offset her portfolio and active income?
Answers
Answer:
$25,000
Explanation:
The computation of the loss from rental activities is shown below
If there is any loss arise from the real estate with respect to the rental activity so the same would be deducted from the passive income
The losses till $25,000 would be used for offset active or the income of the portfolio
Hence, $25,000 would be the losses
a bank promises to pay 5.5% pa compound interest on deposits of £2337 if saved for 3 years. how much will the savings be worth at the end of the period mentioned? write your answer correct to 2 decimal places.
Answers
Answer:
£2,744.20
Explanation:
savings amounts after 3 years can be calculated using the formula below.
A = P x ( 1 + r) ^ n
Where A is the amount after three years
P = principal amounts: £2337
r: interest rate: 5.5% or 0.055
n is the number of periods: 3 years
A =£2337 x( 1 + 0.055)^3
A =£2337 x(1.055) ^3
A=£2337 x 1.174241
£2,744.20
Amount after 3 years will be £2744.20
黑。Will someone help me come up with a name for my product?
I’m having a hard time coming up with a name for my cinnamon body scrub. I don’t want the name to be “Cinnamon Body Scrub.” Anyone have an suggestions or ideas?
請和謝謝你！
Answers
Cinnamon Scrub is a fine name
Would you consider an entrepreneur a consumer or producer? Explain your answer.
Answers
How can you use feedback from your clients?
a. To practice reflective listening
b. To improve your effective communication
c. To improve your trust and rapport with your clients
d. To improve your skills and craft
Answers
What competencies would be needed by a U.S.-born leader being assigned to build power plants in India
Answers
In order to successfully build power plants in India, a U.S.-born leader would need to possess certain competencies. These competencies include the ability to adapt to cultural differences, effective communication skills, knowledge of local laws and regulations.
In a globalized world, leaders are often assigned to work in foreign countries. To be successful, they must possess a range of competencies that enable them to effectively navigate cultural differences, communicate effectively, and understand the local business environment. In the case of a U.S.-born leader being assigned to build power plants in India, several key competencies would be needed:1. Adaptability: India is a diverse country with its own unique cultural norms and traditions. A leader working in this environment must be able to adapt to these differences and work effectively with people from different backgrounds. They must be open-minded, flexible, and willing to learn about local customs.2. Effective communication: Communication is a critical component of any successful project, but it is especially important when working in a foreign country.
A leader must be able to communicate effectively with local stakeholders, including employees, suppliers, and government officials. They must be able to speak the local language, or at least have access to an interpreter.3. Knowledge of local laws and regulations India has its own legal system, which is different from the U.S. legal system. A leader working in this environment must have a solid understanding of local laws and regulations. They must be able to navigate the local legal system and ensure that their project complies with all applicable laws.4. Technical expertise: Building power plants is a complex process that requires technical expertise. A leader working in this field must have a thorough understanding of the technical aspects of power plant construction. They must be able to oversee the design, construction, and commissioning of the power plants to ensure that they meet all safety and quality standards.
To know more about globalized visit :
https://brainly.com/question/12646918
#SPJ11
Parent corporation owns all of subsidiary corporations stock in addition parent corporation owns $100,000 of subsidiary corporation's bonds. When subsidiary corporation is completely liquidated
Answers
Answer:
In this case, when the subsidiary corporation is completely liquidated they have to pay the $100,000 in the subsidiary corporation's bonds.
Explanation:
The reason behind this answer is that in case the subsidiary corporations decide to liquidate all of their assets in any case. They still have a debt to the parent corporation of $100,000. So, after they liquidate they have to take some of the money to pay the debt issued of those bonds. No matter what, or the parent company can write a lawsuit against them for not doing so.
what is marketing management?why is it important?
Answers
Its help to stand competent in highly thriving competition in the market.
Answer:
Marketing management is especially important for smaller businesses because it gives them a level footing to complete with larger players in the field.Thorough customer research,creative campaigns and marketing strategies and positive branding can go a long way in providing a brand with an edge over its competition.
Explanation:
hope it helps you
what is VAT number?why we need this?
Answers
Answer:
what is a vat
Explanation:
assume that ms. sawyer's salary is $74,500, up from $68,900 last year, while the cpi is 165 this year, up from 150 last year. this means that ms. sawyer's real income has
Answers
Assume Ms. Sawyer earns $74,500 this year compared to $68,900 last year, and that the CPI is 165 this year compared to 150 last year. This indicates a decline in Ms. Sawyer's real income from the previous year.
How the CPI is determined?CPI is a statistical calculation based on a sample of representative items that are regularly priced. For various categories and subcategories of products and services, sub-indices and sub-sub-indices are generated, then aggregated to create an overall index with weights that reflect the proportion of total consumer spending covered by the index.
Most National Statistics Bureaus calculate a number of pricing indices, including this one. As a measure of inflation, the CPI's yearly rate of change is utilized. You can utilize CPI and the census are two of the most often consulted national economic data in the majority of nations.
Learn about CPI from here;
https://brainly.com/question/14453270
#SPJ4
magine that you inherit a 12-unit apartment building in cupertino, in the heart of silicon valley, and decide not to sell it. how would you apply the concept of targeting to your marketing of the units for rent?
Answers
Imagine that you inherit a 12-unit apartment building in cupertino, in the heart of silicon valley, and decide not to sell it. Selected customers will be targeted especially engaged in engineering industry.
By definition, targeted marketing is the process of customizing and individualizing online advertising in accordance with information gathered about a certain target demographic.
In other words, a subset is chosen based on their characteristics, interests, and preferences rather than advertising to a very big audience.
Of course, there are many other advantages to customized marketing. You are, in essence, sending adverts to people who are very likely to be interested in them. It's challenging to fail with such a plan.
In actuality, customers favor targeted marketing as their favorite tactic. When given the option to choose between targeted or random commercials, more than 40% favor the latter and 27.6% favor either.
Furthermore, it was shown that behavioral data-based advertisements were the most successful ones; their clickthrough rate was up to 5.3x greater when compared to other approaches.
To know more about targeted marketing:
https://brainly.com/question/13363009
#SPJ4
Business lab!! need help
A market overview, including a summary of challenges and opportunities
Top three sectors for export, with detail of major items or sub-sectors to consider. (Since this is an imaginary assignment, rather than coming to this research with your product already in mind and ready to export, you will research what product would be best to export to your country of choice. An easier task!)
How to sell US products in this market
A recommendation on whether it is a good time (politically, and economically) to export to this country
France:
China:
Japan:
Answers
Top three sectors for export, with detail of major items are
Global Oil & Gas Exploration & Production. Global Pharmaceuticals & Medicine Manufacturing. Global Car & Automobile Manufacturing. .The products are:
Refined PetroleumCrude PetroleumCarsHow to sell us products in the international market?International markets or your own website are your two choices. Alibaba, Etsy, and eBay are examples of international marketplaces where users anticipate purchasing from vendors located in distant nations.
The direct sale of goods and/or services to another nation is known as exporting. It is possibly the least risky and most well-known way to join a foreign market.
Therefore, some global market entry strategies for any kind of product are:
Structured exporting.Licensing and franchising.Direct investment. Buying a business.Learn more about export from
https://brainly.com/question/27899202
#SPJ1
What pricing model requires the consumer to initially pay to download the app and then offers the ability to buy additional functionality?
Paid apps with in-app purchases
Answers
One common pricing model is the ""freemium"" model, in which the consumer initially pays to download the app but then has the option to purchase additional functionality.
In this model, the basic version of the app can be downloaded for free but additional features or in-app purchases are available for a fee. The pricing model is designed to entice users to try the app for free and then offer them additional benefits for a price, once they are hooked on the app.
This pricing strategy works well for games, productivity tools, and other types of apps that have a wide range of features and functionalities.
The key advantage of the freemium pricing model is that it allows consumers to try the app before they buy it, and encourages them to upgrade to the paid version if they find it useful.
However, the downside of this model is that it can lead to a fragmented user base, with some users only using the free version of the app and others paying for the premium features.
To learn more about freemium refer here
https://brainly.com/question/6659321#
#SPJ11
Which of the following riders pays back the premiums paid into a life insurance policy as long as the insured dies within the time as specified in the policy?
Return of cash value allows a whole life policy's cash value to be included in the death benefit. The automatic premium loan allows the insured to automatically use cash value to pay an overdue premium. The excess interest provision pertains to a policy's interest rate and the ability of the policy to build excess cash value. Return of premium pays back premiums paid into the policy.
The correct answer is: Return of premium
Answers
As long as the insured dies within the time as specified in the policy, among the options: the return of premium pays back premiums paid into the policy
The Return of premium rider is a life insurance policy rider that pays back the premiums paid into the policy if the insured individual dies within the specified time period mentioned in the policy. This rider provides a benefit where, if the insured person outlives the policy, they receive a refund of the premiums paid.
It is important to note that the Return of premium rider typically results in higher premium costs compared to a standard life insurance policy without this rider.
The rider provides an added level of financial protection and can be appealing to individuals who want the option to receive a refund of their premiums in case they do not utilize the death benefit during the policy term.
Learn more about insurance policy here:
https://brainly.com/question/30366279
#SPJ11
In 2007, the national public high school _____ rate was 74.7 percent.
crime
graduation
credit
population
Answers
Answer:
graduation
Explanation:
Answer:
Graduation
Explanation:
edge2021
for dropout it was 25.3 percent.
"Mr. Watson works as a human resources professional for an industrial governmental company called . He had a friend and colleague who is called Mr. John who also works for the same company . Mr. Sam is another employee in the company. Mr. Sam claimed that Mr. John had committed an inappropriate behaviour so Mr. Sam asked Mr. Watson to investigate this claim against Mr. John (the friend and collegue of Mr. Watson).
Based on this case and on considering "conflict of interests" probability.
a) Explain whether Mr. Watson will commit a "conflict of interests" if he does not investigate the complaint (claim).
b) Give an example of a "positive paradigm" in this case.
c) Give an example of a "negative paradigm" in this case.
d) Give 3 examples that can be neither positive paradigm nor negative paradigm. The examples should be briefly described and numbered. e) Use the "Line Drawing" method to show your observations in parts b), c). and d). (Refer to the cases in part (d) using their corresponding numbers according to how you numbered them.)
Answers
a) If Mr. Watson does not investigate the complaint against Mr. John, it can potentially create a conflict of interests.
As a human resources professional, Mr. Watson has a responsibility to ensure a fair and unbiased investigation into any claims of inappropriate behavior. b) A positive paradigm in this case could be if Mr. Watson conducts a thorough and impartial investigation into the complaint against Mr. John. c) A negative paradigm in this case could be if Mr. Watson dismisses or ignores the complaint against Mr. John without conducting a proper investigation. d) Examples that may not fit into either positive or negative paradigms: Mr. Watson recuses himself from the investigation due to his personal relationship with Mr. John. This demonstrates his awareness of the potential conflict of interests and ensures an unbiased investigation.
learn more about:- human resources here
https://brainly.com/question/29022219
#SPJ11
Suppose that this pension fund is obligated to pay out $800,000 per year in perpetuity. The interest rate is 8%
a. What should the maturity and face value of the zero-coupon bond it purchases to immunize its obligation?
b. Now suppose the interest rate immediately increases to 8.1%. How should the fund rebalance to remain immunized against further interest rate shocks? Ignore transaction costs
Answers
A pension fund is an investment vehicle that pools contributions from employers and employees to provide retirement benefits. It invests these funds to generate income and ensure future pension payments.
a. To immunize its obligation, the pension fund should purchase a zero-coupon bond with a maturity and face value that generates an annual cash flow of $800,000 at an interest rate of 8%.
Using the present value formula, the face value can be calculated as $800,0000/08=$10,000,000.
Therefore, the bond should have a face value of $10,000,000 and a maturity that aligns with the duration of the pension fund's obligation.
b. In order to remain immunized against further interest rate shocks when the interest rate increases to 8.1%, the pension fund needs to rebalance its portfolio. It should sell a portion of the existing zero-coupon bond and use the proceeds to purchase another bond with a higher coupon rate or longer maturity that compensates for the higher interest rate. By adjusting the portfolio's bond holdings, the fund can maintain the present value of the cash flows equal to its obligation and continue to match the duration of the liability with the duration of the assets.
To know more about Pension Fund visit : brainly.com/question/31849501
#SPJ11