Sienna has a car loan with an annual interest rate of 4.8%. She will make the same monthly payment for 48 months, after which the loan will be paid back. Diego says that Sienna’s loan is an example of closed-end credit while Sienna says it is an example of open-end credit. Which statement about the loan is true?
-Diego is correct because the loan has to be paid in full by a specific date.
-Sienna is correct because she had to pledge collateral to get the loan.
-Sienna is correct because the amount can be borrowed again after she repays the loan
-Diego is correct because the loan is a line of credit.
Answers
Answer:
-Diego is correct because the loan has to be paid in full by a specific date.
Explanation:
Closed-end-credit is a type of credit where a fixed amount is borrowed and must be repaid in full by the end of a specified period. The amounts to be paid back are the principal and the interests. Sienna took a closed-end-credit because her loan was issued at a go, and she had to repay after 48 months.
Open-end credit is like a revolving fund. The borrower is allowed credit up to a specific limit. Once they make repayments, they can re-access the facility.
Answer:
A: Diego is correct because the loan has to be paid in full by a specific date.
Explanation:
Related Questions
An instrument used to enlarge or reduce a map is known as
Answers
Answer:
pantograph
Explanation:
you can use a pantograph to do this.
What is 2+2-5x(87x-32)=
Answers
Answer:
-435x^2+160x+4
Explanation:
put the 2 as a square root
hope it help!
Gladstone company tracks the number of units purchased and sold throughout each accounting period but applies its inventory costing method at the end of each period, as if it uses a periodic inventory system. assume its accounting records provided the following information at the end of the annual accounting period, december 31. transactions units unit cost beginning inventory, january 1 1,800 $ 50 transactions during the year: a. purchase, january 30 2,500 62 b. sale, march 14 ($100 each) (1,450) c. purchase, may 1 1,200 80 d. sale, august 31 ($100 each) (1,900) assuming that for specific identification method (item 1d) the march 14 sale was selected two-fifths from the beginning inventory and three-fifths from the purchase of january 30. required: compute the amount of goods available for sale, ending inventory, and cost of goods sold at december 31 under each of the following inventory costing methods: a. last-in, first-out. b. weighted average cost. c. first-in, first-out. d. specific identification, assuming that the march 14 sale was selected two-fifths from the beginning inventory and three-fifths from the purchase of january 30. assume that the sale of august 31 was selected from the remainder of the beginning inventory, with the balance from the purchase of may 1. 2-a. of the four methods, which will result in the highest gross profit
Answers
a. Last-in, first-out (LIFO):$306,600 , b. Weighted average cost:$275,556, c. First-in, first-out (FIFO):$282,800, d. Specific identification: $293,250.
The computation of the amount of goods available for sale, ending inventory, and cost of goods sold at December 31 under each of the inventory costing methods is as follows:
a. Last-in, first-out (LIFO):
Ending inventory = 50 units × $80 + 450 units × $62 + 1,200 units × $80 = $191,000
Cost of goods sold = 150 units × $50 + 1,000 units × $50 + 800 units × $62 = $115,600
Goods available for sale = $191,000 + $115,600 = $306,600
b. Weighted average cost: Weighted average cost per unit = ($50 × 1,800 + $62 × 2,500 + $80 × 1,200) ÷ (1,800 + 2,500 + 1,200) = $65.58
Ending inventory = 2,300 units × $65.58 = $150,654
Cost of goods sold = 4,200 units × $65.58 = $275,556
Goods available for sale = $275,556 + $0 = $275,556
c. First-in, first-out (FIFO): Ending inventory = 1,200 units × $80 = $96,000
Cost of goods sold = 1,800 units × $50 + 2,500 units × $62 + 1,200 units × $80 - $96,000 = $282,800
Goods available for sale = $282,800 + $0 = $282,800
d. Specific identification: Ending inventory = 700 units × $62 + 1,200 units × $80 = $166,400
Cost of goods sold = 1,100 units × $50 + 1,350 units × $62 + 500 units × $50 = $136,250
Goods available for sale = $191,000 + $102,250 + $0 = $293,250
2-a. Of the four methods, specific identification will result in the highest gross profit. This is because specific identification matches the actual cost of the items sold with the revenue earned, whereas the other methods make assumptions about the cost flow. Since specific identification is not always practical or feasible, the choice of inventory costing method will depend on the company's specific circumstances and the impact on financial statements.
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Congress passes legislation that increases the federal minimum wage from $7. 25 to $9. 0. For firms that hire large quantities of unskilled labor this can be expected to cause ____ in the price of the goods and services they sell due to a shift of the __________ curve.
Answers
Congress passes legislation that increases the federal minimum wage from $7. 25 to $9. 0. For firms that hire large quantities of unskilled labor this can be expected to cause increase in the price of the goods and services they sell due to a shift of the supply curve.
What Is Supply?
Supply in economics is defined as the total amount of a given product or service a supplier offers to consumers at a given period and a given price level. It is usually determined by market movement.
For instance, a higher demand may push a supplier to increase supply.
Supply choices are influenced by a number of factors. Those factors include the price of the product in question, the number of producers, the input costs, the technological changes, the price of other possible products, and unpredictable factors such as weather.
A change in supply is an economic term that describes when the suppliers of a given good or service alter production or output. A change in supply can occur as a result of new technologies, such as more efficient or less expensive production processes, or a change in the number of competitors in the market.
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Allison has a horse stall cleaning business that has been growing rapidly since she started it three years ago. She estimates the total number of horse stalls in her market to be 5000, owned by a total potential population of 1500. Currently, there are only two competitors in the market, Allison, who has 650 stalls that she cleans, and Sam's Hayfaring Maneger, that cleans 1,320 stalls. The remainder of the stalls are cleaned by their owners rather than by a service. Allison prices her cleaning services at $12 per stall per month and Sam charges $8 for the same service. Allison's sales are derived from 104 customers while Sam's are from 71 customers, meaning that Sam's customers have more stalls on a per capita basis. What is the market penetration rate based on potential customers
Answers
Answer:
the market penetration rate based on potential customers is 11.66%
Explanation:
The computation of the market penetration rate based on potential customers is shown below
= Alison + sam
= (104 customers ÷ 1500) + (71 customers ÷ 1500)
= 6.93 % + 4.73%
= 11.66%
hence, the market penetration rate based on potential customers is 11.66%
We simply added both the Alison and sam so that the market penetration rate could come
how
has covid 19 affect sickle cell with hospital financial
strain
Answers
The financial strain caused by the COVID-19 pandemic has had an impact on the management and treatment of sickle cell disease in hospitals.
Hospitals have faced resource constraints, including limited staff, equipment, and funding, which can affect the quality and accessibility of care for individuals with sickle cell disease. This may lead to challenges in providing timely and comprehensive treatment, monitoring, and support services for patients with sickle cell disease, potentially impacting their overall health outcomes. The financial strain on hospitals has highlighted the need for continued investment and support in healthcare systems to ensure the provision of adequate care for individuals with chronic conditions like sickle cell disease.
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without government intervention, public goods tend to be
Answers
It involves developing new products or
improving existing technologies, processes,
designs and marketing to solve problems,
increase efficiency, reach new customers,
and ultimately increase profits.
a. business opportunity
b. entrepreneurship
c. social change
d. socioeconomic
e. livelihood
f. business venture
g. relevance
h. business innovation
i. entrepreneur
j. economy
Answers
Answer:
h. business innovation
Explanation:
Business innovation is a term that describes a situation whereby a firm initiates the latest techniques or methods in the production of goods and, or delivery of services.
The purpose is to create a beneficial transition and change in the operation of business activities to gain more profits.
In other words, business innovation involves enhancing existing strategies or exercises, or in some cases beginning afresh.
Hence, going by the definition in the question. The correct answer is BUSINESS INNOVATION: It involves developing new products or improving existing technologies, processes, designs, and marketing to solve problems, increase efficiency, reach new customers, and ultimately increase profits.
Business innovation is the answer.
Business innovation refers to activity company undertakes by implementing new business processes, ideas, products or services with the main aim of increasing efficiency and profit
The bringing up of ideas for creation of new and improved products or services into market is known as Business InnovationThe initiation of Business Innovation activity is possible through intense brainstorming.Business innovation generally increase a company's efficiency and improve its profitability level.Learn more about Business Innovation here
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Indicate which situations would require Zenda Company to record revenue in the current period.
Answers
Answer:
c & d
Explanation:
Option includes "a. Zenda is paid in advance for services to be performed in the next period. b. Zenda signs a contract with a customer to perform services in a future period. c. Zenda performs services for cash. d. Zenda performs services on account."
Only Zenda Company performance of services for cash and on account will be recognized and will be recorded as revenue in the current period.
____ are a company's most critical indicators of progress toward intended results.
Answers
The question is that Key Performance Indicators (KPIs) are a company's most critical indicators of progress toward intended results.
Key Performance Indicators (KPIs) are specific metrics or measures that are used to evaluate the performance of a company or organization. KPIs are designed to provide a clear and measurable assessment of how well the company is progressing towards its intended goals and objectives. These indicators are chosen based on the company's overall strategy and objectives, and they can vary depending on the industry and specific goals of the organization.
Examples of common KPIs include revenue growth, customer satisfaction, employee productivity, and market share.
By tracking these indicators over time, companies can assess their performance, identify areas for improvement, and make data-driven decisions to achieve their desired results. It is important for companies to regularly review and update their KPIs to ensure they remain aligned with their evolving goals and objectives.
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Which two actions will help you get the most benefit from an informational interview? a. give long answers to impress the other person with your knowledge. b. encourage the interviewer to do most of the talking during the interview. c. make negative comments about other companies. d. show your willingness to accept any job. e. speak with confidence, but be yourself.
Answers
The two actions that will help you get the most benefit from an informational interview are Encourage the interviewer to do most of the talking during the interview and Speak with confidence, but be yourself
What are the two actions will help you get the most benefit from an informational interviewEncourage the interviewer to do most of the talking during the interview . This will allow you to gather as much information as possible about the industry or field, the company, and the interviewer's experiences and insights.
Speak with confidence, but be yourself. This will help you establish a rapport with the interviewer and make a positive impression, while also allowing you to showcase your personality and communication skills.
The other options, such as giving long answers to impress the other person with your knowledge, making negative comments about other companies, or showing your willingness to accept any job, are not effective strategies for getting the most benefit from an informational interview.
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Match the tasks with the professionals who would complete them.
Answers
Videographer: use editing softwares, discuss filming techniques
Network administrator: train users how to use the system, determine ways to make the system more effective
Hope this helps!
Answer:
Explanation:
1,3 and 2,4 and 5,6 and thats it
The combination of advertising, personal selling, public relations, and sales promotion activities traditionally used by an organization represents its: Group of answer choices marketing communications system. marketing mix. public relations package. promotion mix.
Answers
Promotion mix
What is Promotion mix?By using the goal rate of return on investment, or what the company anticipates from the venture's investments, the firm sets the price for a product or service. The rate of return pricing helps the business generate the necessary amount of profit to keep its liquidity. The price is set so that if sales continue to grow at the rate they are now, the ultimate objective of creating corporate profit is achieved.
What is the objective of Promotion mix? To inform potential customers about the features, availability, and applications of items.To increase demand, clients' awareness and interest must be raised.To set a product apart from rival products by fostering brand loyalty. To maintain sales by emphasizing the usefulness of the product.Promotion has often been the target of criticism. Some opine that “promotion contributes nothing to society”, and for some others “promotion forces consumers to buy products they cannot afford and do not need”, and so on. It may be true that promotion can certainly be criticized on many of its aggressive and compelling factors. But it should also be recognized that it plays a crucial role in modern society, particularly in business, economic and social spheres of influence.
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A comprehensive plan usually deals with which of the following elements?a) land uses. b) population. c) public services. d) natural resources. d) all of the above
Answers
The answer is: d) all of the above. A comprehensive plan is a strategic document that guides the development and growth of a community or region.
It typically addresses various elements to ensure coordinated and sustainable development. These elements include land uses, population, public services, and natural resources.
Land uses are an essential aspect of a comprehensive plan as they determine how different areas within the community or region are designated for residential, commercial, industrial, or recreational purposes. Population considerations involve analyzing current and projected population trends, demographics, and housing needs to accommodate growth and ensure adequate infrastructure and services.
Public services encompass a range of amenities and facilities such as transportation, utilities, schools, healthcare, and recreational spaces. Planning for these services ensures that they are appropriately located and meet the needs of the community. Finally, natural resources are crucial to consider to promote environmental sustainability and protection, including the preservation of green spaces, conservation of water resources, and management of wildlife habitats.
In conclusion, a comprehensive plan addresses all of the above elements to create a holistic approach to community or regional development, taking into account land uses, population, public services, and natural resources. By considering these factors together, the plan aims to create a balanced and sustainable environment for the community's present and future needs.
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which of the following is an example of external secondary data?
1. a new market research study conducted by an independent market research company
2. a new market research study conducted by the firm's market research department
3. annual reports of competitors
4. company-based inventory records
Answers
An example of external secondary data is option 3: annual reports of competitors.
External secondary data refers to information that is collected and published by external sources, independent of the organization conducting the research. It includes data and reports that are available to the public or accessible through various sources.
Annual reports of competitors are publicly available documents that provide valuable insights into a competitor's financial performance, market position, strategies, and other relevant information.
These reports are prepared by the competitors themselves and are widely used by organizations for market analysis, benchmarking, and strategic decision-making. They offer an external perspective on industry trends, market conditions, and competitor activities, making them a valuable source of information for organizations seeking to gain a competitive advantage.
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Problem 1: On April 01, 2016 Anees started business with Rs. 100,000 and other transactions for the month are: 2. Purchase Furniture for Cash Rs. 7,000. 8. Purchase Goods for Cash Rs. 2,000 and for Credit Rs. 1,000 from Khalid Retail Store. 14. Sold Goods to Khan Brothers Rs. 12,000 and Cash Sales Rs. 5,000. 18. Owner withdrew of worth Rs. 2,000 for personal use. 22. Paid Khalid Retail Store Rs. 500. 26. Received Rs. 10,000 from Khan Brothers. 30. Paid Salaries Expense Rs. 2,000 Required: Prepared general journal
Answers
Answer:
General Journal
April 01
Cash Rs. 100,000 (debit)
Capital Rs. 100,000 (credit)
Owner invest cash in the business
April 02
Furniture Rs. 7,000 (debit)
Cash Rs. 7,000 (credit)
Cash Purchase of Furniture
April 08
Merchandise Rs. 3,000 (debit)
Cash Rs. 2,000 (credit)
Accounts Payable : Khalid Retail Store Rs. 1,000 (credit)
Cash and credit purchases made
April 14
Accounts Receivables : Khan Brothers Rs. 12,000 (debit)
Cash Rs. 5,000 (credit)
Sales Revenue Rs. 17,000(credit)
Cash and credit sales
April 18
Drawings Rs. 2,000 (debit)
Cash Rs. 2,000 (credit)
Owner withdraws cash from business for personal use
April 22
Accounts Payable : Khalid Retail Store Rs. 500 (debit)
Cash Rs. 500 (credit)
Payment made to supplier Khalid Retail Store
April 26
Cash Rs. 10,000 (debit)
Accounts Receivables : Khan Brothers Rs. 10,000 (credit)
Receipts from customer Khan Brothers
April 30
Salaries Expense Rs. 2,000 (debit)
Cash Rs. 2,000 (credit)
Salaries paid
Explanation:
See the journals and their narrations prepared above for Anees` business.
Select the correct answer.
Why do some critics feel that the IMF should not act to influence exchange rates under some conditions?
A.
They believe that wild swings in currency exchange rates are healthy.
B.
They believe that currencies must find their own market levels.
C.
They fear that the IMF may take over the country’s economy.
D.
They fear that politicians may be using the IMF to cover up their actions.
Answers
Answer:
Explanation:
They believe that currencies must find their own market levels.
Demand for Corn Flakes is: P = 18 - Q. Supply of Kellogg's Corn Flakes is: P = 2 + Q. Now a generic company enters the market, selling generic Corn Flakes for $9. Assume consumers are indifferent between generic and Kellogg's Corn Flakes.
How many boxes of corn flakes will sell in total (both brand and generic)?
Answers
Since the consumers are indifferent between generic and Kellogg's Corn Flakes, the total quantity of corn flakes sold (both brand and generic) would be the equilibrium quantity of 8 boxes.
To determine the total quantity of corn flakes sold (both brand and generic), we need to find the equilibrium quantity at the market level.
Given:
Demand for Corn Flakes: P = 18 - Q
Supply of Kellogg's Corn Flakes: P = 2 + Q
Generic Corn Flakes price: $9
To find the equilibrium quantity, we equate the quantity demanded with the quantity supplied:
18 - Q = 2 + Q
Simplifying the equation:
2Q = 16
Q = 8
The equilibrium quantity in this market is 8.
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sasha rents a market stall selling jewellery. she makes most of her jewellery herself but she also buys in items from large manufacturers. her only other variable cost is the pay of her sales assistant who receives a small payment for each item she sells.sasha wants to expand her business and she found out that there us an empty shop near her home . the fixed costs of the shopare 3 times greater than those of the market stall . what are the advantages and disadvantages sasha has of being the only owner if her business?
Answers
Answer: variable costs cost which can be changed by time according to the produced product is known as variable cost. 2. Identify ...
Explanation: She makes most of the jewelry herself but she also buys items from large manufacturers. Her only other variable cost is her pay off her.
Which of the following correctly describes an example of a secondary competitor?
Answers
Answer: A coffee shop that also sells pastries would be a secondary competitor for a bakery that sells pastries, among other products.
(took the test)
Sometimes news organizations have biases because:
A. they are concerned about a national crisis.
B. the government pays them to be biased.
C. they need to make money and get advertisers.
D. the audience has to be influenced.
Answers
Answer:
c
Explanation:
Sometimes news organizations have biases because they need to make money and get advertisers. Hence, option C is correct.
What is organizations?a group of people who work together in an organized way toward a common objective: the World Health Organization. The essay was about international aid organizations. more occurrences.
A structured grouping of people, such as a company, nonprofit, political party, or club, is known as an organization. These speciality schools are mostly run by nonprofit organizations. a report from the International Labor Organization.
The majority of firms today use one of three types of organizational structures: functional, departmental, or matrix. The advantages and disadvantages of each form must be considered by owners before deciding which to utilize for their business.
Thus, option C is correct.
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Why do lenders tend to lose out in an unexpected inflation?
A. Because the money that is repaid to lenders is worthless.
B. Because inflations mean good cost more.
C. Lenders don't lose out.
D. Because the nominal interest rate that lenders earn falls.
Answers
Lenders tend to lose out in an unexpected inflation because the nominal interest rate they earn falls, resulting in reduced real returns. The correct option is D.
Lenders tend to lose out in unexpected inflation because the nominal interest rate that lenders earn falls. Inflation erodes the purchasing power of money over time, which means that the value of future payments decreases.
When lenders extend loans at a fixed nominal interest rate, they may not anticipate the impact of inflation on the real value of the interest payments they receive.
During inflationary periods, the general price level rises, causing goods and services to become more expensive. However, the nominal interest rate on existing loans remains unchanged.
As a result, lenders receive fixed interest payments that have a lower purchasing power than anticipated due to the reduced value of money.
This decrease in real returns can lead to a loss for lenders as they are unable to maintain the same level of purchasing power over time.
In summary, lenders tend to lose out in unexpected inflation because the nominal interest rate they earn does not keep pace with the rising prices, resulting in reduced real returns and a decrease in their purchasing power.
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A young customer who is a novice investor wishes to begin an investment program. He is eligible for his employer's 401(k) plan, to which the employer makes matching contributions, but he does not participate in the plan. Your advice to the customer should be to begin A) by making regular contributions to an income mutual fund B) by taking positions in individual stocks C) by making regular contributions to a growth mutual fund D) making payroll deduction contributions to the employer's 401(k) plan at least to the employer's matching level
Answers
Answer:
The answer is "Option D"
Explanation:
The first bit of wisdom can offer a consumer qualifying for a 401(k) program is to make regular donations to the program, especially when the business provides employee benefits, therefore the correct choice is to make direct payment donations to the 401(k) plan of both the employee at minimum to just the contributing amount of the employee.
the government wants to transfer welfare from buyers to sellers by collecting a $1 tax on a good from buyers and subsidizing sellers $1 for each unit of the good sold. this policy will: a. decrease the equilibrium price b. increase the equilibrium quantity c. increase the equilibrium price d. decrease the equilibrium quantity
Answers
The government policy above will decrease the equilibrium price of the goods. The correct answer to the question above is option A. decreases the equilibrium price.
The equilibrium price is the condition where the demand for goods matches the supply or the condition where the supply and demand are balanced.
In a market in equilibrium condition, the price reflects an exact balance between buyers and sellers. Market equilibrium rarely happens.
There are some types of equilibrium:
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a supplier code of conduct is intended to inform suppliers of ethical sourcing expectations and is typically a condition for becoming an approved supplier. true or false
Answers
True. A supplier code of conduct is a set of rules that specifies what a company expects from its suppliers in terms of ethical sourcing and business practises.
What is the supplier's code of conduct?Suppliers are required to make every effort to eradicate all types of corruption and bribery and ensure that no steps are taken to violate any applicable anti-bribery or anti-corruption laws and regulations in the areas of their activities.
What exactly is the Supplier Code of Ethics?The supplier shall not partake in any type of bribery, corruption, extortion, or embezzlement and shall have sufficient measures in place to guard against any such behaviour by themselves, individuals working on their behalf, or anyone else in their supply chain.
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a financial plan is most influenced by
Answers
Answer: priorities and goals
Explanation: because
The financial plan is most influenced by priorities and goals Option(b) is correct.
What does Financial Plan means?Overall utilization, a financial plan is a complete assessment of a singular's ongoing compensation and future financial state by utilizing current known factors to foresee future pay, resource values and withdrawal plans.
In business, a financial plan can allude to the three essential financial assertions monetary record, pay explanation, and income proclamation) made inside a field-tested strategy. Financial estimate or financial plan can likewise allude to a yearly projection of pay and costs for an organization, division, or division.
A financial plan can likewise be an assessment of money needs and a choice on the most proficient method to raise the money, like through getting or giving extra offers in an organization A financial plan might contain forthcoming financial explanations, which are comparative, however unique, than a financial plan. Financial plans are the whole financial bookkeeping outline of an organization. Complete financial plans contain all periods and exchange types.
Therefore Option(b) is correct.
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Lincoln informed the South Carolina authorities that he was going to ______ the island fort in the Charleston harbor but not ______ unless the supply ships
Answers
In April 1861, President Abraham Lincoln informed the South Carolina authorities that he was going to “reinforce” the island fort in the Charleston harbor but not “attack” unless the supply ships were fired upon.
This was part of Lincoln's effort to maintain the Union without engaging in war. The fort had been abandoned by federal troops the previous month, and Lincoln feared that the Confederate forces would use it as a base to bombard the Union ships. Lincoln's warning was meant to discourage the South Carolina authorities from attacking the Union ships, as the fort would become a target if they did.
Lincoln’s warning also served as a reminder of the Union’s naval superiority, as the South Carolina forces were no match for the Union fleets. Lincoln was also sending a message to the other Southern states that the Union was determined to preserve the Union and would not be intimidated.
This message was clearly received, as the South Carolina authorities did not fire on the Union ships and the fort remained in the control of the Union forces. Lincoln's warning was a successful effort to avoid full-scale war and provided an example of his commitment to achieving peace through diplomacy.
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What are extension strategies?
Answers
➣ Extension strategies are marketing techniques that seek to improve sales to extend the life of a product before decline begins.
➥ I hope I have helped you, greetings! Atte: ღTheGirlSadღAnswer:
Extension strategies are marketing techniques that seeks to improve sales to extend the life of a product before decline begins .What can a boosted post help an advertiser achieve?
Answers
A boosted post helps an adviser to connect with the audience and gain trust.
Boosted post is a kind of post that is used on social media platforms in order to enhance the page of the platform and to attract audience to the page. Boosted post can help better communication with the audience along with the increase in a greater number of messages, calls and texts. Boosted posts help for better advertisements of the product. For example, A Chocolate brand may use Boosted posts to gain audience as well as consumers. Boosted posts helps an adviser to be discovered among people, to establish a benchmark in the market and to gain more and more customers. It's a kind of marketing strategy used for publicity purpose.
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UA purchased an aircraft from Airbus and was billed €30 million payable in one year. UA is concerned with the USD costs from international sales and would like to control exchange risk. The current spot exchange rate is $1.05/€ and one-year forward exchange rate is $1.10/€ at the moment. UA can buy a one-year option on euro with a strike price of $1.12/€ for a premium of $0.02 per euro. Currently, the annual interest rate is 5% in the euro zone and 6% in the U.S.
This is an (select Accounts Receivable or Payable) case for UA. If UA wants to hedge the transaction exposure using forward, UA should enter a (Long/Short) position in a forward contract of €30 million due in one year.
If UA enters a forward euro contract today, the guaranteed dollar cost for this euro obligation in one year should be XXX$ million. If UA wants to hedge the transaction exposure using money market hedge, UA should ______________. borrow PV of euro and buy USD today, and deposit USD in the bank and sit on it. buy PV of euro today using USD, and deposit euro in the bank and sit on it. If UA uses MMH, the guaranteed dollar cost today should be $ million If UA wants to hedge the transaction exposure using option hedge, UA should ______________. (buy a put option sell a put option buy a call option sell a call option)
If UA hedges the exposure using an option hedge, total option premium: $XXXXX million will be paid today. The option premium will grow to $ million in one year at the US interest rate. In one year, if the spot price is $1.1 per euro, the option is (in/out) of the money. So, UA will buy 30 million euro at the price of $XXXX per euro, which equals to a total cost of $XXXX million. After the option premium, the total (net) dollar costs in one year is $XXXX million. At what future spot exchange rate do you think UA will be indifferent between the option and forward hedge? Answer: $ /€.
Answers
UA will buy 30 million euro at the price of $1.12 per euro, which equals to a total cost of $33.6 million. After the option premium, the total net dollar costs in one year is $34.2 million. At a future spot exchange rate of $1.085/€, UA will be indifferent between the option and forward hedge.
This is a payable case for UA. If UA wants to hedge the transaction exposure using forward, UA should enter a short position in a forward contract of €30 million due in one year.
If UA enters a forward euro contract today, the guaranteed dollar cost for this euro obligation in one year should be $31.5 million.
If UA wants to hedge the transaction exposure using money market hedge, UA should borrow PV of euro and buy USD today, and deposit USD in the bank and sit on it. If UA uses MMH, the guaranteed dollar cost today should be $30 million.
If UA wants to hedge the transaction exposure using option hedge, UA should buy a put option.
If UA hedges the exposure using an option hedge, total option premium: $600,000 million will be paid today. The option premium will grow to $31.8 million in one year at the US interest rate. In one year, if the spot price is $1.1 per euro, the option is out of the money.
So, UA will buy 30 million euro at the price of $1.12 per euro, which equals to a total cost of $33.6 million. After the option premium, the total net dollar costs in one year is $34.2 million.
At a future spot exchange rate of $1.085/€, UA will be indifferent between the option and forward hedge.
Learn more about future spot exchange : https://brainly.com/question/14213755
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