Austrian business cycle theory part 1 What is the Cc/S ratio?

part 2 The CC/S ratio changes from $900/$100 to $700/$300. Graphically show what happens in the loanable funds market as a result.

this is what the article says

The world has billions of consumers, but for now let’s focus on only one. We will assume that this one consumer is representative of other consumers. Let’s say that this representative consumer earns $1,000 a week. Out of the $1,000 he earns each week, he spends $900 on goods and services and saves $100. We can say that he has a current consumption-saving ratio (CC/S ratio) of $900/$100. CC/S = $900/$100 Now ask yourself, what is our representative consumer saving for? People save today so that they can consume more in the future (i.e., more than they would if they didn’t save). For example, a person might save in his working years so that he can consume in his retirement years. What this means is that “saving” (S) is just another name for “future consumption (CF ).” S = CF So instead of talking about a CC/S ratio of $900/$100, we can talk about a CC/CF ratio of $900/$100. CC/CF = $900/$100 The CC/CF ratio that a person has depends upon that person’s rate of time preference. A person’s rate of time preferences is the degree to which a person prefers current (or present) satisfactions to future satisfactions; it is the degree to which a person prefers current consumption to future consumption.

An investor must choose between two bonds:

Bond A pays $85 annual interest and has a market value of $850. It has 10 years to maturity.

Bond B pays $80 annual interest and has a market value of $780. It has five years to maturity.

Assume the par value of the bonds is $1,000.

a. Compute the current yield on both bonds. (Do not round intermediate calculations. Input your answers as a percent rounded to 2 decimal places.)

Bond A. %

Bond B. %

b. Which bond should she select based on your answers to part a?

• Bond B

• Bond A

c. A drawback of current yield is that it does not consider the total life of the bond. For example, the approximate yield to maturity on Bond A is 10.99 percent. What is the approximate yield to maturity on Bond B? The exact yield to maturity? (Use the approximation formula to compute the approximate yield to maturity and use the calculator method to compute the exact yield to maturity. Do not round intermediate calculations. Input your answers as a percent rounded to 2 decimal places.)

Approximate yield to maturity. %

Exact yield to maturity. %

d. Has your answer changed between parts b and c of this question in terms of which bond to select?

No?

or

Yes?

• No

• Yes

The variance of return on investment A is 144 percent squared while the variance of return on investment B is 225 percent squared. If the covariance of returns on A and B is 150 percent squared, the correlation coefficient between the returns on A and B is closest to:

• A. 187.5
• B. 0.0046
• C. 1.2
• D. 0.83

You are graduating from college at the end of this semester and have decided to invest ​$4,500 at the end of each year into a Roth​ IRA, which is a retirement investment account that grows tax free and is not taxed when it is​ liquidated, for the next 50 years. If you earn 10 percent compounded annually on your investment of ​$4,500 at the end of each​ year, how much will you have when you retire in 50 ​years? How much will you have if you wait 10 years before beginning to save and only make 40 payments into your retirement​ account? 

When you retire in 50 ​years, you will have ​$__________ ​(Round to the nearest​ dollar.)

Professor,

In trying to apply my knowledge in the real world, I am trying to create a realistic retirement schedule. However, I am running into difficulties using both a financial calculator as well as our equations from class in doing this.

I am trying to do the following: plan a retirement schedule between the ages of 22 and 68, in which I would deposit 25% of my income each year. The income starts at 80,000 with an annual growth rate of 5% and, to be realistic, assuming an interest rate of 2.5%. I will assume for simplicity that I receive my first salary ($80,000) when I turn 22, and my last salary when I turn 68. As soon as I receive a salary, I will save 25% of it.

However, this raises issues, as if I try to use the equation for the present value of a growing annuity with a 5% growth rate and 2.5% discount rate, r-g will yield a negative number. Also, I could not find online how to do this on my HP 10bII+ financial calculator and I don't want to manually enter 47 payments.

Do you know how I could overcome this obstacle?

1. Briefly comment on Jimmy’s concern that “if I try to use the equation for the present value of a growing annuity with a 5% growth rate and 2.5% discount rate, r-g will yield a negative number”. (3 sentences at most)
2. How much will Jimmy have in his retirement account when he turns 68, immediately after the last deposit?
3. What single deposit made on Jimmy’s 22^nd birthday would give the same account balance when he turns 68?

Assume you are considering a portfolio containing two assets, L and M. Asset L will represent 39% of the dollar value of the portfolio, and asset M will account for the other 61%. The projected returns over the next six years, 2018–2023, for each of these assets are summarized in the following table. *huge thumbs up for correct answers*

Projected Return (%)

(Year)  (Asset L)  (Asset M)

(2018) (14%)  (21%)

(2019) (13%)  (19%)

(2020)  (15%)  (16%)

(2021)  (17%) (15%)

(2022)  (18%)  (11%)

(2023)  (20%)  (10%)

a.Use an Excel spreadsheet to calculate the projected portfolio return, rp, for each of the six years.

b. The average expected portfolio​ return, rp, over the 6-year period is (blank) %

c. The standard deviation of expected portfolio returns over the 6-year period is (blank) %

d. How would you characterize the correlation of returns of the two assets L and​ M? (neg. pos. or un-correlated)

e. Discuss any benefits of diversification achieved through creation of the portfolio.  

​ A. By combining these two negatively correlated​ assets, the overall portfolio risk is increased.

B. By combining these two positively correlated​ assets, the overall portfolio risk is reduced.

C. By combining these two negatively correlated​ assets, the overall portfolio risk is reduced.

D.By combining these two negatively correlated​ assets, the overall portfolio risk is eliminated.

The dollar cost of debt for Coval​ Consulting, a U.S. research​ firm, is 7.3%.

The firm faces a tax rate of 37% on all​ income, no matter where it is earned. Managers in the firm need to know its yen cost of debt because they are considering a new bond issue in Tokyo to raise money for a new investment there. The​ risk-free interest rates on dollars and yen are

r Subscript $ Baseline equals r$=5%

and r Subscript yen Baseline equals r¥=1.4%

respectively. Coval Consulting is willing to assume that capital markets are internationally integrated and that its free cash flows are uncorrelated with the​ yen-dollar spot rate. What is Coval​ Consulting's after-tax cost of debt in​ yen? ​(Hint: Start by finding the​ after-tax cost of debt in dollars and then finding the yen​ equivalent.)

The​ after-tax cost of debt in dollars is _____________%. (Round to two decimal​ places.)

1. you want to buy your dream car which will cost you $5900. If you could invest your entire savings of $3500 at an annual interest of 12%, how long (in years rounded to two decimal places) would you have to wait until you have accumulated enough money to buy the car? answer

2. You want to buy a house in 9 years and expect to need $25000 for a down payment. If you have $14000 to invest, how much interest do you have to earn (compounded annually) to reach your goal? (Enter your answers as a decimal rounded to 4 decimal places, not a percentage. For example, enter 0.0843 instead of 8.43%)

Why is ratio analysis so important when analyzing a company's financial? Please discuss in 150 words or more.

Thank you

Sports Corp has 11.8 million shares of common stock outstanding, 6.8 million shares of preferred stock outstanding, and 2.8 million bonds. If the common shares are selling for $26.8 per share, the preferred shares are selling for $14.3 per share, and the bonds are selling for 96.82 percent of par, what would be the weight used for equity in the computation of Sports's WACC? 55.14% 10.12% 33.33% 11.26%

Par Value 1000

Bonnie and Clyde are married and have purchased a comprehensive major medical policy which covers them and their two sons, Smith and Wesson. The policy has a $500 calendar year family deductible, a $2,500 stop-loss provision, and an 80% co-insurance clause. The following losses occur: On January 1, 2013 Bonnie was treated for an infection at a cost of $200, on July 1, 2013 Smith was treated for an injury suffered while waterskiing at a cost of $10,000, on December 5, 2013 Clyde underwent eye surgery at a cost of $1,500, and on January 5, 2014 Wesson was treated for a broken leg at a cost of $2,000. How much will the insurer pay for each of these losses?

Precisely 15 years ago (you have just made the 180th monthly payment) you took out a traditional, fixed rate 30-year mortgage for $300,000 at 7.20% APR. You are considering whether to refinance this loan and replace it with a fixed rate 15-year mortgage (assume an identical timing of the remaining payments). The closing costs are $3,000, which you intend to borrow. Disregarding the psychic cost of the process, please find the breakeven interest rate (i.e. the rate at which you would be indifferent between refinancing vs. keeping the existing mortgage). Express your answer as an APR with 3 digits after the decimal point.

1- Choose one of the major credit card companies, e.g., Citi, Chase, Capital One, etc. How does your chosen bank use its variety of credit card programs to build relationships with the right customers? Provide at least one specific example in your response.

2- Based on your choice in Questions 1, what are the main variables your chosen bank has focused on to segment its markets? Which of the segmentation variables do you like the most?

3- Now, based on the above, develop a brand new credit card for a specific target market segment of your choice. First, describe your chosen target market segment. What are the unique consumer needs of your choice segment? Finally, specify the key features of your new credit card program. Explain how it differs from existing credit card programs and how this new card could meet the unique consumer needs of your choice segment

The Optical Scam Company has forecast a sales growth rate of 20 percent for next year. Current assets, fixed assets, and short-term debt are proportional to sales. The current financial statements are shown here:
  

  
a. Calculate the external funds needed for next year using the equation from the chapter. (Do not round intermediate calculations.)
  
External financing needed           $   
  
b-1. Prepare the firm’s pro forma balance sheet for next year. (Do not round intermediate calculations.)
   

b-2. Calculate the external funds needed. (Do not round intermediate calculations.)
  
External financing needed           $  

c. Calculate the sustainable growth rate for the company based on the current financial statements. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
  
Sustainable growth rate             %