Question

In: Accounting

Explain what a yield curve is and how it might be used by a management accountant...

Explain what a yield curve is and how it might be used by a management accountant
working with treasury professionals. provide examples

Solutions

Expert Solution

To solve this question just input those variables which are to be used in logistic regression, as the question talks about using two variables only that is total loans and leases to total assets & total expenses/ total assets, so we will not input total cap/assets as an input variable in our excel, here we go

As one can see, we have taken only two variables , total exp/assets and total lns & leases/ assets in calculation, follwing steps have been followed to construct the above table

1. Assume logit= b0+ b1* independent variable1+ b2* independent variable 2 , take values of b0=0.1, b1=0.1, b2=0.1, note that these values of b0, b1 and b2 are just taken for calculation, one could assume any values here for bo , b1 and b2

2. Calculate exponential of logit in the next column by using exp (value in previous column)

3. Calculate probability by using formula, probability= exp (logit)/ { 1+ exp(logit)} in the next column

4. In next column, calculate log likelihood by using formula : financial condition value (i.e. 1 or 0) * LN( probability calculated in previous column) + (1- financial condition value)* LN( 1- probability calculated in previous column)

5. take the total of the column values of log likelihood

6. use solver function in excel to change this total by putting max value of 0 and changing the variable cells containing assumed values of b0, b1 and b2 , by clicking on solve, you will get actual values of b0, b1 and b2

which comes out to be b0=-14.72, b1=89.83, b2= 8.37

therefore you will get logit as

-14.72+ 89.83* Total exp/assets+8.37*Total lns & lsses/ assets

With values given in the question as total exp/ assets= 0.11 and total loans & leases/ assets= 0.6 , we get

logit as -14.72+ 89.83* 0.11+ 8.37*0.6= 0.1833

exp (logit) = 1.20

Probability= 0.546

Loglikelihood= 1*LN(0.546)+0*LN(1-0.546)= LN(0.546)= -0.605


Related Solutions

WORD COUNT 200 1-Explain what is a yield curve , and how it might be used...
WORD COUNT 200 1-Explain what is a yield curve , and how it might be used by a management accountant working with treasury professionals with Example .
a. What is the yield curve? b. What might a downward-sloping yield curve imply about expected...
a. What is the yield curve? b. What might a downward-sloping yield curve imply about expected future short term interest rates? Explain your answer. c. Explain why a downward-sloping yield curve may indicate that the economy is expected to grow slower. What would a steep downward sloping yield curve imply about future inflation? d. How would your answers in b. and c. differ if the curve was flat? if upward-sloping? e. What does the yield curve look like in Australia...
Discuss the yield curve and explain how it applies to the yield to maturity (YTM) of...
Discuss the yield curve and explain how it applies to the yield to maturity (YTM) of short and long-term bonds. Explain what causes an inverted yield curve and the impact that it has on bonds prices. Explain how investors can lose money investing in U.S. Treasury Bonds. Please be detailed, Thank you
Explain what information is embedded into the yield curve. How can we use it to learn...
Explain what information is embedded into the yield curve. How can we use it to learn market-level expectations for the short-term interest rates?
Draw and label a line that corresponds to the inverted yield curve. Under what circumstances might...
Draw and label a line that corresponds to the inverted yield curve. Under what circumstances might the economy experience an inverted yield curve. Why does an inverted yield curve often portend a recession?
Explain how a yield curve is constructed and elaborate on how the different slopes describe the...
Explain how a yield curve is constructed and elaborate on how the different slopes describe the market conditions.
Negative Yield Curve a) Is the yield curve usually positive, or negative? b) What are the...
Negative Yield Curve a) Is the yield curve usually positive, or negative? b) What are the implications of a negative yield curve? In other words, what economic conditions does a negative yield curve indicate (other than long-term rates are lower than short-term rates)?
What is the "maximum sustainable yield" approach to resource management? Reproduce a graph and explain how...
What is the "maximum sustainable yield" approach to resource management? Reproduce a graph and explain how to "maximally" harvest individulas from the target organism's population graphed. Expand the graph to illustrate your point. What are the potential problems of doing this? what are the alternatives to this harvest? (Subject: Environmental Biology)
1. What is "yield-curve control"? What did the Fed do to control the yield curve in...
1. What is "yield-curve control"? What did the Fed do to control the yield curve in March? Please explain
How the shape of yield curve might change when: Central bank adopts an explanatory monetary policy...
How the shape of yield curve might change when: Central bank adopts an explanatory monetary policy Market participants expect an increase in inflation in the future
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT