A random sample of 19 wolf litters in Ontario, Canada, gave an average of x₁ = 5.6 wolf pups per litter, with estimated sample standard deviation s₁ = 1.1. Another random sample of 6 wolf litters in Finland gave an average of x₂ = 3.8 wolf pups per litter, with sample standard deviation s₂ = 1.0.

(a) Categorize the problem below according to parameter being estimated, proportion p, mean μ, difference of means μ₁ – μ₂, or difference of proportions p₁ – p₂. Then solve the problem.

μ₁ – μ₂

μ

p₁ – p₂

p

(b) Find an 99% confidence interval for μ₁ – μ₂, the difference in population mean litter size between Ontario and Finland. (Use 1 decimal place.)

(c) Examine the confidence interval and explain what it means in the context of this problem. Does the interval consist of numbers that are all positive? all negative? of different signs? At the 99% level of confidence, does it appear that the average litter size of wolf pups in Ontario is greater than the average litter size in Finland?

Because the interval contains only positive numbers, we can say that the average litter size of wolf pups is greater in Ontario.

Because the interval contains both positive and negative numbers, we can not say that the average litter size of wolf pups is greater in Ontario.

   We can not make any conclusions using this confidence interval.

Because the interval contains only negative numbers, we can say that the average litter size of wolf pups is greater in Finland.

Gold-I-Locks plc manufactures and sells doors and windows that contain a revolutionary locking mechanism the CEO developed while at university. You have been provided with the company’s trial balance as at 31 March 2020. Unfortunately, it was prepared by a junior member of staff and does NOT balance.

Gold-I-Locks plc

Trial BalanceAs at 31 March 2020

The junior member of staff has identified the following errors but does not know how to correct them:

- A payment of £150 for electricity was entered in the Bank Account but was not recorded in the Electricity Expense Account

- There is a debit in the Rent Expense Account for £718 and a debit to the bank account for the same amount.

- A sale for £1,200 has been entered correctly in Accounts Receivable but as £120 in the Sales Account.

- A payment to a supplier of £457 has been correctly recorded in Accounts Payable Account but no other entry has been made.

Prepare journal entries to correct the above errors and prepare a T-account for the Suspense Account showing the entries.

Assume it is Sept 1, 2020. Company ABC using AUD as functional currency is concerned about currency risk. The company imports goods from the US and sells them in the Australian market with expected revenues for 2021 of AUD 11.5 million. The contract price for these goods from US suppliers is USD 6.5 million payable in one payment on March 1, 2021. The company has a target profit margin (profit as percentage of revenue) of 20%. The minimum acceptable profit margin below which the company will have difficulties servicing its debt is 15%. The spot AUD/USD rate on Sept 1, 2020 is 0.70. The Australian and US six-month interest rates are 2.5% and 2.0%, respectively. Furthermore, the following option contracts expiring on March 1, 2021 are currently available:

Strike AUD/USD rate           Premium

AUDCall 0.73                        0.015

AUDCall 0.68                        0.021

AUDCall 0.70                        0.017

AUDPut 0.72                       0.0125

AUDPut 0.68                        0.008

AUDPut 0.65                        0.005

Based on this information and the knowledge you gained while studying the FRM unit, respond to the questions below. Give all your answers for profit margins and currency rates with 4 (four) decimal places Problem

1. The company analyses the following hedging strategies for managing currency risk:
Strategy I: No hedge at all.
Strategy II: Hedging 100% of the currency exposure with a forward contract.
Strategy III: Hedging 40% of the currency exposure with a forward contract and leaving the remaining 60% unhedged.
Strategy IV: A strategy to meet the target rate and benefit from favourable exchange rate movements.
Strategy V: A strategy for worst-case protection only.

Strategy VI: Using a collar involving the put with the AUD/USD strike rate at 0.68 and the call with the AUD/USD strike rate at 0.73.
For each of these strategies:
 Calculate the profit margin and effective currency rate if the AUD/USD spot exchange rate on 1 March 2021 is:
a) 0.75,
b) 0.63.
 What are the advantages and disadvantages of each hedging strategy?
 If a strategy includes options, state clearly which option contract should be used, whether as a long or short position, and why.

2. Apart from the information provided above and the conducted analysis of the six hedging strategies, what further information would the company need in order to decide which hedging strategy should be adopted?

The Drug Company developed a new sleeping pill. The drug is called Star and was approved by the FDA in 2016. In 2017 the company began to notice problems with this drug. People who were prescribed Star reported feeling sleepy during the next day and developing a dependence on this drug. The company reacted immediately and stopped selling Star near the end of 2017. In the last six months of 2018, the company was sued by 1,000 people who experienced grogginess and dependency reaction to the sleeping pill. At the end of 2018, the company’s attorneys believe there is a 60% chance the company will need to make payments in the range of $1,000 to $5,000 to settle each claim. At the end of 2019, while none of the cases have been resolved, the company’s attorneys now believe there is an 80% chance the company will need to make payments in the range of $2,000 to $7,000 to settle each claim. In 2020, 400 claims were settled at a total cost of $1.2 million. Based on this experience, the company believes 30% of the remaining cases will be settled for $3,000 each, 50% will be settled for $5,000 and 20% will be settled for $10,000 each. The company is in the process of the first-time adoption of IFRS and needs to report under US GAAP and IFRS, as required by IFRS 1. Using US GAAP and IFRS, show what journal entries would be required in 2017, 2018, 2019 and 2020.

Answer all of these questions with the right question number next to the correct choice (letter).

11) You are the CEO of Cute Pups Company, which makes blue jeans for dogs. Sales of your products are taking off so you decide to go public. However, without an MBA, you have no clue how to price and distribute your stock. You would probably hire the services of a(n):

Investment banking house

Savings and loan

Commercial bank

Mutual fund

12)

The SEC (Securities and Exchange Commission) requires companies to file annual financial statements. This disclosure is an example of:

Allocational efficiency

Operational efficiency

Informational efficiency

Frictionless markets

13)

Which of the following describes the main role of financial intermediaries:

Set the price of stocks, bonds, and other assets

Bridge gaps between savers and debtors

All of the above

Help the Federal Reserve set interest rates for other investors

15) After graduation you decide it is time to start planning for the future. You set up a retirement fund that is estimated to earn 5% interest over the next 20 years. What type of markets are you most likely to invest in?

Capital markets

Money markets

It is impossible to tell from the information given.

Private markets

from the end of 2009 to the end of 2019, the size of the united states national debt held by the public grew from $6.8 trillion to $17.2 trillion. during the same period, the 10 year us treasury bond yield to maturity fell from 3.59% in december 2009 to 1.86% in december of 2019. explain how such an increase in the supply of government bonds can lead to a fall in the interest rate. second, consider that the 10 year bond rate has fallen further in 2020 to 0.68 percent on october 1, despite a further increase in the national debt ($20.5 trillion as of june 30, 2020) due to the decline in the economy and increase in federal government spending. why has this continued in 2020 during an economic crisis?

From the end of 2009 to the end of 2019, the size of the United States National Debt held by the public grew from $6.8 trillion to $17.2 trillion. During the same period, the 10 year US Treasury Bond yield to maturity fell from 3.59% in December 2009 to 1.86% in December of 2019. Explain how such an increase in the supply of government bonds can lead to a fall in the interest rate. Second, consider that the 10 year bond rate has fallen further in 2020 to 0.68 percent on October 1, despite a further increase in the national debt ($20.5 trillion as of June 30, 2020) due to the decline in the economy and increase in federal government spending. Why has this continued in 2020 during an economic crisis?

Suppose you are on the Board of Governors of the Federal Reserve System of the United States (US) economy and are reviewing the following hypothetical economic data in 2019-2020: Real GDP per capita growth rate = 3.1% Unemployment rate = 3.2% Inflation rate = 5.3%

a.Determine what phase of the business cycle the US economy is likely to be experiencing in 2019-2020. Provide specific reasons for your answer

b. Use a well-labelled AD/AS diagram to show the position of this economy in 2019-2020. Explain whether the US government should use expansionary or contractionary monetary policy to move the economy back to the long run, fullemployment GDP equilibrium. Draw the AD curve shift(s) associated with this policy change on your diagram.

Q1: On January 1, 2019, Yarmouth Inc. acquired 90% of Covington Co. by paying $477,000 cash. There is no active trading market for Covington stock. Covington Co. reported a Common Stock account balance of $140,000 and Retained Earnings of $280,000 at that date. The fair value of Covington Co. was appraised at $530,000.    The total annual amortization was $11,000 as a result of this transaction. The subsidiary earned $198,000 in 2019 and $226,000 in 2020 with dividend payments of $42,000 each year. Without regard for this investment, Yarmouth had income of $308,000 in 2019 and $364,000 in 2020 (these numbers do not have investment income).

Prepare a proper presentation of consolidated net income and its allocation (Consolidated net income before allocation, NCI share of NI from Covington, and Consolidated Net income to Yarmouth) for 2020.

What is the noncontrolling interest balance as of December 31, 2020?

What is the investment balance as of December 31, 2020?

Empire Company is a manufacturer of smart phones. Its controller resigned in October 2020. An inexperienced assistant accountant has prepared the following income statement for the month of October 2020.

EMPIRE COMPANY
Income Statement
For the Month Ended October 31, 2020
Sales revenue               $795,000   
Less:   Operating expenses                  
Raw materials purchases       $264,600           
Direct labor cost       190,200           
Advertising expense       91,000           
Selling and administrative salaries       77,800           
Rent on factory facilities       61,000           
Depreciation on sales equipment       45,800           
Depreciation on factory equipment       32,500           
Indirect labor cost       28,200           
Utilities expense       11,600           
Insurance expense       8,300        811,000   
Net loss               $(16,000)  

Prior to October 2020, the company had been profitable every month. The company’s president is concerned about the accuracy of the income statement. As her friend, you have been asked to review the income statement and make necessary corrections. After examining other manufacturing cost data, you have acquired additional information as follows.

1. Inventory balances at the beginning and end of October were:

October 1
October 31
Raw materials       $19,700       $36,000
Work in process       19,400       14,700
Finished goods       29,900       53,500

2. Only 75% of the utilities expense and 60% of the insurance expense apply to factory operations. The remaining amounts should be charged to selling and administrative activities.
(a)
Prepare a schedule of cost of goods manufactured for October 2020.

EMPIRE COMPANY
Cost of Goods Manufactured Schedule