We have considered a regression equation to predict life expectancy from percent of government expenditure on health care, using data for a sample of 50 countries in SampCountries. Using technology and this dataset, find a 95% prediction interval for each of the following situations.

(a) A country which puts only 3% of its expenditure into health care. Round your answers to one decimal place.

(b) A country which puts 10% of its expenditure into health care. Round your answers to two decimal places.

(c) A country which puts 50% of its expenditure into health care. Round your answers to two decimal places.

We have considered a regression equation to predict life expectancy from percent of government expenditure on health care, using data for a sample of 50 countries in SampCountries. Using technology and this dataset, find a 95% prediction interval for each of the following situations.

(a) A country which puts only 3% of its expenditure into health care. Round your answers to one decimal place.

(b) A country which puts 10% of its expenditure into health care. Round your answers to two decimal places.

(c) A country which puts 50% of its expenditure into health care. Round your answers to two decimal places.

The following table provides information on life expectancies for a sample of 22 countries. It also lists the number of people per television set in each country.

Instructions: When Minitab is used to answer a question below, copy the output from Minitab into your document.

Use Minitab to produce a scatterplot of life expectancy vs. people per television set. Does there appear to be an association between the two variables? Elaborate briefly.

Have Minitab calculate the value of the Pearson correlation coefficient between life expectancy and people per television.

Since the association is so strongly negative, one might conclude that simply sending television sets to the countries with lower life expectancies would cause their inhabitants to live longer. Comment on this argument.

If two variables have a correlation close to +1 or –1, indicating a strong linear association between them, does it follow that there must be a cause-and-effect relationship between them?

This example illustrates the very important distinction between association and causation. Two variables may be strongly associated (as measured by the correlation coefficient) without a cause-and-effect relationship existing between them. Often the explanation is that both variables are related to a third variable not being measured; this variable is often called a lurking variable.

In the case of life expectancy and television sets, suggest a lurking variable that is associated both with a country’s life expectancy and with the prevalence of televisions in the country.

Scenario: Jim Logan, the owner of an American based small business, Sports Exports, Inc., specializes in exporting footballs to Great Britain. In return, he receives payments in British pounds every month which need to be converted into dollars. He has noticed that the exchange rate between the dollar and the pound at the time of exchange every month is significantly affecting his profits. Since he is a small business owner and not a foreign currency expert, he has hired your consulting firm to advise him with respect to the following matters below. A) Jim Logan recently heard on CNBC that inflation is expected to rise substantially in the United Kingdom, while inflation in the United States will remain low. They also expect that the interest rates in both countries will rise by about the same amount. He asks you to answer the following questions so that he may take the appropriate measures if CNBC is correct in their projections.

1. From an economic perspective, will the pound appreciate or depreciate against the dollar and explain why?

2. Will Sports Exports, Inc. be favorably or unfavorably affected by the future changes and explain why?

3. How can Sports Exports, Inc. use currency futures contracts to hedge against exchange rate risk? Are there any limitations of using currency futures contracts that would prevent Sports Exports, Inc. from locking in a specific exchange rate at which it can sell all the pounds it expects to receive in each of the upcoming months?

4. How can Sports Exports, Inc. use currency options contracts to hedge against exchange rate risk? Are there any limitations of using currency futures contracts that would prevent Sports Exports, Inc. from locking in a specific exchange rate at which it can sell all the pounds it expects to receive in each of the upcoming months?

5. While Mr. Logan believes the CNBC report, he would also like to know what to do if CBNC is incorrect specifically with respect to using futures or options to hedge the exchange rate risk in this opposing scenario? Are there any disadvantages in this scenario?

6. A Treasury bill that settled January 15, 2020 has face value $1 million and matures April 14, 2020. Its yield on a bank discount basis was 3.00%.

1. Show that the actual number of days elapsed between settlement and maturity is 90 days. [Hint: 2020 is a leap year.]
2. Calculate the bond equivalent yield (actual/365 basis).
3. Calculate the coupon equivalent yield (30/360 basis).
4. Calculate the CD equivalent yield (actual/360 basis).
5. Explain why the bond equivalent yield in part b is 365/360 of the CD equivalent yield in part d.

The following information is related to Tobey Corporation for 2020:
 Net Income: $2,500,000
 Common Stock Activities
1/1/20: 700,000 common shares outstanding
3/1/20: Purchased 60,000 treasury shares
7/1/20: 3-for-1 stock split
11/1/20: 120,000 new shares issued for cash
 8% Cumulative Preferred Stock
10,000 shares at $100 par
Required
a. Compute weighted average common shares outstanding (WACSO) for 2020.
b. Compute basic earnings per share for 2020. (Round to no fewer than four decimal places.)

Bone Thugs-n-Harmony incurs the expenditures listed below for constructing its corporate headquarters. They took out a $250,000 loan at 8% for the construction. They also have 2 additional loans: 500,000 at 10%, 200,000 at 6%. All loans were outstanding as of 1/1/2019 and were still outstanding when construction was completed on 4/30/2020.

How much interest does Bone Thugs-n-Harmony capitalize in 2019?