Suppose the inflation rate is expected to be 6% next year, 4% the following year, and 2.15% thereafter. Assume that the real risk-free rate, r*, will remain at 2.45% and that maturity risk premiums on Treasury securities rise from zero on very short-term bonds (those that mature in a few days) to 0.2% for 1-year securities. Furthermore, maturity risk premiums increase 0.2% for each year to maturity, up to a limit of 1.0% on 5-year or longer-term T-bonds.
Calculate the interest rate on 2-year
Treasury securities. Round your answer to two decimal places.
________ %
Calculate the interest rate on 3-year
Treasury securities. Round your answer to two decimal places.
________ %
Calculate the interest rate on 4-year
Treasury securities. Round your answer to two decimal places.
________ %
Calculate the interest rate on 5-year
Treasury securities. Round your answer to two decimal places.
________ %
Calculate the interest rate on 10-year
Treasury securities. Round your answer to two decimal places.
________ %
Calculate the interest rate on 20-year
Treasury securities. Round your answer to two decimal places.
________ %
Select the correct yield curve based on these data.
In: Finance
4. What is the difference between the null and alternative hypotheses? What does alpha
represent? (4 pts)
The proportion of professional baseball players who take steroids has been assumed to be twenty percent by the team owner council. The Commissioner of Baseball has instituted a new campaign to reduce the proportion of players who take steroids. The Commissioner would now like to test whether their campaign has worked. (α = 0.05)
State the null and alternative hypotheses that the Commissioner would test. Use
symbols in the hypotheses. State alpha and define the parameter. (7 pts)
Ho: p = 0.2 (.)
Ha: p < 0.2 (.)
Time Magazine states that the nationwide drop out rate for high school seniors is ten percent. You conduct a test to see if the drop out rate for high school seniors is actually more than ten percent. ( α = 0.01)
State the null and alternative hypotheses for this test. Use symbols in the hypotheses.
State alpha and define the parameter. (7 pts)
The Maryland Department of Health claims that the proportion of heroin users in Maryland that have been infected by HIV is four percent. Suppose a researcher wants to show that this claim is not true. ( α = 0.1)
State the null and alternative hypotheses to dispute the Maryland Department of
Health’s claim. Use symbols in the hypotheses. State alpha and define the parameter.
(7 pts)
Ho:
Ha:
In: Math
Exam case study Foreign direct investment in China: A case study from the Yangtze Delta Basin The metropolis of Shanghai dominates the rich, fertile and low-lying plain south of the Yangtze River in China. Within a 150 kilometre radius are also located the major urban centres of Suzhou, Nanjing, Hangzhou and Ningbo. Suzhou is approximately one hour by road from Shanghai and is one of the oldest cities in the Yangtze Delta Basin, with an identifiable history stretching back 2500 years. There is a traditional Chinese saying: ‘There’s paradise in heaven, but Suzhou and Hangzhou on earth’—a reference to Suzhou’s beautiful gardens and canals. In the 1980s Deng Xiaoping’s ‘open door policy’ was adopted in China and provided preferential treatment for coastal regions to develop special economic zones. These themed reforms nurtured economic change and were in line with Deng’s wishes, enabling ‘some people to get rich’ (Isaak 2000). To persuade foreign direct investment to come to Suzhou, policies for the effective leadership of development were enacted. For example, in 1998 L Government, the Jurong Township Corporation (JTC), was appointed to manage the establishment process for what was initially called the Singapore Industrial Park (SIP). Located between Shanghai and Suzhou, SIP became a flagship project for the new generation of ETDZs. The initial investment and control was 65 per cent Singaporean and 35 per cent Chinese, and a specially set up authority managed the ETDZ. It had its own customs house, and was notable for its superior infrastructure and strict environmental controls. However, the success of the Singaporean model became awkward for the Chinese and the local Suzhou municipality. They witnessed the success of the SIP, but had limited share in the wealth being generated. This prompted a flurry of activity for the emergence of another ETDZ on the other side of Suzhou, which created direct competition with the SIP. The Suzhou new district The Suzhou New District (SND) was thus built by the local municipality. SND was first established in 1992, and was considered a ‘high-tech’ ETDZ with a science and technology theme. It promoted a ‘garden-like’ atmosphere with ‘liveable surroundings’. The infrastructure in SND was developed through establishing a banking sector and a mediumrise expatriate living area. The growth of this ETDZ was credited to the development of its infrastructure services. SND established a theme park and invested in recruiting, employment and training industries. The land quality and position of SND was superior to that of the SIP and it was located right beside the city centre of Suzhou, whereas the SIP was, at this time, somewhat more remote. Despite fierce initial rivalry, both ETDZs are now successfully established and are attracting substantial FDI; the local TVEs are booming and local private business is encouraged. Considerations for FDI in the ETDZs While Jiangsu province now boasts a number of development zones, the Suzhou New District and the Suzhou Industrial Park are the main economic and technological development zones in this region. Specific regulations vary within each zone, which provide incentives for foreign direct investment. Important considerations for the ETDZs are the infrastructure (such as water plants, sewage and gas, power supply and ISDN telecommunications) and a preferential tax policy offering favourable terms to foreign investment companies. Furthermore, housing for both expatriates and workers, along with sporting, cultural, dining and shopping precincts, enhances the quality of life for residents living in the region. For example, SND provides incentives for housing local workers and SIP has a waste management plan. The administrative authorities within the zones play an integral role in the operations of the ETDZs and in the activities of enterprises within those zones. To help the facilitation of business by making it easier to obtain the permits and licences required for registration as a foreign enterprise in China, the SIP and SND both promote their ‘one-stop set-up shops’ for foreign enterprises. Promotion portraying the convenience of the residential and recreation facilities is clearly visible. When faced with the depth of regulation, language and cultural differences, and bureaucratic delays in obtaining approvals and registrations, facilities within the ETDZs assist foreign enterprises to start up their operations in China. There are also facilities to conduct major recruitment fairs on behalf of enterprises. Each year these fairs attract graduates from all over China. As part of the process, administration checks, qualification and reference checks, along with additional training, are provided, which streamlines employment for both candidates and enterprises. Cultural differences between the international and local culture prevail. SND is located close to the old city of Suzhou, whereas there is a distinctly more international flavour in the SIP, which hosts a ‘Singapore Square’ along with a tax policy favouring foreign investment. The rapid expansion in the ETDZs also has its drawbacks for foreign direct investors. The infrastructure development has not always kept up with expansion in the zones. Access to essential services, long waiting times for operational components and minimal or reduced social and cultural activities are the consequences of rapid progress. This, in turn, has produced diverse opportunities for local entrepreneurs to seize the chance to capitalise on gaps in economic development. The ETDZs are notable for their ability to assimilate supply chains quickly. Because of the large geographical area of the ETDZs, many small townships are located within them. Township enterprises have begun producing components required by the foreign direct investors. Most of these townships were communes during the Maoist area, meaning that production is still organised along these lines. In many instances, these TVEs were single-product-based and supplied Suzhou and Shanghai with farmed fish, fresh vegetables and craft items. Now, many have changed their production to manufacturing items required further along the supply chain. For example a ‘Technology Township’ in SND designs and provides research and development, then component manufacture, to supply the larger assembly plants located in the ETDZ. Therefore, a distinct logistical chain operates between the ETDZs and Shanghai, with components being manufactured in one location and assembled in another, while sales and marketing offices are situated in Shanghai. Perry and Yeoh (2000) provide a history of the China-Singapore- Suzhou Industrial Park. The authors describe the ETDZ’s success in attracting high-technology firms in the electronics, software, mobile telecommunications and pharmaceuticals sectors, although they also highlight the absence of R&D activities in some cases.
There are three main points to consider in discussion of the ETDZs located near Suzhou in Jiangsu province, China:
1 The area has been selected by China’s central government as region for major growth.
2 Multinational/international companies are established in, and are directly investing in, the region.
3 SMEs and TVEs have established supply chains to help facilitate supply and provide logistical channel support to FDI enterprises.
In: Economics
Mastery Problem: Corporations: Organization, Stock Transactions, and Dividends Pranks, Inc. Pranks, Inc. is a manufacturer of joke and novelty products for perpetrators of practical jokes. The corporation has paid several cash dividends throughout Year 6, the current year. It is also declaring a stock dividend to its stockholders as the calendar year-end approaches. You’ve been brought in as a consultant to assist with this process, and also to help determine whether some missing information can be determined before the distribution of the stock dividend is made. The company has two classes of stock: common stock and cumulative preferred stock. Number of common shares authorized 900,000 Number of common shares issued 750,000 Par value of common shares $20 Par value of cumulative preferred shares $30 Paid-in capital in excess of par-common stock $7,000,000 Paid-in capital in excess of par-preferred stock $0 Total retained earnings before the stock dividend is declared $33,500,000 No treasury share have been reissued. Preferred Dividends Common Dividends Year Total Cash Dividends Total Per Share Total Per Share Year 1 30,000 30,000 0.20 0 0.00 Year 2 54,000 54,000 0.36 0 0.00 Year 3 105,000 51,000 0.34 54,000 0.09 Year 4 135,000 45,000 0.3 90,000 0.15 Year 5 153,000 45,000 0.3 108,000 0.18 Year 6 225,000 45,000 0.3 180,000 0.3 Cash Dividends The accounting manager for the company prepared the schedule of cash dividends paid from Year 1 to Year 6 on the Pranks, Inc. panel. However, one of the reasons for Pranks, Inc.’s missing information is that the manager is away on vacation and is unreachable by phone, because he is backpacking on a remote island that does not have cell phone reception. Management would like you to determine some information from the data you’ve collected regarding its outstanding stock. Fill in the following answers. How many shares of common stock are outstanding? How many shares of preferred stock are outstanding? What is the preferred dividend as a percent of par? % Additional Questions 1. After completing the Cash Dividends panel, answer the following question. Does Pranks, Inc. have any treasury stock? How can you tell? 2. In which years has Pranks, Inc. paid cumulative preferred dividends in arrears? a. Year 1 b. Year 2 c. Year 3 d. Year 4 e. Year 5 f. Year 6 Stock Dividend The company declared a 2% common stock dividend on December 1, and would like you to compute the following pieces of missing information. The market value of the common shares is $26 on December 1, and is $30 on the actual distribution date of the stock, December 31. Fill in the missing information in the following table, using the information given and your work on the other panels. All “before” items are before the stock dividend was declared. All “after” items are after the stock dividend was declared and closing entries were recorded at the end of the year.
Total paid-in capital before the stock dividend $
Total retained earnings before the stock dividend $
Total stockholders’ equity before the stock dividend $
Total paid-in capital after the stock dividend $
Total retained earnings after the stock dividend $
Total stockholders’ equity after the stock dividend $
In: Accounting
Mastery Problem: Corporations: Organization, Stock Transactions, and Dividends
Pranks, Inc.
Pranks, Inc. is a manufacturer of joke and novelty products for perpetrators of practical jokes. The corporation has paid several cash dividends throughout Year 6, the current year. It is also declaring a stock dividend to its stockholders as the calendar year-end approaches. You’ve been brought in as a consultant to assist with this process, and also to help determine whether some missing information can be determined before the distribution of the stock dividend is made. The company has two classes of stock: common stock and cumulative preferred stock.
| Number of common shares authorized | 900,000 |
| Number of common shares issued | 750,000 |
| Par value of common shares | $20 |
| Par value of cumulative preferred shares | $30 |
| Paid-in capital in excess of par-common stock | $7,000,000 |
| Paid-in capital in excess of par-preferred stock | $0 |
| Total retained earnings before the stock dividend is declared | $33,500,000 |
| No treasury share have been reissued. |
| Preferred Dividends | Common Dividends | ||||
| Year | Total Cash Dividends |
Total | Per Share | Total | Per Share |
| Year 1 | 30,000 | 30,000 | 0.20 | 0 | 0.00 |
| Year 2 | 54,000 | 54,000 | 0.36 | 0 | 0.00 |
| Year 3 | 105,000 | 51,000 | 0.34 | 54,000 | 0.09 |
| Year 4 | 135,000 | 45,000 | 0.3 | 90,000 | 0.15 |
| Year 5 | 153,000 | 45,000 | 0.3 | 108,000 | 0.18 |
| Year 6 | 225,000 | 45,000 | 0.3 | 180,000 | 0.3 |
Cash Dividends
The accounting manager for the company prepared the schedule of cash dividends paid from Year 1 to Year 6 on the Pranks, Inc. panel. However, one of the reasons for Pranks, Inc.’s missing information is that the manager is away on vacation and is unreachable by phone, because he is backpacking on a remote island that does not have cell phone reception. Management would like you to determine some information from the data you’ve collected regarding its outstanding stock.
Fill in the following answers.
How many shares of common stock are outstanding?
How many shares of preferred stock are outstanding?
What is the preferred dividend as a percent of par?
%
Additional Questions
1. After completing the Cash Dividends panel, answer the following question.
Does Pranks, Inc. have any treasury stock? How can you tell?
2. In which years has Pranks, Inc. paid cumulative preferred dividends in arrears?
| a. | Year 1 |
| b. | Year 2 |
| c. | Year 3 |
| d. | Year 4 |
| e. | Year 5 |
| f. | Year 6 |
Stock Dividend
The company declared a 2% common stock dividend on December 1, and would like you to compute the following pieces of missing information. The market value of the common shares is $26 on December 1, and is $30 on the actual distribution date of the stock, December 31.
Fill in the missing information in the following table, using the information given and your work on the other panels. All “before” items are before the stock dividend was declared. All “after” items are after the stock dividend was declared and closing entries were recorded at the end of the year.
| Total paid-in capital before the stock dividend | $ |
| Total retained earnings before the stock dividend | |
| Total stockholders’ equity before the stock dividend | $ |
| Total paid-in capital after the stock dividend | $ |
| Total retained earnings after the stock dividend | |
| Total stockholders’ equity after the stock dividend | $ |
In: Accounting
Which of the following is an example of economies of scope?
A) A mountain resort begins running chairlifts for mountain bikers and hikers during the summer. The resort was initially built for skiing during the winter months.
B) Some computer hardware manufacturers lower costs by outsourcing support services to call centers in India.
C) Securicorp can provide security services to all local households at a lower average cost than if two firms provided home security.
D) Walmart can transport goods and services at a lower cost than any of its retail competitors can.
In: Economics
What is the primary difference between tangible and intangible resources?
Select one:
a.
Tangible resources take a longer time to build, whereas intangible assets can be built comparatively easily.
b.
Tangible assets are difficult for competitors to imitate, whereas intangible assets can be easily replicated.
c.
Tangible resources contribute to a company's competitive advantage, whereas intangible resources have no effect on competitive advantage.
d.
Tangible assets can be bought on the open market by anyone with the necessary cash, whereas intangible assets cannot be easily purchased.
In: Finance
Assume that the City of Rockwall sold an issue of $1,000 maturity value, tax-exempt (municipal bond), zero coupon bonds 5 years ago. The bonds had a 25-year maturity when they were issued, and the interest rate built into the issue was a nominal 10 percent, but with semiannual compounding. The bonds are now callable at a premium of 10 percent over the accrued value. What effective annual rate of return would an investor who bought the bonds when they were issued and who still owns them earn if they were called today?
In: Finance
1) Given a silicon p-n junction diode. Consider there are ND = 1E16 cm-3 in its conduction band while NA = 1E17 cm-3 . (i) At thermal equilibrium, calculate built-in potential (Vbi) using band diagram (no formulae). On the n-side, estimate the electron concentration and flux at q*Vbi above the conduction band. (ii) Now a forward bias VA is applied. On the n-side, estimate the electron concentration and flux at the same energy level at part (i). Hence show that the current will be exponentially dependent on the forward bias voltage.
In: Physics
In: Statistics and Probability