Answer:
RPG Consulting
1. RPG Consulting Income Statements:
Year 2 Year 3
Service Revenue $ 320,000 $ 420,000
Expenses:
Rent 38,500 38,500
Salaries 137,000 157,000
Utilities 27,000 37,000
Advertising 22,000 18,800
Total Expenses $224,500 $251,300
Accrual Net Income $95,500 $168,700
2. Amount due to the advertising agency at the end of year 2 = $13,200.
Explanation:
a) Data and Calculations:
Year 2 Year 3
Amounts billed to customers
for services rendered $ 320,000 $ 420,000
Cash collected from credit customers 230,000 370,000
Cash disbursements:
Payment of rent 77,000 0
Salaries paid to employees for services 137,000 157,000
Utilities 27,000 37,000
Advertising 13,500 32,000
Advertising:
Year 1 Ending Balance (Credit) $4,700
Year 2 Expense 22,000
Year 2 Cash payment (13,500)
Year 2 Ending balance (Credit) 13,200
Year 3 Cash payment (32,000)
Year 3 Expense $18,800
Rent:
Year 1 = $38,500
Year 2 - $38,500
Handyman Services has total assets for the year of and total liabilities of $9,400.Requirements
1. Use the accounting equation to solve for equity.
2. If next year assets increased by $3,700 and equity decreased by $1,740, what would be the amount of total liabilities for Hill CountryHill Country Handyman Services?
The question is incomplete. The complete question is stated below,
Handyman Services has total assets for the year of $14, 700 and total liabilities of $9,400.
Requirements ,
1. Use the accounting equation to solve for equity.
2. If next year assets increased by $3,700 and equity decreased by $1,740, what would be the amount of total liabilities for Hill CountryHill Country Handyman Services?
Answer:
1.
Total Equity = $5300
2.
Total Liabilities = $14840
Explanation:
1.
The basic accounting equation states that the value of total assets is always equal to the sum of the values of total liabilities and the total equity. Thus, the equation can be written as,
Total Assets = Total Liabilities + Total Equity
14700 = 9400 + Total Equity
14700 - 9400 = Total Equity
Total Equity = $5300
2.
The new value of assets and equity after increase is,
Total Assets = 14700 + 3700 = $18400
Total Equity = 5300 - 1740 = $3560
So, the new value of total liabilities will be,
Total Assets = Total Liabilities + Total Equity
18400 = Total Liabilities + 3560
18400 - 3560 = Total Liabilities
Total Liabilities = $14840
The experience gained by first-line managers as they perform their jobs enables them to acquire all the skills they will need when promoted to higher levels of management.
a. True
b. False
Answer:
False
Explanation:
First line managers occupy the position just above non managerial staff. They supervise teams in a department and ensure they perform to meet organisational goals.
First line managers are closest to employees.
Although the hands on experience gained as a front line manager is important when the person is promoted to a higher position, it does not provide all the skills of higher management.
Higher manager positions needs leadership skill where implementing directives of top management is balanced with the ensuring first line managers perform well.
Negotiation skills needs to be developed by higher management to resolve conflicts between competing needs.
(Analyzing the cash flowStatement) Google, Inc. (GOOG), is one of the most successful Internet firms, and it experienced very rapid growth in revenues from 2011 through 2014. The cash flow statements for Google, Inc. spanning the period are found here: .Answer the following questions using the information found in these statements:a. Is Google generating positive cash flow from itsoperations?b. How much did Google invest in new capital expenditures over the period?c. Describe Google's sources of financing in the financial markets over the period?d. Based solely on the cash flow statements for 2011 through2014, write a brief narrative that describes the major activities of Google's management team over the period.Is Google generating positive cash flow from its operations? (Select the best choice below.)a. Google has generated positive cash flow from its operations during the years 2012, 2013, and 2014.b. Google has generated positive cash flow from its operations during the years 2011, 2012, and 2014.c. Google has generated positive cash flow from its operations during the years 2011, 2013, and 2014.d. Google has generated positive cash flow from its operations during the years 2011, 2012, 2013, and 2014.(US$ millions) 12/31/2014 1 2/31/2013 12/31/2012 12/31/2011Net income $14,463 $12,898 $10,786 $9,720Depreciation 3,470 2,780 1,909 1,357Amortization 1,470 1,131 914 483Deferred taxes (179) (441) (298) 332Noncash items 2,664 2,234 2,310 2,024Changes in working capital 349 (29) 860 631Cash from operating activities $22,237 $18,573 $16,481 $14,547Capital expenditures $(10,937) $(7,345) $(3,201) $(3,437)Other investing cash flow items (10,086) (6,327) (9,821) (15,612)Cash from investing activities $(21,023) $(13,672) $(13,022) $(19,049)Interest and financing cash flow items $(1,449) $(282) $(98) $88Total cash dividends paid 0 0 0 0Issuance (retirement) of stock 4 0 50 0Issuance (retirement) of debt (15) (532) 1,341 793Cash from financing activities $(1,460) $(814) $1,293 $881Foreign exchange effects $(467) $(3) $2 $20Net change in cash $(713) $4,084 $4,754 $(3,601)
Answer:
Analyzing the Cash Flow Statement (Google, Inc. (GOOGLE)
a. Is Google generating positive cash flow from its operations?
Google is generating positive cash flow from its operations. Throughout the period under review it has generated a total of $71,738 million positive cash flow from its operations. See the yearly breakdown below:
(US$ millions) 12/31/2014 1 2/31/2013 12/31/2012 12/31/2011
Cash from operating activities $22,237 $18,573 $16,481 $14,547
b. How much did Google invest in new capital expenditures over the period?
It invested a total of $24,920 in new capital expenditures over the period. See breakdown below:
(US$ millions) 12/31/2014 1 2/31/2013 12/31/2012 12/31/2011
Capital expenditures $(10,937) $(7,345) $(3,201) $(3,437)
c. Describe Google's sources of financing in the financial markets over the period?
Google's sources of financing in the financial markets over the period are from issuance of stock and debt. It generated $50 million in 2012 from issuance of stock. In 2011 and 2012, it generated $793 million and $1,341 million from issuance of debt respectively.
d. Based solely on the cash flow statements for 2011 through2014, write a brief narrative that describes the major activities of Google's management team over the period.Is Google generating positive cash flow from its operations? (Select the best choice below.)
d. Google has generated positive cash flow from its operations during the years 2011, 2012, 2013, and 2014.
Explanation:
a) Data and Calculations:
(US$ millions) 12/31/2014 1 2/31/2013 12/31/2012 12/31/2011
Net income $14,463 $12,898 $10,786 $9,720
Depreciation 3,470 2,780 1,909 1,357
Amortization 1,470 1,131 914 483
Deferred taxes (179) (441) (298) 332
Noncash items 2,664 2,234 2,310 2,024
Changes in working capital 349 (29) 860 631
Cash from operating activities $22,237 $18,573 $16,481 $14,547
Capital expenditures $(10,937) $(7,345) $(3,201) $(3,437)
Other investing cash flow
items (10,086) (6,327) (9,821) (15,612)
Cash from
investing activities $(21,023) $(13,672) $(13,022) $(19,049)
Interest and financing
cash flow items $(1,449) $(282) $(98) $88
Total cash dividends paid 0 0 0 0
Issuance (retirement) of stock 4 0 50 0
Issuance (retirement) of debt (15) (532) 1,341 793
Cash from financing activities $(1,460) $(814) $1,293 $881
Foreign exchange effects $(467) $(3) $2 $20
Net change in cash $(713) $4,084 $4,754 $(3,601)
b) Google's statement of cash flows is one of the three fundamental financial statements which a company is required to prepare and present to its stockholders and the general public. This statement shows the cash generated by the company's management from operating activities, financing activities, and investing activities. From this statement, the management, stockholders, creditors, and investment analysts will gain invaluable data to assess management's performance in key financial variables.
One of the strengths of the sole proprietorship is its ability to sustain rapid growth by raising large amounts of financial resources.a) trueb) false
Answer: False
Explanation:
A sole proprietorship is a form of business which is typically small and managed by one person. The person bears all the risk and is also entitled to all the profit made.
It should be noted that the sole proprietor usually has little capital and therefore the statement in the question that "One of the strengths of the sole proprietorship is its ability to sustain rapid growth by raising large amounts of financial resources is false".
The stock of North American Dandruff Company is currently selling at $80 per share. The firm pays a dividend of $2.50 per share.a. What is the dividend yield?b. If the firm has a payout rate of 50 percent, what is the firms P/E ratio?
Answer:
3.1% / 0.031
16
Explanation:
dividend yield = dividend per share / share price
$2.50 / $80 = 0.031 = 3.1%
Payout ratio = dividend per share / earning per share = 50% = 0.5
$2.5 / earning per share = 0.5
earning per share = $2.5 / 0.5 = $5
P / E = Stock price / earning per share = $80 / $5 = 16
The _____ is the starting point in creating a marketing mix. a. priceb. productc. distribution channeld. promotional mediae. production line
Answer:
B. product
Explanation:
The marketing mix refers to a marketing strategy that involves four types of Ps i.e. product, price, promotion, and place
The product is the beginning point for developing a marketing mix as without product no organization could able to set the prices, no promotion took place nor any location could be set
Also the product should be decided by the company which type of product should be launched by considering all rivals in the market place
Therefore, the option B is correct
What can McDonald’s do to win customers over?
Chuck, a single taxpayer, earns $58,500 in taxable income and $20,800 in interest from an investment in City of Heflin bonds. (Use the U.S tax rate schedule.)Required: How much federal tax will he owe? What is his average tax rate? What is his effective tax rate? What is his current marginal tax rate?
Answer;
1. Chuck's federal taxes
The interest from the Helfin bond is tax free as municipal bonds are free of federal taxes.
Chuck's taxable income is therefore $58,500.
The tax bracket for 2020 will mean his tax is;
= 4,617.50 + 22 % *( 58,500 - 40,125)
= $8,660
2. Average Tax Rate
= Total tax/ taxable income
= 8,660/58,500
= 14.8%
3. Effective Tax Rate
= Total tax / ( total income)
= 8,660 / ( 58,500 + 20,800)
= 10.9%
4. As given by his income level and the bracket in which he falls as a result, Chucks's marginal tax rate is 22%.
Predetermined Factory Overhead Rate Exotic Engine Shop uses a job order cost system to determine the cost of performing engine repair work. Estimated costs and expenses for the coming period are as follows: Engine parts $959,000 Shop direct labor 700,000 Shop and repair equipment depreciation 46,100 Shop supervisor salaries 128,300 Shop property taxes 23,300 Shop supplies 17,900 Advertising expense 19,200 Administrative office salaries 82,500 Administrative office depreciation expense 10,500 Total costs and expenses $1,986,800 The average shop direct labor rate is $25.00 per hour. Determine the predetermined shop overhead rate per direct labor hour. Round the answer to nearest whole cent. $ per direct labor hour
Answer:
7.7 per direct labor hour
Explanation:
Number of direct labor hours = 700,000 / 25
Number of direct labor hours = 28,000 labor hours
Overhead cost = Shop and repair equipment depreciation + Shop supervisor salaries + Shop property taxes + Shop supplies
Overhead cost = 46,100 + 128,300 + 23,300 + 17,900
Overhead cost = 215,600
Predetermined overhead rate = Overhead cost/Direct labor hours
= 215,600 / 28,000 labor hours
= 7.7 per direct labor hour
Team morale depends on the following except for:
a. Support
b. Resources
c. Connections
d. Communication
Explanation:
Except for resources.........
QUESTION 7 of 10: Which is NOT one of the five steps in conducting market research?
ОООО
a) Apply for government funding
b) Identify problem
c) Obtain data
d) Choose the best solution
Submit
Answer:
Apply for government funding
Explanation:
It is not one of the five steps in conducting market research.
What was the total manufacturing cost assigned to Job P? (Do not round intermediate calculations.) Total manufacturing cost_________.
Answer:
$52,285
Explanation:
The computation of the total manufacturing cost assigned to Job P is shown below:-
Total manufacturing cost = Direct material + Direct labor + Manufacturing overhead applied
= $13,000 + $21,000 + (2,300 × $7.95)
= $13,000 + $21,000 + $18,285
= $52,285
Therefore for computing the total manufacturing cost assigned to Job P we simply applied the above formula.
Compute and select the correct common-size percent for each account title.Total Assets is $700,000 Accounts Payable is $75,000 Bonds Payable is $225,000 Common Stock is $300,000 Retained Earnings is $100,000
Answer and Explanation:
The computation for each corrected common-size percent for each account is shown below:
Particulars Amount Percentage
Total assets $700,000 100%
Accounts payable $75,000 10.71%
($75,000 ÷ $700,000)
Bonds payable $225,000 32.14%
($225,000 ÷ $700,000)
Common stock $300,000 42.86%
($300,000 ÷ $700,000)
Retained earnings $100,000 14.29%
($100,000 ÷ $700,000)
Therefore each one of assetm liabilities and stockholder equity is presented as a percentage of total assets and the same is to be considered
________ decisions involve higher level issues concerned with the overall direction of the organization; these decisions define the organization’s overall goals and aspirations for the future.
Answer:
strategic decision
Explanation:
a decision that involves higher-level issues and that is concerned with the overall direction of the organization, defining the overarching goals and aspirations for the organization's future.
Decisions that define the organization’s overall goals and aspirations for the future and also involve higher-level issues concerned with the overall direction of the organization are known as strategic decisions.
What is an organization?A group of people who works in a company, an institution or an association with the aim of achieving the same goal or aim or working in the same direction forms an organization. An organization is an entity, that gets affected by various factors, and the people who are working in the organization are also get affected by various things.
Factors that mostly affect the organization, as well as the people working in it, are the environment and the aim for which they all are working. At the same time, it is necessary that they work for the same goal and with the same intention.
As a result, sometimes the organization has to make decisions that define the organization’s overall goals are known as strategic decisions.
Learn more about strategic decisions from here:
https://brainly.com/question/24128805
#SPJ6
Pearse Kennel uses tenant-days as its measure of activity; an animal housed in the kennel for one day is counted as one tenant-day. During December, the kennel budgeted for 3,000 tenant-days, but its actual level of activity was 2,980 tenant-days. The kennel has provided the following data concerning the formulas used in its budgeting and its actual results for December:
Data used in budgeting:
Fixed Variable
per month per tenant-day
Revenue $32.10
Wages & Salaries $2,400 $ 7.00
Food & Supplies $ 900 $11.30
Facitlity Expenses $8,600 $ 3.50
Admin Expenses $6,700 $ 0.30
Total Expenses $18,600 $22.10
Actual results for December:
Revenue $97,978
Wages & Salaries $23,530
Food & Supplies $35,224
Facility Expenses $19,780
Admin. Expenses $ 7,404
1. The activity variance (show any unfavorable variance as a negative number) for net operating income in December would be:
2. The net operating income in the planning budget for December would be:
3. The net operating income in the flexible budget for December would be:
Answer:
Pearse Kennel
1. Activity variance for net operating income in December would be:
= $200
2. The net operating income in the planning budget for December would be:
= $11,400
3. The net operating income in the flexible budget for December would be:
= $11,200
Explanation:
Data and Calculations:
Fixed Variable Planning Flexible Variance
per month per tenant-day Budget Budget
Revenue $32.10 $96,300 $95,658 $642
Wages & Salaries $2,400 $ 7.00 23,400 23,260 140
Food & Supplies $ 900 $11.30 34,800 34,574 226
Facility Expenses $8,600 $ 3.50 19,100 19,030 70
Admin Expenses $6,700 $ 0.30 7,600 7,594 6
Total Expenses $18,600 $22.10 $84,900 $84,458 $442
Net operating income $11,400 $11,200 $200
Over 1.5 million different species have been discovered on Earth, and scientists discover about 15,000 new species each year. These species are very different, ranging from bacteria and algae to whales and redwood trees. Select four characteristics that all of these species have in common.
A
All species have metabolic functions.
B
All species have cell walls.
C
All species are composed of cells.
D
All species reproduce.
E
All species use sunlight to make food.
F
All species require energy.
THE SUBJECT IS SCIENCE!!!!!!!
Characteristics that all of these species have in common:
All species have metabolic functions.All species are composed of cells.All species reproduce.All species require energy.How many species have been identified on Earth?2.13 million species were recognized on the earth in 2021. The distribution of 1.05 million insects, more than 11,000 birds, more than 11,000 reptiles, and more than 6,000 mammals is shown in the graph. These numbers may be a little high, especially for less well-known categories like plants or fungi.
86% of land-dwelling species and 91% of aquatic species, according to scientists, have not yet been thoroughly investigated. Researchers are always searching. Every year, some 18,000 new species are found. On our globe, there are an estimated 8.7 million plant and animal species. This indicates that a little more than 86 percent of terrestrial species and 91 percent of sea species have yet to be identified.
Learn more about species on Earth here:
https://brainly.com/question/983919
#SPJ6
What is the relationship between the costs of child care and the quality of
experience for the children and teachers?
Supply has the potential to contribute to: ___________a. Cost management, profitability, return on assets, competitive position and corporate social policy. b. Cost management, profitability, return on assets and competitive position. c. Cost management, profitability and return on assets. d. Cost management and profitability. e. Cost management.
Answer: Cost management, profitability, return on assets, competitive position and corporate social policy
Explanation:
Supply has the potential to contribute to cost management, profitability, return on assets, competitive position and corporate social policy.
Supply is defined as the amount of goods or services that a supplier is willing to offer for sale at a particular price and at a certain period. The amount of goods offered can determine the revenue generated and hence the profit made.
Finance managers tend to be more customer centric than marketers
True or false?
Answer:
imma say its tru
Explanation:
Answer:
True
Explanation:
I took the test on edge
Which of the following is an example of external-operational communication?
a. Discussions that senior management holds to determine the goals and processes of the business
b. The orders and instructions that supervisors give employees about dealing with angry customers
c. Advertisements that companies put up on their websites for the general public
d. The reports that employees prepare concerning sales, production, inventories, finance and maintenance
e. The messages that employees write to their supervisors regarding the progress of their work
Answer:
c. Advertisements that companies put up on their websites for the general public
Explanation:
An external-operational communication can be defined as conversations, interactions or communication that are work related in nature that a business entity has with individuals or group of people such as customers, government agencies, suppliers, etc outside of the organization.
An example of external-operational communication is the advertisements that companies put up on their websites for the general public.
In most businesses, what is the most costly factor of production?
How are manufacturing companies and service companies alike? a. They both produce products. b. They both have product-production costs. c. They both have labor, material, and overhead costs. d. They both have manufacturing costs.
Answer:
The answer is d.
Explanation:
A manufacturing company uses labor and other inputs to transforms raw materials into finished product and then sells the product, like a merchandising company. A service company, on the other hand, does not produce/sell products, instead it provides service.
In the bona fide need obligation rule for requesting funds to fund warfighters, what critical questions do you ask to ensure adherence to this rule? A) Who is responsible for enforcing the bona fide need rule and rules of engagement for funding warfighters? B) Is there a valid requirement for the goods or services as well as the quantity and duration of the services or supplies provided? C) Does a bona fide need exist in the year of execution authorized by the appropriation? D) Does the proposed dollar amount exceed authorizations?
Answer:
C) Does a bona fide need exist in the year of execution authorized by the appropriation?
Explanation:
Bona fide is a rule which helps to ensure that, there is a bona fide need for the appropriation of money in a given fiscal year. In a situation there is none, then there would be no need for any allocation of money. In the case of funds for the warfighters, the critical question would be if there is any bona fide need for such figher planes or jet.
Why is Business process reengineering and organizational change seen to have a pain-pleasure relationship
Answer:ungesoma bana
Explanation:
You have ten workers who are all equally skilled and who can do each other worker's job
with the same efficiency. The first worker does a task worth $100, the second, $90, and so on
until the last whose task is worth $10. Worker number one comes to you, demands a raise,
and threatens to quit if the raise is not forth coming. How much at most should you be
willing to pay worker number one?
It really depends. If all jobs are similar and demand the same requirements, I would find a middle amount like $25 for all ten workers.
If employee number one left, the other employees might be given new jobs, and your loss would only be $10. Therefore, the maximum wage for employee 1 should be $10.
What do you mean by Efficiency?The two words used in management the most are efficiency and effectiveness. Efficiency is the practice of carrying out tasks with the least amount of time wasted and the best use of available resources, resulting in work that is completed more quickly and without errors.
A worker who is paid an hourly rate receives a fixed sum of money for each hour they work. The employer determines how much a worker will be paid, but it must at least equal the provincial minimum wage. Although the overall minimum wage in Ontario was $11.40 per hour, it might vary for students and specific occupations.
Therefore, The maximum wage for employee 1 should be $10.
Learn more about Efficiency, here;
https://brainly.com/question/30280642
#SPJ2
Ron Landscaping's income statement reports net income of $73,300, which includes deductions for interest expense of $10,500 and income taxes of $32,900. Its times interest earned is:
Answer: 11.1 times
Explanation:
Times Interest Ratio = Earnings before Interest and Tax/ Interest
Earnings before Interest and tax = Net Income + Interest + Tax
= 73,300 + 10,500 + 32,900
= $116,700
Times Interest ratio = 116,700/10,500
= 11.1 times
Jim Brown, a tax practitioner, received a complaint from the IRS for disreputable conduct. Which of the following items was not required to be listed in the complaint?
A. The unit and employee of the Internal Revenue Service that recommended the action against Jim
B. Clear and concise description of the facts that constitute the proceeding
C. Clear and concise description of the law that constitute the proceeding
D. Specific sanction sought
Answer: a. The unit and employee of the Internal Revenue Service that recommended the action against Jim.
Explanation:
From the question, we're informed that Jim Brown, a tax practitioner, received a complaint from the IRS for disreputable conduct.
Of the options given, the item that is not required to be listed in the complaint is the unit and employee of the Internal Revenue Service that recommended the action against Jim.
This is not necessary as the necessary things are clear and concise description of the facts that constitute the proceeding, clear and concise description of the law that constitute the proceeding and specific sanction sought.
The item "the unit and employee of the Internal Revenue Service that recommended the action against Jim" was not required to be listed in the complaint of the IRS for disreputable conduct.
The Internal Revenue Service is the federal government's revenue service, in charge of collecting taxes and enforcing the Internal Revenue Code, which is the main body of statutory regulatory tax legislation.
Conviction, false or misleading information, Solicitation of employment, willfully failing, misappropriation, direct or indirect influence, Disbarment, and many more are examples of disreputable conduct for which a solicitor, certified public bookkeeper, or enrolled professional may be removed from office or stopped from exercise before the Agency.
Therefore, the correct option is A.
To know more about the IRS for disreputable conduct, refer to the link below:
https://brainly.com/question/25248941
McDonald’s pressed on with the strategic plan of offering all-day breakfast in spite of initial struggles because strategic decisions require long-term commitment.a. Trueb. False
Answer: True
Explanation:
Strategic decisions do indeed take long-term commitment because they are meant to help the company in the long term not the short.
Strategic decisions usually set goals and achieve results in the long term. They are not expected to yield results in the short terms which is why MacDonald's pressed on with the all-day breakfast despite initial challenges.
Consider the following transactions for Thomas Company and their effect ont he accounting equation. Determine the new balance for each component of the accounting equation from the transactioon. If an amount box does not require an entry, leave it blank.1. Investment in the business= $17,010
2. Borrow cash= $7620
3. Purchase equipment= the list price was $8700 but the final price was $8300
4. Revenues earned = $298,600, the cash has been collected from the customers for all revenue earned
5. Expenses incurred= total $210,900 during the same year, all expenses paid in cash
6. Dividens= end of each quarter, the company distributed cash to stockholders, the sum of those quarterly distributions was $15,000
Transaction Assets =Liabilities Stockholders' Equity
Beginning $0 $0 $0
1. Investment in the business $17,010
2. Borrow cash $7620
3. Purchase equipment
4. Revenues earned
5. Expenses incurred
6. Dividends
Answer:
Since there is not enough room here I used an excel spreadsheet. I assumed that all sales and expenses were collected and paid in cash.
Answer:Answer:so here is it explained fully.|Assests=||Liabilities +||StockH.Eq.|Investment n Bus.: |$17160=||$0.00+||$17,160||Borrow Cash: |$24,900=||$7,740+||$17,160||Purchase Equipment:|$24,900=||$7,740+||$17,160||Revenues Earned: |$323,300=||$7,740+||$315,560||Expenses Incurred:|$111,600=||$7,740+||$103,860||Dividends:|$96,200=||$7,740+||$88,460||
Explanation:image explains how I got those numbers and shows that I have the correct on my worksheet.You are basically subtracting and adding the transaction from either the assets or stockholders’ equity. !THESE ANSWERS ARE CORRECT FOR ONLY CERTAIN NUMBERS GIVEN TO YOUR SPECIFIC TRANSACTIONS!check image below if you have different number on your work sheet to figure out how to get the correct answer with the numbers you received on your work sheet.
Everyone uses money, and it is important to understand what factors affect the cost of money.
Consider the following scenario:
Due to recent political and economic events, general prices of goods and services are expected to increase significantly over the next five years. You were about to purchase a five-year bond. You now require a higher return on the bond than you did before you found out about these expected price increases.
Determine which of these fundamental factors is affecting the cost of money in the scenario described:______.
a. Inflation
b. Time preferences for consumption
c. Risk
Answer:
A
Explanation:
Inflation is a persistent rise in general price level. Investors usually factor in inflation levels when making investment decisions. they demand rates of return based on the expected inflation. This rate of return is known as a nominal rate of return
Types of inflation
1. Demand-pull inflation :This is when the demand for good exceeds the supply of the goods. As a result the price of the good increases
2. Cost push inflation : this type of inflation is caused as a result of an increase in the cost of goods used in the production of goods and services