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As a long-time investment expert, you have come to firmly believe in the following rules: 1. If a person is age thirty-five or younger, and is married, then he or she should invest in securities. 2. If a person has less than $20,000 to invest and is looking for long-term return, then he or she should invest in multiple stocks. 3. If a person wants to invest in growth stocks or has an annual income of at least $50,000, then he or she should invest in Macrosoft stock. 4. If a person seeks long-term return, and wants to invest in multiple stocks, then he or she should invest in growth stocks. 5. If a person has less than $20,000 to invest and wants to invest in securities, or if he or she has an annual income of at least $50,000, then he or she should invest in growth stocks. 6. If a person is married, then he or she should look for long-term return. A. Identify all the underlying conditions/actions and give each a short name. For example: • A = Person’s Age is 35 or less • M = Person is Married • S = Invest in Securities B. Translate each of the given 6 rules into a graphic formula using the above abbreviated names and arrows. Show “If X, then Y” and “If X and Y, then Z”, respectively, as: X X Y Z Y C. Integrate the above graphic fragments into a single diagram showing all the conditions/actions and all the rules. It may take several trials to create a neat, elegant diagram. If the diagram becomes too messy and unreadable, rearrange the items to eliminate crossed lines. Use the drawing toolbar (Insert/Shapes) in MS-Word to draw the arrows. D. An investor approaches you to seek advice on investing in Macrosoft stock. She is married and has $15,000 to invest. Use the above diagram to figure out what advice you would offer her. Clearly explain your thinking process.
A consumer has decided to set aside $2000 out of her income in the current year and save it for retirement. She has the choice of putting all $2000 in a traditional IRA or else putting all $2000 in a Roth IRA. you may assume that she knows her margin..
Last year, you earned 11.67 percent on your investments. During that time period, inflation averaged 6.4 percent. What was your real rate of return based on the Fisher formula?
The cost of building each streetlight is 3. If it is impossible to purchase a fractional number of streetlights,- how many streetlights are socially optimal?
Kaufman Enterprises has bonds outstanding with a $1,000 face value and 10 years left until maturity. They have an 12% annual coupon payment, and their current price is $1,180. The bonds may be called in 5 years at 109% of face value (Call price = $1,..
Repurchase Agreement Stanford Corporation arranged a repurchase agreement in which it purchased securities for $4.9 million and will sell the securities back for $5 million in 40 days. - What is the yield (or repo rate) to Stanford Corporation?
A taxable corporate issue yields 7 percent. For an investor in a 35 percent tax bracket, what is the equivalent aftertax yield?
G Corporation is considering acquiring a newer, more modern machine. The machine, which requires an initial outlay of $4.5 million, will generate cash flows of $1.1 million at the end of each year for 5 years. Investors could earn 7.5 percent elsewhe..
How do societal expectations affect corporations and their initiatives? Give an example of a company that had to alter a product or service because of society's concerns about its health, moral, or social impacts.
Joe Black just won a $550,000 lottery in Pennsylvania. Instead of receiving a lump sum, he found that he would receive $25,500 annually (end of year) for 20 years. Joe is 75 years old and wants his money now. He has been offered $140,827 to sell his ..
Assume you have both taxes and inflation. You are in the 20% tax bracket, and the inflation rate is 5% per year. - What is the NPV of this project?
The phenomenon of diminishing marginal utility refers to the fact that A. People do not like additional units of a good. B. It is unfair to give more of a good to a person with high marginal utility. C. The extra gain from having 1 more unit of a goo..
Maggie's Muffins, Inc., generated $4,000,000 in sales during 2016, and its year-end total assets were $2,800,000. Also, at year-end 2016, current liabilities were $1,000,000, consisting of $300,000 of notes payable, $500,000 of accounts payable, and ..
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