NPV is net present value and IRR is internal is internal rate of interest
To calculate the NPV (Net Present Value) and IRR (Internal Rate of Return) for both scenarios, we need to discount the cash flows using the risk-adjusted WACC (Weighted Average Cost of Capital) of 11%.
1. With Mitigation:
Initial outlay: -$63 million
Annual cash inflows: $22 million (for 5 years)
Calculating the NPV:
NPV = -Initial outlay + Σ(Cash inflows / (1 + WACC)^t)
NPV = -$63 + Σ($22 / (1 + 0.11)^t) for t = 1 to 5
Using the formula for the sum of a geometric series, we get:
NPV = -$63 + $22 * (1 - (1 + 0.11)^-5) / 0.11
NPV ≈ -$63 + $22 * 3.487 * 0.11
NPV ≈ -$63 + $76.716
NPV ≈ $13.716 million
Calculating the IRR:
IRR is the discount rate that makes the NPV zero. We can use the IRR function in Excel or a financial calculator to find the IRR. In this case, the IRR is approximately 18.21%.
2. Without Mitigation:
Initial outlay: -$63 million
Annual cash inflows: $21 million (for 5 years)
Calculating the NPV:
NPV = -Initial outlay + Σ(Cash inflows / (1 + WACC)^t)
NPV = -$63 + Σ($21 / (1 + 0.11)^t) for t = 1 to 5
Using the formula for the sum of a geometric series, we get:
NPV = -$63 + $21 * (1 - (1 + 0.11)^-5) / 0.11
NPV ≈ -$63 + $21 * 3.169 * 0.11
NPV ≈ -$63 + $69.219
NPV ≈ $6.219 million
Calculating the IRR:
IRR is the discount rate that makes the NPV zero. We can use the IRR function in Excel or a financial calculator to find the IRR. In this case, the IRR is approximately 14.64%.
Summary:
With mitigation:
NPV: $13.716 million
IRR: 18.21%
Without mitigation:
NPSPJ11V: $6.219 million
IRR: 14.64%
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In the current year, Vince exchanged unimproved land for an office building. The land had a basis of $300,000 and a fair market value (FMV) of $420,000, and was encumbered by a $100,000 mortgage. The office building had a FMV of $550,000 and was encumbered by a $230,000 mortgage. Each party assumed the other's mortgage. What is Vince's basis in the office building? $430,000 $300,000 $320,000 $550,000
Vince's basis in the office building is $320,000.
To determine Vince's basis in the office building, we need to calculate the adjusted basis of the land and the adjusted basis of the office building separately, and then add them together.
The adjusted basis of the land is calculated by subtracting the mortgage assumption from the fair market value (FMV). In this case, the mortgage assumption is $100,000, and the FMV of the land is $420,000. Therefore, the adjusted basis of the land is $420,000 - $100,000 = $320,000.
Similarly, the adjusted basis of the office building is calculated by subtracting the mortgage assumption from the FMV. Here, the mortgage assumption is $230,000, and the FMV of the office building is $550,000. So, the adjusted basis of the office building is $550,000 - $230,000 = $320,000.
Finally, we add the adjusted basis of the land ($320,000) to the adjusted basis of the office building ($320,000), giving us a total basis of $640,000. Therefore, Vince's basis in the office building is $320,000.
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FILL THE BLANK.
the type of credit frequently offered to customers who are purchasing big-ticket items like cars and boats where the customer makes a down payment and then monthly payments is known as a/an ______.
purchasing big-ticket items like cars and boats, where the customer makes a down payment and then monthly payments, is known as an "installment credit or an installment loan.
In installment credit, the customer borrows a specific amount of money to finance the purchase of the item. They then make regular, fixed payments (usually monthly) over a predetermined period, which includes both principal and interest. The loan is typically repaid in equal frequently installments until the total amount, including interest, is paid off. This type of credit arrangement allows customers to spread out the cost of the purchase over time, making it more manageable and affordable. purchasing It is commonly used for purchases that have a high value and a long useful life, such as automobiles, boats, furniture, or appliances. The down payment and regular payments ensure gradual repayment of the loan until it is fully settled.
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Flounder Corporation purchased a 40\% interest in Moss Inc. for $170. This investment gave Flounder significant influence over Moss. During the year, Moss earned net income of $15 and paid dividends of $5. Assuming the purchase price was equal to 40% of Moss's net carrying amount when it was acquired. Prepare Flounder's journal entries related to this investment using the equity method.
Flounder Corporation's journal entries for the investment in Moss Inc. using the equity method would include recording the initial investment at cost, recognizing Flounder's share of Moss's net income, and adjusting the investment balance for dividends received.
To record Flounder Corporation's investment in Moss Inc. using the equity method, we start with the initial purchase of the 40% interest. The investment is recorded at cost, which in this case is $170. The journal entry to record the initial investment would be:
Investment in Moss Inc. $170
Cash $170
Next, we need to recognize Flounder's share of Moss's net income. Since Flounder has significant influence over Moss, it is appropriate to use the equity method to account for the investment. Flounder's share of Moss's net income is calculated by multiplying the net income by the ownership percentage. In this case, Flounder's share would be 40% of the $15 net income, which is $6. The journal entry to record Flounder's share of the net income would be:
Investment in Moss Inc.$6
Equity in Moss Inc. Income$6
Lastly, we need to adjust the investment balance for dividends received from Moss. Flounder's share of the dividends would be 40% of the $5 dividend payment, which is $2. The journal entry to record the dividends received would be:
Cash $2
Investment in Moss Inc. $2
These journal entries reflect the appropriate accounting treatment for Flounder Corporation's investment in Moss Inc. using the equity method. The investment is initially recorded at cost, the share of net income is recognized, and the investment balance is adjusted for dividends received.
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Which of the following is a measure of dispersion?
a. percentiles
b. quartiles
c. interquartile range
d. all of these are measures of dispersion
D. All of these are measures of dispersion. All of these options—percentiles, quartiles, and the interquartile range—are measures of dispersion, as they provide information about the spread and variability within a dataset.
Explanation: Measures of dispersion are used to describe the spread or variability of a dataset. Percentiles, quartiles, and the interquartile range are all measures of dispersion.
Percentiles divide a dataset into 100 equal parts, providing information about how values are distributed throughout the data. Quartiles divide a dataset into four equal parts, indicating the spread of the data and identifying the median and the range between the upper and lower quartiles. The interquartile range specifically measures the spread of the middle 50% of the data, representing the range between the first quartile (25th percentile) and the third quartile (75th percentile).
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To determine the future value of an equal amount of cash being invested each year, use the A. future value of an ordinary annuity of $1 table B. present value of an ordinary annuity of $1 table C. future value of a $1 table D. present value of a $1 table
To determine the future value of an equal amount of cash being invested each year, use the future value of an ordinary annuity of $1 table.
To determine the future value of an equal amount of cash being invested each year, we use the A. Future value of an ordinary annuity of $1 table. An annuity is a type of investment that involves receiving equal payments at regular intervals over a set period. Future value refers to the value of the annuity at a specified future date. To calculate the future value of an ordinary annuity, the formula FV = Pmt x [(1 + i)^n - 1] / i is used. Where FV is the future value of the annuity, Pmt is the equal amount being invested each year, i is the interest rate per compounding period, and n is the number of compounding periods. Furthermore, to simplify the calculations, the future value of an ordinary annuity of $1 table is used, which provides the future value of a series of $1 payments invested at a given interest rate for a specific number of periods.
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What leadership style should a manager follow to
foster and support diversity in the workplace?
A manager should adopt a transformational leadership style to foster and support diversity in the workplace.
Transformational leadership is characterized by inspiring and motivating employees to reach their full potential, fostering positive relationships, and promoting innovation and creativity. This leadership style is well-suited for creating an inclusive and diverse work environment for several reasons.
Vision and Inspiration: Transformational leaders can articulate a compelling vision that promotes diversity and inclusion, inspiring employees to embrace and contribute to a diverse workplace.
Role Modeling: By demonstrating inclusive behaviors and valuing diversity themselves, transformational leaders set a positive example for others to follow, encouraging acceptance and respect for differences.
Individualized Consideration: Transformational leaders recognize and appreciate the unique strengths and perspectives of each employee, fostering an environment where diverse ideas and contributions are valued and encouraged.
Intellectual Stimulation: Transformational leaders stimulate innovation and critical thinking by challenging employees' assumptions and encouraging them to approach problems from different angles, leveraging the diversity of thought within the team.
Empowerment and Support: Transformational leaders empower employees by providing support, resources, and opportunities for growth, which promotes a sense of belonging and encourages individuals from diverse backgrounds to thrive.
By adopting a transformational leadership style, managers can create an inclusive culture where diversity is valued, individuals feel respected and empowered, and innovation and collaboration are enhanced. This approach not only benefits the organization by leveraging the full potential of its diverse workforce but also contributes to increased employee satisfaction, engagement, and overall performance.
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Cherry Banana Inc. (Banana) is a publicly traded company that manufactures fruity beverages. During the current year, Banana decided to add a series of mango-flavored beverages to its current product line. Management anticipated that the costs associated with developing the new product line and ramping up production would be significant. In an effort to defray some of the costs and manage the risk associated with the new product line in 2010, Banana identified a partner, Berry Inc. (Berry), and together they created a separate legal entity, Cherry LLC (Cherry), and entered into a joint venture arrangement. Berry is a publicly traded subsidiary of international conglomerate Berry Cherry Inc., a privately held corporation with significant cash reserves. Berry and Banana are unrelated parties. Banana Inc.
Contributes intellectual property with a fair value of $60 million and $20 million in cash.
Receives 80% of common stock.
50% vote. Cherry LLC (Joint Venture) Key terms of the joint venture arrangement are as follows:
Banana contributed intellectual property with a fair value of $60 million, plus cash of $20 million, in return for 80 percent of the common stock of the joint venture. The contributed intellectual property consisted of certain license agreements acquired by Banana in a business combination during fiscal year 2003. The license agreements had been recorded at fair value at the time of the business combination.
Berry contributed $20 million in cash in return for 20 percent of the common stock of the joint venture and an agreement to be the exclusive supplier of all software and hardware used in the manufacturing process. Berry Inc.
Contributes $20 million.
Receives 20% of common stock and right to supply all software and hardware used in the manufacturing process.
50% vote. Copyright 2004 © Deloitte Development LLC All Rights Reserved. Case 05-3: Cherry Page 2
Earnings and losses of the joint venture are allocated 80 percent to Banana and 20 percent to Berry.
The board of directors is responsible for directing all of the significant activities of the entity including the approval of operating budgets, marketing and sales plans, capital requirements, and distribution channels. Each partner has an equal vote on all matters involving the venture and equal representation on the board of directors. The board of directors has four positions; Banana designates two, while Berry designates the other two. In the event that the two parties cannot reach an agreement on an issue requiring a board vote, an independent arbitrator will be used to resolve the conflict.
Embedded in its equity interest, Berry has an option to put its investment in Cherry common stock back to Cherry for the greater of $20 million or appraised value after two years. The option expires after year five.
In the event that either joint venture member chooses to sell a portion, or all, of its ownership interest, the other member has the right of first refusal to acquire the available interest.
Cherry expects losses of $20 million.
Cherry sells its product directly to end customers. Additional Facts:
Each entity has all the requisite information to determine whether it is a variable interest.
There are no other arrangements that give Banana or Berry power beyond the stated agreement. In anticipation of filing its year-end financial statements, Banana reviewed the joint venture arrangement and determined that consolidation of Cherry was not required. Required:
Determine if Banana, Berry, or both, are required to apply the provisions of the variable interest entity (VIE) model in ASC 810-10 (Interpretation 46(R), as amended by Statement 167) to Cherry.
Determine if Cherry is a VIE.
If it is determined that Cherry is a VIE, which venturer, if either, should consolidate the entity?
Would the conclusion change if the put option referenced above is removed from the joint venture agreement?
Are Banana and Berry permitted to reconsider if Cherry is a VIE?
Is Cherry a VIE?
Which party, if any, should consolidate Cherry?
As per the details provided in the given scenario, Cherry LLC (Cherry) is a variable interest entity (VIE). The venturer who should consolidate the entity is Banana Inc., and yes, if the put option referenced above is removed from the joint venture agreement, then the conclusion changes.
Let's discuss these in detail:
Determine if Banana, Berry, or both, are required to apply the provisions of the variable interest entity (VIE) model in ASC 810-10 (Interpretation 46(R), as amended by Statement 167) to Cherry:
The Variable interest entity (VIE) model's provisions in ASC 810-10 should apply to Cherry for both Banana and Berry.
Determine if Cherry is a VIE:
Yes, Cherry is a VIE as it has insufficient equity to support its operations as it has the option to put its investment back to Cherry for the greater of $20 million or appraised value.
Also, its total equity at the start is $20 million, and it is anticipating losses of $20 million.
Determine which venturer, if either, should consolidate the entity:
As per the information provided, Banana has contributed the intellectual property, including certain license agreements acquired by Banana in a business combination during fiscal year 2003, which has a fair value of $60 million, plus cash of $20 million, in return for 80 percent of the common stock of the joint venture.
Hence, Banana Inc. should consolidate Cherry LLC.
Yes, the conclusion will change if the put option referenced above is removed from the joint venture agreement.
In this case, Berry and Banana would be 50-50 owners of Cherry LLC.
However, the Joint Venture agreement states that both parties have an equal vote on all matters involving the venture and equal representation on the board of directors.
As such, if the put option is removed from the joint venture agreement, both Berry and Banana would have to apply the equity method of accounting to report their investments in Cherry LLC.
Are Banana and Berry permitted to reconsider if Cherry is a VIE?
Yes, Banana and Berry are allowed to reconsider if Cherry is a VIE.
However, a reconsideration would require the presence of additional evidence indicating the change and the reconsideration should only occur when such evidence arises.
Is Cherry a VIE?
Yes, Cherry is a VIE, and the reason for the same has been discussed above.
Which party, if any, should consolidate Cherry?
Banana Inc. should consolidate Cherry LLC.
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why are set user id (suid) and set group id (sgid) programs potentially risky?
Set user id (SUID) and set group id (SGID) programs are considered risky due to their capability of providing unprivileged users the permissions of a privileged user, which can be misused to alter system resources in undesirable ways. The permissions provided are too powerful to be in the wrong hands.
When an unprivileged user uses an SUID program, the program is executed with the permissions of the user who created the program, rather than with the user's permissions. This allows the user to execute the SUID program with elevated permissions that are not otherwise permitted.
SGID programs work in a similar way, but with group permissions. An unprivileged user can execute the SGID program with the group permissions, providing them access to resources that are not otherwise accessible. Setting the SUID and SGID bits on programs can be convenient, but it can also be risky.
The permissions provided by these programs are too powerful to be in the hands of unprivileged users who could use them to alter system resources in undesirable ways. They can also be abused by malicious users to gain access to unauthorized resources or to perform malicious activities.
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Who will lose when coffee prices fall as countries become more efficient at growing coffee and begin exporting them? Please explain your answer using the specific-factors model.
When coffee prices fall as countries become more efficient at growing coffee and begin exporting them, coffee producers in the exporting country will lose while coffee consumers in the importing country will benefit.
The specific factors model is used to explain this phenomenon. In the specific-factors model, there are two types of factors of production: specific and mobile factors.
Specific factors can only be used in the production of one good, while mobile factors can be used in the production of multiple goods. In this case, coffee producers in the exporting country are specific factors, while consumers in the importing country are mobile factors. When coffee prices fall, the specific factors (coffee producers) will lose because they will earn less revenue.
However, the mobile factors (coffee consumers) will benefit because they will be able to buy coffee at a lower price. This is because the exporting country has become more efficient at producing coffee and is able to produce more coffee at a lower cost. As a result, the price of coffee falls on the world market, and consumers in the importing country can buy more coffee at a lower price.
In conclusion, coffee producers in the exporting country will lose when coffee prices fall as countries become more efficient at growing coffee and begin exporting them, while coffee consumers in the importing country will benefit.
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Hero Manufacturing has 7.9 million shares of common stock outstanding. The current share price is $83 and the book value per share is $4. The company also has two bond issues outstanding. The first bond issue has a face value of $65 million, a coupon rate of 6.7 percent and sells for 107.3 percent of par. The second issue has a face value of $45.8 million, a coupon rate of 7.2 percent and sells for 111.1 percent of par. The first issue matures in 8 years, the second in 28 years.
Suppose the company’s stock has a beta of 1.2. The risk-free rate is 3.2 percent and the market risk premium is 7.1 percent. Assume that the overall cost of debt is the weighted average implied by the two outstanding debt issues. Both bonds make semiannual payments. The tax rate is 21 percent. What is the company’s WACC?
The company's Weighted Average Cost of Capital (WACC) is the weighted average of its cost of equity and cost of debt, considering the proportions of equity and debt in the capital structure.
To calculate the company's Weighted Average Cost of Capital (WACC), we need to consider the cost of both equity and debt. The cost of equity is determined using the Capital Asset Pricing Model (CAPM), considering the company's beta, risk-free rate, and market risk premium. The cost of debt is calculated as the weighted average of the two outstanding bond issues, taking into account their face values, coupon rates, and market prices. The WACC is then obtained by weighting the cost of equity and cost of debt based on the proportions of equity and debt in the company's capital structure.
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QUESTION 4 [20 MARKS]
a) Critically discuss the pros and cons of global sourcing in
the supply chain, including from the perspectives of risk, price,
ethics and sustainability. (8)
b) Identify a key p
a)The following are the pros and cons of global sourcing in the supply chain, from the perspectives of risk, price, ethics, and sustainability:
Pros:
Cost savings- The primary advantage of global sourcing is cost savings. Companies may purchase low-cost raw materials, goods, and labor to lower their production and distribution expenses. This enables businesses to save a lot of money, which can be passed on to customers and increase competitiveness.Flexibility- Global sourcing allows for the possibility of locating and obtaining raw materials and finished products from a variety of different countries. This increases flexibility in the supply chain. This can be particularly beneficial in times of unexpected demand spikes or supply chain interruptions.Increased market opportunities- Companies that engage in global sourcing can tap into new markets that were previously inaccessible. This is particularly useful for firms that wish to expand their customer base and revenue streams.Cons:
Risk- Global sourcing entails a certain amount of risk. One of the most significant challenges associated with global sourcing is the risk of supply chain interruption. This could occur due to issues such as natural disasters, political unrest, and labor strikes.Poor quality- Products obtained from different countries may not meet the same quality standards as those manufactured domestically. This can be attributed to variations in production techniques, working conditions, and labor standards. Companies must have systems in place to ensure that goods obtained from overseas suppliers are of acceptable quality.Ethics- Working conditions and labor standards vary greatly between countries. Suppliers in some countries may engage in unethical labor practices such as child labor, human trafficking, and wage exploitation. Companies must establish stringent social compliance criteria to ensure that they do not engage in unethical practices.Sustainability- Long-distance shipping necessitates the use of substantial amounts of energy, which has a significant environmental impact. Companies must take steps to minimize the carbon footprint of their global sourcing activities. This includes considering alternative modes of transportation, using local suppliers, and ensuring that suppliers adhere to sustainable business practices.b) Key principles of global sourcing:
Understanding cultural differences- One of the most critical elements of global sourcing is understanding cultural differences. Culture influences the way people behave, communicate, and conduct business. Understanding the norms, values, and beliefs of other cultures is critical to establishing good relationships with suppliers.Communication- Clear communication is critical to the success of global sourcing initiatives. Firms must develop effective communication channels with their suppliers, particularly those that are located overseas. It is critical to establish open and transparent lines of communication that allow for the exchange of information and ideas.Long-term supplier relationships- Developing long-term supplier relationships is critical to the success of global sourcing initiatives. When suppliers have a good understanding of their customer's business, they are better equipped to anticipate changes in demand and supply. This can assist in avoiding disruptions in the supply chain.Quality control- Companies must ensure that the quality of products purchased from suppliers is consistent with their standards. Quality control procedures, such as regular supplier assessments, should be implemented to ensure that products conform to specifications.Cost- Cost is a critical consideration in global sourcing. Companies should compare the costs of local and international sourcing to determine which option provides the greatest benefit. While low-cost sourcing is essential, firms must ensure that they are not compromising quality and social compliance.learn more about global sourcing: https://brainly.com/question/16027482
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Explain the implications of your results to the concept of diversification based on the key differences between the two approaches in estimating the mean variance optimal portfolio: the Sharpe diagonal and the Markowitz approach.
The implications of the results to the concept of diversification based on the key differences between the Sharpe diagonal and Markowitz approaches in estimating the mean-variance optimal portfolio are significant.
The Sharpe diagonal approach and the Markowitz approach are two different methods used to estimate the mean-variance optimal portfolio. The Sharpe diagonal approach simplifies the portfolio optimization process by assuming that all asset returns have the same correlation with each other. On the other hand, the Markowitz approach takes into account the covariance matrix of asset returns, allowing for a more comprehensive analysis of the diversification benefits.
The implications of these differences on the concept of diversification are as follows:
1. Diversification Benefits: The Markowitz approach, with its consideration of the covariance matrix, allows for a more accurate assessment of the diversification benefits of combining different assets in a portfolio. By taking into account the correlation between asset returns, it can identify assets that have low or negative correlations, which can help reduce overall portfolio risk. The Sharpe diagonal approach, by assuming equal correlations, may overlook potential diversification benefits and result in suboptimal portfolio allocations.
2. Risk-Return Tradeoff: The Markowitz approach provides a more nuanced analysis of the risk-return tradeoff in portfolio construction. By considering the covariance matrix, it can identify efficient portfolios that offer higher expected returns for a given level of risk or lower risk for a given level of expected return. This allows investors to make more informed decisions based on their risk preferences. In contrast, the Sharpe diagonal approach, with its simplifying assumption of equal correlations, may not capture the full spectrum of risk-return tradeoffs available in the portfolio construction process.
3. Sensitivity to Input Data: The Markowitz approach, due to its reliance on the covariance matrix, is more sensitive to changes in input data, such as expected returns and correlations. Small changes in these inputs can significantly affect the optimal portfolio allocations. This sensitivity highlights the importance of accurate and reliable data in the Markowitz approach. The Sharpe diagonal approach, with its assumption of equal correlations, is less sensitive to changes in input data but may not capture the nuances of the underlying asset relationships.
In summary, the implications of the results to the concept of diversification indicate that the Markowitz approach, with its consideration of the covariance matrix, offers a more robust and comprehensive analysis of portfolio diversification benefits. It allows investors to better understand the risk-return tradeoff and make informed decisions in portfolio construction. While the Sharpe diagonal approach simplifies the optimization process, it may not fully capture the potential benefits of diversification.
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Ashfaaq: Which of the following is not an advantage of a franchise?
a. The franchisor provides advertising and marketing support.
b. The franchisee can be creative in terms of store design and marketing.
c. The franchisee gets business advice from the franchisor.
d. The franchisee is able to sell a known, popular product or service.
A franchise is a business model in which a company grants the right to operate a business under its name and sell its goods or services to another party. The franchisor and franchisee are the two parties involved in the franchise relationship. The franchisor is the one who licenses its name and trademark to the franchisee, whereas the franchisee is the one who pays a fee to use the franchisor's name and trademark.
Franchising has numerous advantages, including the following:
The franchisor provides advertising and marketing support. The franchisee gets business advice from the franchisor. The franchisee is able to sell a known, popular product or service. The franchisee can benefit from a proven business model and training that is provided by the franchisor. The franchisee has the support of the franchisor to help them succeed. The disadvantage of a franchise is that franchisees can be limited in their creativity with store design and marketing.
Therefore, the franchisee can be creative in terms of store design and marketing is not an advantage of a franchise.
Hence option (b) is correct.
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VII. Investment in an Asset with Negative Expected Returns (15 points)
1. (7 points) Will you ever invest in an asset with negative expected returns? Why or why not? Please explain briefly (3-4 sentences).
2. ( 8 points) Irrespective of your answer above, please explain whether a financial asset with negative expected returns will be priced higher or lower? Why? Please explain briefly, providing an example (5-6 sentences).
1. I will never invest in an asset with negative expected returns because I expect a positive return on my investments, not a loss. Investing in an asset with a negative expected return is simply gambling and does not make logical financial sense. Investing in an asset with negative expected returns would be a waste of time, effort, and resources.
An asset with negative expected returns refers to an investment that has an expected outcome of losing money over time. Since investors are looking for ways to maximize their returns, it would be unwise to invest in an asset with a negative expected return. For instance, investing in a company that is on the verge of bankruptcy is investing in a negative expected return investment. It's important to note that an investment with a negative expected return does not necessarily mean that it will perform poorly.
2. A financial asset with negative expected returns will be priced lower. The reason for this is that investors are looking for ways to maximize their returns. Since an investment with negative expected returns is expected to lose money over time, investors would not be willing to pay a high price for the investment. This would drive the price of the investment down, reflecting its true value. For example, if a stock has a negative expected return, investors would not be willing to pay a high price for the stock, and the stock would be priced lower to reflect its negative expected return.
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All of the following is true about beta except; a. Beta measure of a stock can change from time to time b. If a stock is riskier than the market it will have a beta less than one. c. Beta is a measure of how risky a security or portfolio is. d. Beta is only suitable in determining a security's short-term risk. In capital Markets, investors are willing to supply more capital when interest rates are low and risk levels are moderate. Select one: True False
Previous question
The statement "investors are willing to supply more capital when interest rates are low and risk levels are moderate" is not entirely accurate.
false.
in capital markets, investors are generally willing to supply more capital when interest rates are low and risk levels are low, not necessarily moderate. low interest rates tend to make borrowing cheaper and can stimulate investment activity. additionally, when risk levels are perceived to be low, investors may feel more confident in allocating capital to various investment opportunities.
All of the following is true about beta except; a. Beta measure of a stock can change from time to time b. If a stock is riskier than the market it will have a beta less than one. c. Beta is a measure of how risky a security or portfolio is. d. Beta is only suitable in determining a security's short-term risk. In capital Markets, investors are willing to supply more capital when interest rates are low and risk levels are moderate.
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A share valued at $261.20 pays quarterly dividends in perpetuity
at a rate of return of 5.25% compounded semi-annually. Calculate
the end-of-quarter dividends.
]The end-of-quarter dividends for a share valued at $261.20, which pays quarterly dividends in perpetuity at a rate of return of 5.25% compounded semi-annually, amount to $1.37.
To calculate the end-of-quarter dividends, we need to determine the dividend amount for each quarter. The rate of return, compounded semi-annually, means that the effective rate per quarter is half of the annual rate, which is (5.25% / 2) = 2.625%.
To calculate the dividend amount, we can use the formula for perpetuity dividend valuation:
Dividend Amount = Share Value * Effective Quarterly Rate
Substituting the given values, the dividend amount is $261.20 * 2.625% = $6.85 per quarter. However, since the dividends are paid at the end of each quarter, we need to calculate the present value of perpetuity dividends paid at the end of each quarter. Considering the time value of money, the present value of a perpetuity is given by dividing the dividend amount by the effective quarterly rate:
Present Value = Dividend Amount / Effective Quarterly Rate
Substituting the values, the present value is $6.85 / 2.625% = $261.90. Since the dividends are paid at the end of each quarter, the end-of-quarter dividend amount is slightly less than the present value, which is $261.90 - $261.20 = $0.70. Therefore, the end-of-quarter dividends amount to $0.70.
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Benjamin Boo, aged 47, draws an annual income of $120,000. It is projected that his wage growth rate is 3% per annum. Assuming a replacement ratio of 70%, what is the estimated retirement income per annum for Benjamin if he plans to retire at age 60? $123,357
$105,734
$130,869
$176,224
When annual income of $120,000 is projected at 3% per annum than retirement income is $121,485.42 Retirement income refers to the amount of money an individual receives during their retirement years. Hence option (A) is correct answer.
To calculate Benjamin's estimated retirement income per annum, we can use the replacement ratio and wage growth rate provided.
Given:
Benjamin's current annual income: $120,000
Wage growth rate: 3% per annum
Replacement ratio: 70% (0.70)
First, we need to calculate Benjamin's projected annual income at age 60 by applying the wage growth rate.
Projected annual income at age 60:
Projected income = Current income × (1 + Wage growth rate)/(Age at retirement - Current age)
Projected income = $120,000 × (1 + 0.03)^(60 - 47)
Projected income ≈ $120,000 × (1.03)^13
Projected income ≈ $120,000 × 1.446255
Projected income ≈ $173,550.60
Next, we calculate the estimated retirement income by applying the replacement ratio to the projected annual income.
Retirement income = Projected income × Replacement ratio
Retirement income ≈ $173,550.60 × 0.70
Retirement income ≈ $121,485.42
Therefore, the estimated retirement income per annum for Benjamin if he plans to retire at age 60 is approximately $121,485.42. Option (A) is correct answer.
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Kuhns Corp. has 210,000 shares of preferred stock outstanding that is cumulatlve and 100,000 common stock outstanding. The preferred dividend is $6.50 per share and has not been paid for 3 years. If Kuhns earned $1.80 million this year, what could be the maximum payment to the preferred stockholders on a per share basis? (Round your answer to 2 decimal places.) Muriple Choice $10.07 per share 58.57 per share 57,47 per share $1082 per stiare
The maximum payment to the preferred stockholders on a per share basis is approximately $0.000093 per share.
The maximum payment to the preferred stockholders on a per share basis can be calculated by determining the accumulated dividends for the preferred stock and dividing it by the number of preferred shares outstanding. Since the preferred dividends have not been paid for 3 years, the accumulated dividends for each preferred share would be the product of the preferred dividend rate ($6.50) and the number of years (3).
Accumulated Dividends = Preferred Dividend Rate * Number of Years
= $6.50 * 3
= $19.50
To find the maximum payment to the preferred stockholders on a per share basis, we divide the accumulated dividends by the number of preferred shares outstanding.
Maximum Payment per Preferred Share = Accumulated Dividends / Number of Preferred Shares
= $19.50 / 210,000
≈ $0.000093 per share (rounded to 2 decimal places)
Therefore, the maximum payment to the preferred stockholders on a per share basis would be approximately $0.000093 per share.
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In 38 low-income and emerging economies with GDP per capita below $25,000 tracked by World Bank, the induced terms of trade movements accounted for fluctuations on average for all those countries. 20 percent of GDP 40 percent of GDP 30 percent of GDP 10 percent of GDP
In the sample of 38 low-income and emerging economies with GDP per capita below $25,000 tracked by the World Bank, the induced terms of trade movements accounted for an average of 20 percent of GDP.
These fluctuations in terms of trade have significant implications for the economic performance of these countries, impacting their trade balances, export revenues, and overall economic growth.
Terms of trade refer to the ratio between the prices of a country's exports and imports. When the terms of trade improve, meaning the prices of exports increase relative to imports, a country can generate higher export revenues, leading to increased GDP.
Conversely, a decline in terms of trade can negatively affect a country's economy by reducing export revenues and potentially leading to trade deficits. In the given sample of low-income and emerging economies, the induced terms of trade movements accounted for an average of 20 percent of GDP.
This indicates that changes in the terms of trade, whether positive or negative, have a significant impact on these economies, representing a substantial share of their overall economic activity.
Governments and policymakers in these countries need to carefully monitor and manage terms of trade fluctuations to mitigate any adverse effects on their economies and pursue strategies to enhance export competitiveness and diversify their economies.
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Last year, ABC stock returned 12.6 percent, the risk-free rate was 4.0 percent, and the inflation rate was 2.5 percent. What was the risk premium on ABC stock?
8.20%
8.43%
8.60%
8.88%
8.97%
The correct answer is 8.60%. the risk premium for purchasing ABC stock is 8.6%. A risk premium is an additional return earned on a hazardous asset compared to the return made on an asset with no inherent risk.
Using the information that we have at our disposal, we have been tasked with determining the risk premium of the ABC stock in this scenario. During the previous fiscal year, shareholders of ABC saw a return of 12.6% on their investment. The rate of return for the investor is 4%, and there is no risk involved in the investment. The rate of inflation now stands at 2.5%. We are aware that the Risk Premium is equivalent to the difference in rates of return between the asset's rate of return and the risk-free rate of return.
Risk Premium = 12.6% - 4.0%
Risk Premium = 8.6%
As a result, the risk premium for purchasing ABC stock is 8.6%. Answer: 8.60%
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17. Problem 12-01 (AFN Equation) AFN equation
Broussard Skateboard's sales are expected to increase by 20% from $7.8 million in 2019 to $9.36 million in 2020. Its assets totaled $5 million at the end of 2019.
Broussard is already at full capacity, so its assets must grow at the same rate as projected sales. At the end of 2019, current liabilities were $1.4 million, consisting of $450,000 of accounts payable, $500,000 of notes payable, and $450,000 of accruals. The after-tax profit margin is forecasted to be 6%, and the forecasted payout ratio is 65%. Use the AFN equation to forecast Broussard's additional funds needed for the coming year. Enter your answer in dollars. For example, an answer of $1.2 million should be entered as $1,200,000. Do not round intermediate calculations. Round your answer to the nearest dollar.
$ ______________
The Additional Funds Needed (AFN) for Broussard Skateboard for the coming year is $1,392,400.
To calculate the Additional Funds Needed (AFN) for Broussard Skateboard, we can use the AFN equation:
AFN = (A*/S₀) * ΔS - (L*/S₀) * ΔS - MS₁(1 - Payout ratio)
Where:
A* = Assets required to sales ratio
S₀ = Sales in the previous year
ΔS = Increase in sales
L* = Liabilities required to sales ratio
MS₁ = After-tax profit margin
Payout ratio = Retained earnings ratio
Let's calculate the AFN for Broussard Skateboard step by step:
Calculate the Assets required to sales ratio (A*/S₀):
A*/S₀ = Assets at the end of 2019 / Sales in 2019
A*/S₀ = $5,000,000 / $7,800,000
Calculate the Increase in sales (ΔS):
ΔS = Sales in 2020 - Sales in 2019
ΔS = $9,360,000 - $7,800,000
Calculate the Liabilities required to sales ratio (L*/S₀):
L*/S₀ = Current liabilities at the end of 2019 / Sales in 2019
L*/S₀ = $1,400,000 / $7,800,000
Calculate the After-tax profit margin (MS₁):
MS₁ = After-tax profit margin = 6% = 0.06
Calculate the Payout ratio:
Payout ratio = Retained earnings ratio = 65% = 0.65
Now, let's substitute the values into the AFN equation:
AFN = (A*/S₀) * ΔS - (L*/S₀) * ΔS - MS₁(1 - Payout ratio)
AFN = ($5,000,000 / $7,800,000) * ($9,360,000 - $7,800,000) - ($1,400,000 / $7,800,000) * ($9,360,000 - $7,800,000) - 0.06 * (1 - 0.65)
AFN = ($5,000,000 / $7,800,000) * $1,560,000 - ($1,400,000 / $7,800,000) * $1,560,000 - 0.06 * (1 - 0.65)
AFN = $2,000,000 - $280,000 - 0.06 * 0.35 * $1,560,000
AFN = $1,720,000 - $327,600
AFN = $1,392,400
Therefore, the Additional Funds Needed (AFN) for Broussard Skateboard for the coming year is approximately $1,392,400.
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Select all the statements below that represents characteristics of the neo-classical macroeconomic model A. Sticky prices and wages B. Flexible prices and wages C. Potential GDP determining the size of the economy D. Focus on government intervention in the economy E. Focus on long term macroeconomic conditions
The characteristics of the neoclassical macroeconomic model include sticky prices and wages, potential GDP determining the size of the economy, and a focus on long-term macroeconomic conditions.
A. Sticky prices and wages: This statement aligns with the neoclassical macroeconomic model. Neoclassical economists assume that prices and wages are sticky in the short run, meaning they do not adjust immediately to changes in supply and demand conditions.
C. Potential GDP determining the size of the economy: This statement is consistent with the neoclassical macroeconomic model. Neoclassical economists emphasize potential GDP as the maximum sustainable level of output determined by factors such as technology, capital accumulation, and labor force growth.
E. Focus on long-term macroeconomic conditions: This statement accurately represents the neoclassical macroeconomic model. Neoclassical economists emphasize long-term equilibrium and factors that affect economic growth and productivity over time.
B. Flexible prices and wages: This statement does not align with the neoclassical macroeconomic model. Neoclassical economists assume sticky prices and wages in the short run, rather than immediate adjustments.
D. Focus on government intervention in the economy: This statement does not reflect the neoclassical macroeconomic model. Neoclassical economists generally advocate for limited government intervention and rely on market mechanisms for resource allocation.
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Terry Petch is launching a new brand of Beer called "The Sour Seed" into the Ontario market. It is a crowded field in the craft beer category, but it is made with Crabapples and there is no other product that has this tart (sour) but sweeter taste profile in the market. He is launching this in a 473ml size can in this market segment ranges from $2.25 to $3.50.
He has just hired you as the new brand manager and he wants your help in answering the following questions.
Sustainability
You are going to educate Terry on the importance of sustainability.
Q) What can Terry do to make his product more sustainable? Remember, you are a marketer so think outside of the box
Q) What initiatives could he have with his packaging?
By implementing strategies such as locally sourced ingredients, water conservation, energy-efficient brewing, waste reduction, carbon offset programs, and sustainable packaging initiatives, Terry can make "The Sour Seed" beer more sustainable.
To make "The Sour Seed" beer more sustainable, Terry can consider implementing the following strategies:
Ingredient sourcing: Terry can focus on using locally sourced and organic ingredients, including crabapples. By supporting local farmers and reducing transportation emissions, he can promote sustainability and emphasize the freshness of his product.
Water conservation: Beer production requires a significant amount of water. Terry can explore water conservation techniques like recycling, rainwater harvesting, or investing in water-efficient technologies.
He can also educate consumers about the importance of water conservation and encourage responsible water usage.
Energy-efficient brewing process: Terry can invest in energy-efficient brewing equipment and technologies to reduce energy consumption during the production process.
This could include using energy-efficient boilers, optimizing heating and cooling systems, and exploring renewable energy options such as solar panels or wind turbines.
Waste reduction: Terry can implement a comprehensive waste management strategy by prioritizing recycling, composting organic waste, and minimizing packaging materials.
He could explore partnerships with local organizations or farms to repurpose spent grains or collaborate with composting facilities to reduce waste sent to landfills.
Carbon offset programs: Terry can consider participating in carbon offset programs to neutralize the carbon emissions associated with the production and distribution of "The Sour Seed" beer.
This could involve investing in renewable energy projects, reforestation initiatives, or supporting environmental conservation efforts.
Regarding packaging initiatives, Terry can:
Sustainable materials: Consider using eco-friendly packaging materials such as recyclable or compostable cans or bottles made from recycled content. He can also explore innovative alternatives like plant-based plastics or biodegradable materials.
Minimalist design: Opt for a simple and minimalistic packaging design to reduce the amount of ink, dyes, and materials used. Clear labeling with eco-friendly symbols or certifications can inform consumers about the sustainable attributes of the product.
Packaging size options: Alongside the 473ml cans, Terry could offer smaller serving sizes to cater to different consumer preferences and reduce potential waste from unfinished beverages.
Packaging return program: Implement a packaging return program where consumers can return empty cans for a refund or incentive. This encourages recycling and ensures proper disposal of the packaging.
Collaborative partnerships: Terry could collaborate with local artists, designers, or environmental organizations to create limited-edition packaging or promotional materials that raise awareness about sustainability and support relevant causes.
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A Real Estate Investment Company has a weighted average cost of capital of 10% and $2 mil of capital to invest. Which of the following properties is the most appropriate to buy?
a.Property C: 10% Cap Rate, NOI $100,000
b.Property D: 12% Cap Rate, NOI $300,000
c.None of the properties
d.Property A: 8% Cap Rate, NOI $400,000
e.Property B: 11% Cap Rate, NOI $180,000
We must compare each property's return to the weighted average cost of capital (WACC), which is 10%, and the $2 million in available capital in order to choose the best one to purchase.
Using the capitalization rate (Cap Rate) and net operating income (NOI), determine the value of each asset: Value = NOI / Cap Rate = $100,000 / 0.10 = $1,000,000 for Property C Value = NOI / Cap Rate = $300,000 / 0.12 = $2.5 million for Property D. Value = NOI / Cap Rate = $400,000 / 0.08 = $5 million for Property A. Value = NOI / Cap Rate = $180,000 / 0.11 = $1.64 million for Property B. We can observe that Property D, with a value of $2.5 million, exceeds the $2 million in available capital by comparing the property values. not practical. We can compare the values of the two remaining properties, Property A and Property B, and decide which one to buy. Property B, valued at $1.64 million, is within the budget whereas Property A, valued at $5 million, surpasses it. Therefore, given the limited budget, Property B with an 11% Cap Rate and a $180,000 NOI would be the best choice.
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Discuss the importance of management accounting concepts that covers the financial statements and reporting analysis. Choose an organization to justify your answer. [5 Marks]
Management accounting concepts that cover financial statements and reporting analysis are crucial for organizations to make informed decisions and evaluate performance.
For instance, in the case of Apple Inc., these concepts help assess profitability, liquidity, and solvency, enabling management to optimize resource allocation, set realistic targets, and identify areas for improvement.
Management accounting concepts, such as financial statements and reporting analysis, are essential for organizations to effectively manage their operations. Taking Apple Inc. as an example, these concepts provide valuable insights into the company's financial performance and health. By analyzing financial statements, including the income statement, balance sheet, and cash flow statement, Apple's management can assess the profitability, liquidity, and solvency of the company.
This information is vital for decision-making processes such as resource allocation, budgeting, and investment planning. For instance, by understanding the profitability ratios derived from financial statements, Apple can identify which product lines or business segments are generating the most profit and allocate resources accordingly.
Furthermore, financial reporting analysis allows Apple's management to compare current and past financial performance, assess trends, and identify areas for improvement. For example, if Apple's profitability has been declining over time, the management can investigate the underlying causes and take corrective actions to improve efficiency, reduce costs, or enhance revenue streams.
In summary, management accounting concepts related to financial statements and reporting analysis are crucial for organizations like Apple Inc. These concepts provide valuable information to assess financial performance, make informed decisions, and drive continuous improvement. By leveraging these tools effectively, organizations can optimize resource allocation, set realistic targets, and ensure long-term sustainability.
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Which of the following statement best describes the reason why bank regulators set minimum capital standards?
agtion
Select one:
A. protect creditors from decreases in asset values
B. protect shareholders from managerial fraud or incompetence
C. make work for regulators
D. force banks to follow socially desirable policies
E. inhibit rapid growth rate of bank assets
The best statement that describes the reason why bank regulators set minimum capital standards is: A. protect creditors from decreases in asset values.
The reason why bank regulators set minimum capital standards is primarily to protect creditors from decreases in asset values.
play a crucial role in the economy by accepting deposits from individuals and entities and providing loans and other financial services. By setting minimum capital standards, regulators aim to ensure that banks maintain a sufficient buffer of capital to absorb losses and honor their obligations to depositors and other creditors.
In the event of financial distress or economic downturns, banks may experience losses on their assets, such as loans that are not repaid. If a bank's capital is inadequate, it may not have the financial strength to absorb these losses, potentially leading to insolvency. Minimum capital standards act as a safeguard by requiring banks to maintain a certain level of capital relative to their risk-weighted assets, thereby reducing the likelihood of default and protecting creditors.
While protecting shareholders from managerial fraud or incompetence is also a consideration, the primary focus of minimum capital standards is on safeguarding the interests of creditors. Additionally, the establishment of capital standards does involve some regulatory work, but it is primarily driven by the need to maintain financial stability and protect the broader economy.
In summary, the primary reason for setting minimum capital standards is to protect creditors from decreases in asset values and ensure the stability and resilience of the banking system.
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A direct cost is:
a.
A cost which is directly
related to the cost object
b.
A cost which is directly
related to a fixed cost
c.
An overhead cost
d.
A cost which increases as
volume
A direct cost refers to a cost that is directly related to the cost object.The correct answer is option (a). A cost object is any activity, product, or service for which costs are measured or assigned. Direct costs are specifically incurred as a result of the production or acquisition of a particular cost object.
Unlike indirect costs, which are not directly traceable to a specific cost object, direct costs can be easily allocated or assigned to a specific activity, product, or service. Examples of direct costs include direct labor, direct materials, and direct expenses such as specific equipment or tools used in the production process.
Direct costs are typically variable costs, meaning they increase or decrease proportionately with changes in the volume of production or activity. As the volume increases, the direct costs associated with producing or acquiring the cost object also increase. This relationship allows for more accurate cost tracking and helps determine the cost per unit of production or service.Hence, option (a) is the correct answer.
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6. Close-ended mutual funds
Use the following table to match each fund characteristic with the type of mutual fund.
Fund Characteristic Open-End Mutual Funds Close-Ended Funds
Do not redeem shares o o
Usually sell shares of the mutual fund,
and allow investors to redeem their shares, o o
at the net asset value
In a single initial public offering (IPO), a closed-end fund, a particular kind of mutual fund, offers a certain number of shares to raise money for its initial investments.
On a stock exchange, its shares can then be bought and sold, but no new shares or funds will be added to the fund.
Close-ended funds are mutual funds with a set maturity period, according to the Securities and Exchange Board of India (SEBI). At the time of the inception of the programme, these mutual funds are open for subscription for a predetermined amount of time.
A closed-end fund (CEF), which differs from typical mutual funds and exchange-traded funds (ETFs), is frequently misunderstood.
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- Match the Sport Marketing Plan to its step order.
Matching the sport marketing plan to its step order involves identifying the correct sequence of steps in the marketing planning process for sports.
This process includes various stages such as conducting research, setting objectives, developing strategies, implementing tactics, and evaluating the results.
The sport marketing plan follows a sequential order of steps to ensure an effective and comprehensive approach. The first step is conducting research, which involves gathering relevant data and information about the target market, competitors, and industry trends.
This research forms the foundation for setting clear objectives in the second step, where specific and measurable goals are established.
Once the objectives are defined, the next step is developing strategies. This includes identifying target segments, positioning the sports product or service, and determining the marketing mix elements such as product, price, promotion, and place.
Strategies are then translated into action through the implementation of tactics. This involves executing the marketing initiatives, which may include advertising campaigns, sponsorships, digital marketing efforts, and other promotional activities.
After the tactics are implemented, the final step is evaluating the results. This involves assessing the effectiveness and impact of the marketing initiatives by measuring key performance indicators (KPIs) and analyzing the return on investment (ROI).
Evaluation helps in identifying areas of success and areas that require improvement, leading to valuable insights for future planning and decision-making.
To match the sport marketing plan to its step order, the correct sequence would be: 1) Research, 2) Setting Objectives, 3) Developing Strategies, 4) Implementing Tactics, and 5) Evaluating Results.
This order ensures a systematic approach to planning, executing, and assessing sport marketing efforts, allowing for continuous improvement and maximizing the effectiveness of marketing initiatives in the sports industry.
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Registered representative are required to requalify by examination if their registrations are not sponsored by a member firm for a period of
A) 1 month
B) 6 months
C) 1 year
D) 2 years
Registered representatives are required to requalify by examination if their registrations are not sponsored by a member firm for a period of 2 years. Option D.
What happens if the registrations of a Registered representative are not sponsored by a member firm?If the registrations of a Registered representative are not sponsored by a member firm for a period of 2 years, they are required to requalify by examination. If they fail to do so, their registration may be revoked.
Registered representatives are required to requalify by examination if their registrations are not sponsored by a member firm for a period of 2 years. Option D.
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