A floating exchange rate usually has a neutral impact on a country's current account deficit.
The current account balance is determined by the trade balance, which includes the balance of goods and services exports and imports, as well as other factors such as income from abroad and transfers.
Under a floating exchange rate regime, the value of the currency is determined by market forces of supply and demand. This means that the exchange rate can freely adjust to reflect changes in the economic fundamentals, such as trade imbalances.
If a country has a current account deficit, meaning it imports more than it exports, a floating exchange rate can help adjust the trade balance. A depreciation of the currency makes imports relatively more expensive and exports relatively cheaper, which can lead to an improvement in the trade balance over time. However, other factors such as domestic demand, productivity, and global economic conditions also play significant roles in determining the current account balance. Therefore, the impact of a floating exchange rate on a country's current account deficit can vary and is not solely determined by the exchange rate regime.
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__________ is the art of utilizing organizational resources to accomplish goals at work.
A. Management
B. Socialization
C. Justification
D. Preparation
Management is the art of utilizing organizational resources to accomplish goals at work. Option A, management, accurately describes the concept being referred to in the given statement.
Management involves the process of planning, organizing, coordinating, and controlling resources within an organization to achieve specific goals and objectives. It is the art of utilizing various resources such as human capital, financial assets, technology, and materials to accomplish tasks and drive the organization towards success.
Effective management involves making strategic decisions, setting goals, allocating resources, coordinating activities, and leading teams. Managers are responsible for ensuring that resources are used efficiently and effectively to maximize productivity, minimize waste, and achieve desired outcomes. They utilize their skills, knowledge, and expertise to analyze situations, make informed decisions, and guide employees towards accomplishing organizational goals.
Management is a dynamic and multifaceted discipline that encompasses various functions, roles, and responsibilities. It requires a combination of leadership, communication, problem-solving, and decision-making skills to navigate the complexities of the work environment and drive success.
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A brand-specific frequent guest program is an example of a:
a. hotel sales effort
b. hotel marketing effort
c. franchisor's sales and marketing effort
d. franchisor's call center activity
A brand-specific frequent guest program is an example of a hotel marketing effort.The correct answer is option (b). A brand-specific frequent guest program is designed and implemented by a hotel as part of its marketing strategy to enhance customer loyalty and encourage repeat business.
This program is typically aimed at incentivizing guests to choose and stay at a particular hotel brand repeatedly. Through the frequent guest program, hotels offer various benefits, rewards, and exclusive perks to members who frequently stay at their properties. These incentives may include discounted rates, room upgrades, access to exclusive amenities, priority check-in, and other personalized services. While hotel sales efforts (option a) may involve negotiating contracts and agreements with corporate clients or group bookings, a brand-specific frequent guest program primarily focuses on marketing initiatives.
Option c, franchisor's sales and marketing effort, is not an accurate choice as the program is typically implemented and managed by the individual hotel brand rather than the franchisor. Option d, franchisor's call center activity, is unrelated to a brand-specific frequent guest program as it refers to a specific operation within a franchisor's business model that handles customer inquiries and reservations through phone channels. Hence, option (b) is the correct answer.
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Which of the following statements best reflects the relationship between saving and savings?
A. Saving is the total amount not consumed whereas savings refers to the amount placed into a savings account.
B. Saving is a flow variable; savings is a stock variable.
C. Saving and savings are both flow variables.
D. Saving and savings are both stock variables.
Option A best reflects the relationship between saving and savings.
Option A states that saving is the total amount not consumed, while savings refers to the amount placed into a savings account. This statement accurately describes the relationship between saving and savings. Saving refers to the act of setting aside money or resources instead of spending them, which can be done in various forms such as depositing into a savings account, investing, or holding cash. It is a broader concept that encompasses the total amount of money or resources that are not consumed or spent.
On the other hand, savings specifically refers to the amount of money that is placed into a savings account or saved for future use. It is a more specific term that focuses on the portion of saving that is allocated to a savings account.
Therefore, option A provides the most accurate reflection of the relationship between saving and savings, highlighting the distinction between the total amount not consumed (saving) and the amount placed into a savings account (savings).
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(b) You bought GameStart shares on Jan 1
st of this year at $30.50. The share paid an annual dividend of $1.90 during the year. However, the share price underperformed during the year and you sold them at $18.70 on Dec31. What is the \% return you realized on GameStart shares? (6 marks)
The percentage return realized on GameStart shares can be calculated by considering the initial purchase price, dividend payments received, and the final selling price. In this case, the percentage return is -35.74%.
To calculate the percentage return, we need to consider the initial purchase price, dividend payments, and the final selling price.
The initial purchase price of GameStart shares was $30.50. Throughout the year, the share paid an annual dividend of $1.90.
The dividend is not reinvested but considered as cash received.
To calculate the dividend received, we multiply the dividend amount by the number of shares owned:
Dividend received = $1.90
The final selling price of the shares was $18.70.
To calculate the percentage return, we use the formula:
Percentage Return = ((Selling Price + Dividends Received - Purchase Price) / Purchase Price) * 100
Substituting the given values:
Percentage Return = (($18.70 + $1.90 - $30.50) / $30.50) * 100
= (-$9.90 / $30.50) * 100
= -0.3246 * 100
= -35.74%
Therefore, the percentage return realized on GameStart shares is -35.74%.
This negative return indicates a loss on the investment compared to the initial purchase price.
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which one of the following set of factors determines what risks are eligible for coverage under a Businessowners Policy (BOP)?
A. Size of building and type of business.
B. Location of building and number of employees.
C. Type of building construction and number of exposure units.
D. Age of building and value of inventory.
C. Type of building construction and number of exposure units. When considering eligibility for coverage under a Businessowners Policy (BOP), the type of building construction and the number of exposure units are the key factors that insurance providers consider.
The factors that determine what risks are eligible for coverage under a Businessowners Policy (BOP) include the type of building construction and the number of exposure units. These factors are crucial in assessing the level of risk associated with the insured property and the business operations conducted within it. The type of building construction is important because it affects the building's resistance to hazards such as fire or natural disasters. The number of exposure units refers to the number of separate locations or properties covered by the policy, which helps determine the overall risk profile.
When considering eligibility for coverage under a Businessowners Policy (BOP), the type of building construction and the number of exposure units are the key factors that insurance providers consider. These factors provide insights into the risk level associated with the property and the business operations, allowing insurers to assess and determine the appropriate coverage options for the policyholder.
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Diana, a 4th year BAFM student has just received a lumpsum payment of Kes 10 million after participating in sport betting She is contemplating investing Kes 5 millon in stocks of Kiserian Ltd today that pays a 6% annual dividend. The T-bill rate is 7.5% and Diana expects the market to rise in value by 10% per year. The Directors of Kiserian Ltd have approved an expansion project that is expected to increase the firm’s annual cash inflow by Ksh 100 million. Information on this project will be released to the market together with the announcement of the rights issue. This dividend together with the company’s earnings is expected to grow by 5% annually after investing in the expansion project. In order to effectively manage it risk, Kiserian Ltd invested in 2-asset portfolio to diversify it incomes. Their weights of the assets are 45% and 55% respectively, their standard deviations are 2.1% and 3.2% and their betas are 0.9 and 1.2, respectively. Their mutual correlation coefficient is 0.5.
Required;
(a) Calculate the expected return of the portfolio (2 Marks)
(b) Calculate the portfolio beta (5 Marks)
(c0 Based on the results in (i) above, comment on the risk profile of Kiserian Management Limited, in relation to the market (3 Marks)
(d) Do you think Diana has adopted the right investment strategy considering her age and investment time horizon? Justify your answer (2 Marks)
(e) "Investing in shares is riskier than investing in fixed-income investments. Having a portfolio of shares subjects’ investors to an emotional roller-coaster". This was a comment made by one Expert Panelist during an Investment media coverage at KTN TV. Comment on the statement above and discuss four key risks associated with shares. (3 Marks)
QUESTION TWO
(a) The following data was obtained from Belcom Microfinance- a licensed microfinance Bank during the financial year 2020-2021:
Net Income: $. 1,500,000
Number of equity shares (2020): 150,000
Number of equity shares (2021): 250,000
Dividend paid: $. 400,000
Required:
Calculate the following market value ratios for Belcom Microfinance.
(i) Earnings per share (EPS) (2 Marks)
(ii) Dividend per share (DPS) (2 Marks)
(iii) Dividend Payout ratio (2 Marks)
(iii) Retention Ratio (2 Marks)
(b) You have been tasked by the Belcom Microfinance management to calculate the value of a 3-year bond with face value of Kes. 1,200,000 and coupon rate being 12% paid annually. Calculate the value of the bond and advise whether Belcom microfinance should sell or keep the bond (7 Marks)
This question consists of two parts. Part 1 focuses on Diana, who has received a lump sum payment and is considering investing in Kiserian Ltd stocks.
The expected return of the portfolio and the portfolio beta need to be calculated. The risk profile of Kiserian Management Limited is also discussed.
Part 2 involves calculating market value ratios for Belcom Microfinance, including earnings per share, dividend per share, dividend payout ratio, and retention ratio. Additionally, the value of a 3-year bond with a coupon rate of 12% is to be calculated, and a recommendation is to be given on whether Belcom Microfinance should sell or keep the bond.
Due to the extensive nature of the question, it exceeds the response limit of 150 words. It would be best to address each part separately in order to provide a comprehensive answer. Let's begin with Part 1 and address Part 2 in a separate response.
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Quad Enterprises is considering a new 3-year expansion project that requires an initial fixed asset investment of $5.346 million. The fixed asset will be depreciated straight-line to zero over its 3-year tax life, after which time it will have a market value of $415,800. The project requires an initial investment in net working capital of $594,000. The project is estimated to generate $4,752,000 in annual sales, with costs of $1,900,800. The tax rate is 24 percent and the required return on the project is 15 percent. What is the project's Year 0 net cash flow? Year 0 cash flow What is the project's Year 1 net cash flow? What is the project's Year 2 net cash flow? Year 2 cash flow What is the project's Year 3 net cash flow? What is the NPV?
a. Year 0 net cash flow: -$5,940,000 b. Year 1 net cash flow: $2,448,318.60 (calculate present value). c. The present values for all years and sum them to find the NPV.
a. Year 0 net cash flow:
Initial Fixed Asset Investment = $5,346,000
Initial Investment in Net Working Capital = $594,000
Year 0 Net Cash Flow = -(Initial Fixed Asset Investment + Initial Investment in Net Working Capital)
Year 0 Net Cash Flow = -($5,346,000 + $594,000)
Year 0 Net Cash Flow = -$5,940,000
b. Year 1 net cash flow:
Sales = $4,752,000
Costs = $1,900,800
Depreciation Expense = (Initial Fixed Asset Investment - Salvage Value) / Tax Life
Depreciation Expense = ($5,346,000 - $415,800) / 3
Depreciation Expense = $1,310,400
Taxable Income = Sales - Costs - Depreciation Expense
Taxable Income = $4,752,000 - $1,900,800 - $1,310,400
Taxable Income = $1,540,800
Taxes = Taxable Income * Tax Rate
Taxes = $1,540,800 * 0.24
Taxes = $369,792
Year 1 Net Cash Flow = (Sales - Costs - Taxes) + Depreciation Expense
Year 1 Net Cash Flow = ($4,752,000 - $1,900,800 - $369,792) + $1,310,400
Year 1 Net Cash Flow = $2,791,808
c, Net Present Value (NPV):
Calculate the present value of each year's net cash flow by discounting it at the required return rate of 14 percent. Then sum up all the present values.
For example, if the calculated Year 1 net cash flow is $2,791,808, and the discount rate is 14 percent, you would calculate the present value as follows:
PV = Year 1 Net Cash Flow / (1 + Required Return Rate)¹
PV = $2,791,808 / (1 + 0.14)¹
PV = $2,791,808 / (1.14)¹
PV = $2,791,808 / 1.14
PV = $2,448,318.60
Please repeat this calculation for each year's net cash flow and sum up all the present values to obtain the NPV.
Year 2 net cash flow:
Calculate the net cash flow for Year 2 using the same methodology as Year 1.
Year 3 net cash flow:
Calculate the net cash flow for Year 3 using the same methodology as Year 1.
Once you have the net cash flows for Year 0, Year 1, Year 2, and Year 3, calculate their present values (PV) individually by discounting each cash flow at the required return rate which is not given in question. Then, sum up all the present values to obtain the NPV. The formula for NPV is the sum of all present values
NPV = PV0 + PV1 + PV2 + PV3
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--The given question is incomplete, the complete question is given below " Quad Enterprises is considering a new 3-year expansion project that requires an initial fixed asset investment of $5.346 million. The fixed asset will be depreciated straight-line to zero over its 3-year tax life, after which time it will have a market value of $415,800. The project requires an initial investment in net working capital of $594,000. The project is estimated to generate $4,752,000 in annual sales, with costs of $1,900,800. The tax rate is 24 percent and the required return on the project is 14 percent.
a. What is the project's Year 0 net cash flow? Year 0 cash flow
b, What is the project's Year 1 net cash flow?
c, What is the NPV? "--
Suppose that a new government wants to keep out the poor. It declares that the minmum rent that can be charged ia 52500 per herin is we government can enforce that price foor, wil there be a surplus or a shortage? Select one: a. Indeteminant b. shortage c. None of the answers d. surplus Clear my choice Suppose that the demand and suinnlu manawawise aiven in the tatie belowi remains unchanged, by how many units of housing would the governmentium monthily rent by increasing the supply of housing. Assuming that demand remailibrium rental price to fall to $1500 per month? equilibrium rental price to fall to $1500 per month? Select one: a. 2000 units b. 1500 units c. None of the answers d. 2500 units Clear my choice Sappose that the dermand and sugpiv sichatuilan of an given in the late balewt - What is the shortage per month? Solect one: a. 5,000 b. 15,000 c. 0 d. 10,000 Clear my cholce Suppose that the demand and supply schedules for rental annus. If the municipal government can enforce a rent-control law that sets the maximum monthly rent at $1500, will there be a surplas or a shortage? Select one: a. shortage b. surplus c. Non of the answers Clear my choice Select one: 3. 15000 b. 10000 c. 13500 d. 12500 e. None of the answers Clearmy choice and demand analysis to verify your answers. - Supply decreases and demand is constant. Select one: a. None of the above b. Price down; quantity down; c. Price up; quantity up; d. Price down; quantity up e. Price up; quantify down: and demand anafysis to verify your answers. - Demand decreases and supply is constant. Select one: a. Price down; quantity up; b. Price indeterminate; quantity up; c. None of the above d. Price up; quantity down; e. Price down; quantity down;
In the given scenario, where the minimum rent is set at $52,500 per house, there would be a shortage of housing.
If the government increases the supply of housing, assuming the demand remains unchanged and rental prices fall to $1,500 per month, approximately 2,000 units of housing would need to be added to reach the new equilibrium. However, if the demand and supply schedules for rental housing are given, and the government enforces a rent-control law setting the maximum rent at $1,500, there would be a shortage of housing. Finally, when supply decreases and demand remains constant, the price will increase, and the quantity supplied will decrease. When demand decreases and supply remains constant, the price will decrease, and the quantity demanded will decrease as well.
Minimum Rent and Surplus/Shortage: The minimum rent of $52,500 per house would likely result in a shortage of housing. This is because the high minimum rent would make housing unaffordable for many individuals or families with lower incomes, leading to a decrease in the quantity demanded and an excess supply of housing.
Increasing Housing Supply: If the government wants to lower the rental price to $1,500 per month and keep the demand constant, they would need to increase the supply of housing. To calculate the number of units needed to reach the new equilibrium, we would need the original supply and demand schedules, which are not provided in the question.
Rent-Control Law: If the government enforces a rent-control law setting the maximum rent at $1,500, there would likely be a shortage of housing. Rent control tends to create a situation where the quantity demanded exceeds the quantity supplied, leading to a housing shortage.
Supply and Demand Analysis: When supply decreases while demand remains constant, the price of housing will increase, and the quantity supplied will decrease. This is because the reduction in supply restricts the availability of housing, causing prices to rise.
On the other hand, when demand decreases while supply remains constant, the price of housing will decrease, and the quantity demanded will also decrease. The reduced demand puts downward pressure on prices, resulting in a decrease in both price and quantity demanded.
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Woznick offers clients a variety of legal services. Some clients pay Woznick a monthly retainer, while others are billed as services are rendered. Identify each of the revenues below as variable, fixed, or mixed. Use V for variable, F for fixed, and M for mixed. Activity is measured as the number of hours of legal service provided. A. Nicky hires Woznick to handle her divorce. She is billed for the hours worked. B. Paul hires Woznick for estate planning. He is billed a research fee plus time worked. C. Michelle hires Woznick to handle her real estate transactions. This is an ongoing situation for which Michelle pays a monthly fee. D. David hires Woznick for legal advice as he incorporates his business. Woznick charges David a flat fee to prepare the documents plus a fee per hours worked. E. Katie hires Woznick to write a partnership agreement. Woznick charges a flat fee for this service. F. Jason hires Woznick to obtain local permits to operate his business. Woznick bills Jason for time worked.
A. Variable
B. Mixed
C. Fixed
D. Mixed
E. Fixed
F. Variable
A. Nicky hires Woznick to handle her divorce. She is billed for the hours worked. - Variable (since the revenue is directly proportional to the number of hours worked).
B. Paul hires Woznick for estate planning. He is billed a research fee plus time worked. - Mixed (since the revenue includes both a fixed research fee and a variable component based on the number of hours worked).
C. Michelle hires Woznick to handle her real estate transactions. This is an ongoing situation for which Michelle pays a monthly fee. - Fixed (since the revenue is a fixed monthly fee).
D. David hires Woznick for legal advice as he incorporates his business. Woznick charges David a flat fee to prepare the documents plus a fee per hours worked. - Mixed (since the revenue includes both a fixed flat fee and a variable component based on the number of hours worked).
E. Katie hires Woznick to write a partnership agreement. Woznick charges a flat fee for this service. - Fixed (since the revenue is a fixed flat fee).
F. Jason hires Woznick to obtain local permits to operate his business. Woznick bills Jason for time worked. - Variable (since the revenue is directly proportional to the number of hours worked).
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Hall Corp. manufactures three products from a common input in a joint processing operation. Each product may be sold at the split-off point or processed further. The additional processing costs and sales value after further processing for each product (on an annual basis) are:
Sales Value Further After Sales Value Processing Further at Split-Off Costs Processing Product X $100,000 $50,000 $160,000 Product Y $150,000 $30,000 $170,000 Product Z $120,000 $60,000 $200,000 The "Further Processing Costs" consist of variable and avoidable fixed costs.
Which product or products should be sold at the split-off point, and which product or products should be processed further? Show computations. \
Product Y should be processed further since it has the highest net value. Products X and Z should be sold at the split-off point.
Product X has a net value of $50,000.
Product Y has a net value of $120,000.
Product Z has a net value of $60,000.
to determine which products should be sold at the split-off point and which should be processed further, we need to compare the sales value after further processing with the additional processing costs for each product. let's analyze the data provided:
product x:
sales value after further processing: $100,000
additional processing costs: $50,000
product y:
sales value after further processing: $150,000
additional processing costs: $30,000
product z:
sales value after further processing: $120,000
additional processing costs: $60,000
for each product, we need to calculate the net value (sales value after further processing minus additional processing costs):
product x net value: $100,000 - $50,000 = $50,000
product y net value: $150,000 - $30,000 = $120,000
product z net value: $120,000 - $60,000 = $60,000
To make the decision, we calculated the net value for each product by subtracting the additional processing costs from the sales value after further processing. the net value represents the potential profit from further processing. product y has the highest net value of $120,000, indicating that processing it further would result in the greatest profit. on the other hand, products x and z have lower net values of $50,000 and $60,000 respectively, suggesting that selling them at the split-off point would be more financial beneficial.
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Walid Inc. is a Canadian company, is preparing its financial statements for the fiscal year ended December 31, 2023. The following information has been gathered to calculate earnings per share.
- 50,000 options were issued in 2022, allowing the holder to buy one share at $100 for every option held. The options expire in March 2025.
- 480,000 common shares were outstanding on January 1, 2023.
- 100,000 of \$ 4 no par value non-cumulative preferred shares were outstanding throughout 2023.
- 100,000 of \$ 5 no par value cumulative convertible preferred shares were outstanding throughout 2023. The shares had been issued on January 1, 2021. No dividends had been declared and or paid on these shares in either 2021 or 2022 . The preferred shares are convertible at any time into one common share for every preferred share.
- $1,000,000 convertible bonds payable were arranged in 2021 due 2030 with a coupon rate of 4%. Each $1,000 bond payable can be converted into 5 common shares.
- 60,000 common shares were sold for \$150 per share on March 1, 2023.
- On September 1, Walid met contingency conditions that led to 90,000 new common shares issued on October 1.
- Net income was $6,000,000. There were no discounted operations in 2023.
- The company is subject to 30% income tax rate and average common share price in 2023 was $ 180.
- In December 2023, the company declared and paid the dividends to all preferred shareholders. - No dividends were declared or paid to common shareholders in 2023.
Required:
a. Calculate Walid's basic EPS for the year ended December 31, 2023.
b. Calculate Walid's diluted EPS for the year needed December 31, 2023.
To calculate Walid Inc.'s earnings per share (EPS) for the year ended December 31, 2023, we need to consider both basic EPS and diluted EPS. Here's how you can calculate them:
a. Basic EPS:
Basic EPS represents the earnings per common share without considering the impact of potential dilution.
Calculate the weighted average number of common shares outstanding:
Common shares outstanding on January 1, 2023: 480,000
Shares sold on March 1, 2023: 60,000
Shares issued on October 1, 2023: 90,000
Weighted average number of common shares = [(480,000 * 12) + (60,000 * 10) + (90,000 * 3)] / 12
Weighted average number of common shares = (5,760,000 + 600,000 + 270,000) / 12
Weighted average number of common shares = 6,630,000 / 12
Weighted average number of common shares = 552,500
Calculate basic EPS:
Net income: $6,000,000
Basic EPS = Net income / Weighted average number of common shares
Basic EPS = $6,000,000 / 552,500
Basic EPS = $10.85
b. Diluted EPS:
Diluted EPS takes into account the potential dilution from convertible securities, such as options, convertible preferred shares, and convertible bonds.
Calculate the diluted weighted average number of common shares:
Weighted average number of common shares: 552,500
Options:
Since the options were issued but not exercised, they are not included in the diluted EPS calculation.
Convertible Preferred Shares:
Preferred shares outstanding: 100,000
Convertible ratio: 1 common share for every preferred share
Convertible preferred shares = 100,000 * 1 = 100,000
Diluted weighted average number of common shares = Weighted average number of common shares + Convertible preferred shares
Diluted weighted average number of common shares = 552,500 + 100,000
Diluted weighted average number of common shares = 652,500
Calculate diluted EPS:
Diluted EPS = Net income / Diluted weighted average number of common shares
Diluted EPS = $6,000,000 / 652,500
Diluted EPS = $9.19
Therefore, Walid Inc.'s basic EPS for the year ended December 31, 2023, is $10.85, and the diluted EPS is $9.19.
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Case Scenario-
Covid 19 pandemic manifested declining the economic growth rate for every nation. Moreover, Russia - Ukraine crisis can accelerate the economic recession for the world. In one hand, Twain case become the major part for global economy. The world faces the several problems due to various complicated situations. Among of these factors, Myanmar has unique problem for its concern. Myanmar business environment become more shrinkage for make proper business operations than previous days. The major actors of world shifting can significantly impact on Myanmar's cconomy and political situation. Can you predict the conditions of Myanmar's coonomy in near future? Please make analysis based on academic perspectives by making careful
1. Newly elected India president.
2. Trip to Asia of Nancy Pelosi and US-China Tension
3. Russia- Ukraine crisis
4. Civil-Military relations of Myanmar
Task required 1 Briefly discuss the changing world environment in terms of politic, economic and public health issues.
Task required 2 Summarize the Myanmar's current economic conditions
Task required 3 Predict the future Myanmar's business environment situation by analysis above mentioned facts.
"Analysis of Myanmar's Economy Conditions" The purpose of this assignment is to-
1. Discuss how to coverage of globalization and the global business environment.
2. Explore "Culture in the Global Workplace," which covers how people in different cultures view time, work, cultural change, and material culture.
3. Learn about political, legal, and economic systems as integrated systems of political economy by absorbing the topic of economic systems.
4. Explain economic development and how it is measured.
5. Describe the benefits, volume, and patterns of international trade.
6. Describe the policy instruments governments use to promote and restrict FDI.
7. Outline the levels of economic integration and its debate.
8. Explain the importance of the international capital market.
The changing world environment, including the newly elected India president, Nancy Pelosi's trip to Asia, US-China tension, and the Russia-Ukraine crisis, along with Myanmar's civil-military relations.
The global environment is currently influenced by several factors, including political, economic, and public health issues. The recent election of a new president in India can have implications for international relations and trade partnerships, potentially affecting Myanmar's economic ties with India. Similarly, Nancy Pelosi's trip to Asia and the ongoing tension between the US and China can impact regional dynamics, trade policies, and investment flows, which can indirectly affect Myanmar's economy.
The Russia-Ukraine crisis is another significant factor that can have global consequences, including potential economic repercussions such as sanctions, trade disruptions, and shifts in energy markets. These developments can indirectly impact Myanmar's economy through their influence on global economic stability and investor sentiment.
Moreover, Myanmar's own civil-military relations play a crucial role in shaping the country's economic environment. Political stability, policy consistency, and the ability to attract foreign direct investment can be influenced by the dynamics between the civilian government and the military, which in turn can impact Myanmar's economic growth and business environment.
Given these factors, predicting the future business environment in Myanmar requires careful analysis and consideration of various academic perspectives. The interplay of globalization, cultural factors, political economy, economic development, international trade, FDI policies, economic integration, and the international capital market all contribute to shaping the overall economic conditions in Myanmar.
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A company's long-term strategic plan usually covers which of the following time frames? Select one: © a. 7 years. b. 3 to 7 years c. 5 years. O d. 10 years.
c. 5 years. A company's long-term strategic plan typically covers a time frame of around 5 years.
This duration allows for sufficient planning and implementation of strategic initiatives while still accounting for the dynamic nature of the business environment. It strikes a balance between providing a clear direction for the organization and allowing flexibility to adapt to changing market conditions and technological advancements. Within this 5-year period, companies can set specific goals and objectives, allocate resources, develop new products or services, expand into new markets, and establish competitive advantages. The plan outlines the overall strategic direction, identifies key priorities, and guides decision-making to ensure the company remains focused on achieving its long-term vision while remaining responsive to emerging opportunities or challenges.
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Acefacto Inc., has asked for you to calculate the after-tax salvage value of an asset it plans on using in a construction project. The project will be depreciated straight line to a value of $670,000 at the end of the project's and assets ten year life. Ace's marginal tax rate is 32%. The firm will have to pay $8,262,001 to buy the asset. You have estimated that they could sell the asset for $622,702 to a Brazilian firm at the end of the project.
The after-tax salvage value of the asset for Acefacto Inc. is $3,065,997.68.
To calculate the after-tax salvage value of the asset, consider the depreciation, the selling price, and the tax implications. Here's the step-by-step calculation:
Step 1: Calculate the total depreciation expense:
Depreciation Expense = Initial Cost - Salvage Value
Depreciation Expense = $8,262,001 - $670,000 = $7,592,001
Step 2: Calculate the tax shield provided by depreciation:
Tax Shield = Depreciation Expense * Tax Rate
Tax Shield = $7,592,001 * 0.32 = $2,428,160.32
Step 3: Calculate the taxable gain or loss from selling the asset:
Taxable Gain/Loss = Selling Price - Book Value
Taxable Gain/Loss = $622,702 - $670,000 = -$47,298
Step 4: Calculate the tax on the gain or loss:
Tax on Gain/Loss = Taxable Gain/Loss * Tax Rate
Tax on Gain/Loss = -$47,298 * 0.32 = -$15,135.36
Step 5: Calculate the after-tax salvage value:
After-Tax Salvage Value = Selling Price - Tax on Gain/Loss + Tax Shield
After-Tax Salvage Value = $622,702 - (-$15,135.36) + $2,428,160.32
After-Tax Salvage Value = $622,702 + $15,135.36 + $2,428,160.32
After-Tax Salvage Value = $3,065,997.68
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Give your own example illustrating two of the following economic principles.
(a) How much is a decision at the margin.
(b) People usually respond to incentives, exploiting opportunities to make themselves better off.
Illustration of two economic principles: decision at the margin and people responding to incentives.
Example: Consider a student deciding how many hours to allocate for studying for an upcoming exam.
(a) Decision at the margin: The student has already studied for 4 hours and is contemplating whether to study for an additional hour. The principle of decision at the margin states that individuals make choices based on the marginal benefits and costs. In this case, the student evaluates the additional knowledge gained and the diminishing returns of studying for an extra hour compared to other activities. If the marginal benefit of studying for an extra hour is higher than the marginal cost, the student may choose to study further.
(b) Responding to incentives: The professor announces that those who score above 90% on the exam will receive extra credit. This creates an incentive for the student to allocate more time and effort towards studying in order to secure the opportunity to improve their grade. The principle of people responding to incentives suggests that individuals alter their behavior to take advantage of opportunities that make them better off. In this case, the student responds to the incentive of extra credit by increasing their study time to improve their chances of obtaining a higher grade.
In summary, the student's decision at the margin considers the trade-off between additional studying and other activities, while the response to the incentive of extra credit motivates the student to allocate more time and effort towards studying.
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You are a management analyst working in the City Manager’s office of a local municipal government. The local Chamber of Commerce has received from the City a Special Events Permit to hold a carnival on Main Street. The City Council is very supportive of this event, as is the community, and it is always well attended.
You receive an email from a disgruntled "former business owner and Chamber member" named John Smith who informs you that they plan to attend the carnival, set up a booth and loudspeaker, and inform the public in attendance of the "wasteful spending that goes on inside the City as well as the Chamber of Commerce."
The City Council and City Manager are concerned this will have a disruptive influence on the carnival. There have been rumblings in the past about the Chamber of Commerce being irresponsible with money so Smith’s message might resonate with some people.
The City Manager has asked you to prepare a memo outlining your recommendations for how the City should deal with the situation. There will be many people in attendance as well as all City Council members.
Your memo should include several potential options for dealing with Smith, with an analysis of each option you identify in terms of positives, negatives, opportunities, and constraints. After you thoroughly analyze the options, you need to recommend one to the City Manager.
Memo
To: City ManagerFrom: Management Analyst
Date: [Date]Subject: Dealing with Disruptive Presence at Carnival
I have reviewed the situation regarding John Smith's intention to attend the carnival, set up a booth, and criticize the City's and Chamber of Commerce's spending.
options available, I present the following analysis and recommendation:
Option 1: Allow John Smith to attend and express his opinions openly
- Positives: Demonstrates transparency and openness, respects freedom of speech- Negatives: May disrupt the carnival's atmosphere, potential negative impact on the City's reputation
- Opportunities: Provides an opportunity for dialogue and addressing concerns- Constraints: Risk of negative perception by attendees and potential escalation of conflicts
Option 2: Establish a designated "Free Speech Zone" away from the main carnival area
- Positives: Allows expression of dissenting opinions while minimizing disruption- Negatives: May limit visibility and impact of Smith's message, potential perception of suppression
- Opportunities: Creates a controlled environment for dialogue and maintaining carnival ambiance- Constraints: Need to clearly define the boundaries of the "Free Speech Zone" and manage potential conflicts
Option 3: Engage in proactive communication and address concerns before the carnival
- Positives: Demonstrates responsiveness and commitment to addressing community concerns- Negatives: May not completely prevent Smith's presence, potential limited effectiveness in changing his intentions
- Opportunities: Provides an opportunity to clarify misconceptions, showcase responsible spending practices- Constraints: Time constraints in reaching out to Smith and addressing concerns effectively
Recommendation:
Considering the potential disruptions and the City's and Chamber of Commerce's interest in maintaining a positive carnival experience, I recommend pursuing Option 2: Establish a designated "Free Speech Zone" away from the main carnival area. This approach balances the need to respect freedom of speech while minimizing the impact on the overall event and ensuring the safety and enjoyment of attendees.
To implement this option, it is important to clearly communicate the designated area, its purpose, and any guidelines or restrictions associated with it. Additionally, security personnel or volunteers should be present to maintain order and prevent any potential conflicts.
By adopting this approach, we can address Smith's concerns while safeguarding the carnival's success and the positive image of the City and Chamber of Commerce.
Please let me know if you require any further information or if you would like to discuss alternative approaches.
Thank you.
[Your Name]Management Analyst
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which of the following is an example of functional products? a. toilet paper b. fashionable clothing c. designer handbags d. luxury cars
Correct option is a. Toilet paper is an example of a functional product. because it serves a practical purpose by providing hygiene and sanitation solutions.
Toilet paper falls under the category of functional products because its primary purpose is to serve a utilitarian function. It is designed to meet a basic need for personal hygiene and sanitation. Its functionality lies in its ability to provide a convenient and hygienic solution for cleaning oneself after using the toilet.
Unlike fashionable clothing, designer handbags, and luxury cars, which are often associated with aesthetics, style, and luxury, toilet paper focuses solely on its practical use. It is a necessity in everyday life, essential for maintaining cleanliness and preventing the spread of germs and diseases.
Toilet paper's functionality is evident in its design, which is typically lightweight, absorbent, and easy to tear. It is made from soft, biodegradable materials, ensuring comfort during use and minimizing environmental impact. The convenience of toilet paper also lies in its widespread availability and affordability, making it accessible to people across different socioeconomic backgrounds.
In conclusion, toilet paper is a prime example of a functional product because it is specifically designed to fulfill a basic need efficiently and effectively. Its emphasis on practicality, hygiene, and accessibility sets it apart from fashionable clothing, designer handbags, and luxury cars, which cater to different desires and preferences.
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In a two-period model, suppose the optimal extraction in period
1 is 20, MC=20, MB=70-2Q, r=10%. What is the total reserve?
In the given two-period model, with optimal extraction in period 1 being 20 units, a marginal cost (MC) of 20, a marginal benefit (MB) function of 70-2Q, and an interest rate (r) of 10%, the total reserve can be calculated.
In this two-period model, the optimal extraction level in period 1 is determined based on the balance between marginal cost and marginal benefit. The marginal cost (MC) is given as 20, and the marginal benefit (MB) function is defined as 70-2Q, where Q represents the extraction quantity. The optimal extraction level occurs where MC equals MB.
To find the total reserve, we need to calculate the total quantity extracted in period 1. Given that the optimal extraction level is 20 units, the total reserve would be the sum of this optimal extraction and any remaining reserves for future periods.
Since the information provided does not specify the remaining reserves or extraction levels in period 2, we cannot determine the exact total reserve based on the given data.
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What might motivate two companies that are negotiating the allocation of common cost to use the Shapley value method instead of the incremental method?
The main motivation for two companies to use the Shapley value method instead of the incremental method for allocating common costs is fairness.
The Shapley value method takes into account the contributions of each company in a cooperative game, considering all possible coalitions and their outcomes. This method ensures a fair distribution of costs based on the relative importance and contribution of each company. Unlike the incremental method, which allocates costs based on a step-by-step addition of individual contributions, the Shapley value method considers the synergistic effects and interactions among companies. It provides a more comprehensive and balanced approach to cost allocation, taking into consideration the overall value created by the coalition. By using the Shapley value method, the companies can foster a sense of fairness and transparency in the negotiation process, leading to a more cooperative and mutually beneficial outcome.
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Builtrite had sales of $1,000,000 and COGS of $270,000. In addition, operating expenses were calculated at 33% of sales. Builtrite also received dividends of $90,000 and paid out common stock dividends of $60,000 to its stockholders. A long-term capital gain of $40,000 was realized during the year along with a capital loss of $70,000 What is Builtrite's taxable income?
The Builtrite's taxable income is $400,000.
Given;
Sales = $1,000,000
COGS = $270,000
Operating expenses = 33% of sales
Dividend received = $90,000
Common stock dividends = $60,000
Long-term capital gain = $40,000
Capital loss = $70,000
The formula to calculate the taxable income is;
Taxable income = Total income - Total deductions
Calculation of total income:
Total income = Sales - COGS + Dividend received + Long-term capital gain
= $1,000,000 - $270,000 + $90,000 + $40,000= $860,000
Calculation of total deductions:
Total deductions = Operating expenses + Capital loss + Common stock dividends
=33% of sales + $70,000 + $60,000
=0.33 × $1,000,000 + $70,000 + $60,000
=$330,000 + $70,000 + $60,000= $460,000
Therefore,
`Taxable income=Total income-Total deductions
= $860,000 - $460,000= $400,000
Thus, the Builtrite's taxable income is $400,000.
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5. Discuss how the demand enhancement graphic increases wage
rates, p. 328/336.
The demand enhancement graphic illustrates the relationship between the demand for labor and wage rates. It shows that an increase in demand for labor leads to an increase in wage rates. This is because when the demand for labor exceeds the supply, employers are willing to pay higher wages to attract and retain workers.
The demand enhancement graphic depicts the interaction between the demand for labor and wage rates. It shows that when there is an increase in the demand for labor, either due to economic growth or other factors, the demand curve for labor shifts to the right. This indicates that employers are willing to hire more workers at various wage rates.
As the demand for labor increases, employers face a labor shortage, meaning there are more job openings than available workers. In order to attract workers and fill these vacancies, employers need to offer higher wages. This leads to an upward pressure on wage rates.
The increase in wage rates acts as an incentive for individuals to enter the labor market or switch jobs, as they are attracted by the higher pay. This helps to address the labor shortage and bring the labor market closer to equilibrium.
Factors that contribute to demand enhancement and the subsequent increase in wage rates include economic growth, which leads to increased business activity and the need for more workers, and technological advancements, which create new jobs and require skilled labor. Additionally, improvements in labor productivity can also drive up the demand for labor and result in higher wages.
Therefore, the demand enhancement graphic illustrates that an increase in the demand for labor leads to an increase in wage rates. This occurs when the demand for labor exceeds the supply, prompting employers to offer higher wages to attract and retain workers.
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B) For a unity feedback system having G(s)=k / s(s+50)(s+120), use frequency response techniques to find the value of gain, K, to yield a closedloop step response with 20% overshoot. Use the following Bode plot which is drawn for K=6000.
The value of gain, K, to yield a closed-loop step response with 20% overshoot is approximately 7,173.82.
To find the value of gain, K, that yields a closed-loop step response with 20% overshoot, we need to determine the gain value at the frequency where the phase crossover occurs in the Bode plot.
From the given Bode plot, we can see that the phase crossover occurs at approximately -180 degrees. At this frequency, the magnitude is equal to the 0 dB line (unity gain).
To find the exact gain value at this frequency, we can use the gain margin formula:
GM = 20 log10(K)
Since the system is desired to have 20% overshoot, we know that the damping ratio, ζ, is equal to 0.45. From the damping ratio, we can determine the gain margin using the following formula:
GM = -20 log10(ζ)
Substituting the value of ζ = 0.45 into the formula, we can solve for the gain margin:
GM = -20 log10(0.45) ≈ 8.92 dB
From the Bode plot, at the phase crossover frequency, the magnitude is 0 dB, which corresponds to the gain margin of 8.92 dB.
Now we can calculate the value of gain, K, using the gain margin formula:
GM = 20 log10(K)
8.92 = 20 log10(K)
log10(K) = 8.92 / 20
K = 10^(8.92 / 20)
K ≈ 7,173.82
Therefore, the value of gain, K, to yield a closed-loop step response with 20% overshoot is approximately 7,173.82.
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Review the feature "I'll Never Have to Write Because..." on page 6 of our text. Have you had any of these same thoughts? Discuss.
Explain a time in a job, volunteer, or other organizational setting when you were forced to write or otherwise communicate when you didn't expect that to be "part of my job."
In your future career or job field, discuss where you expect to spend most of your time writing:
Interpersonal direct communications such as email or memos
Presentations such as teaching, meetings, or sales
Reports or other statistics info reporting
Contracts, bidding, or other negotiation/legal documents
Something else?
Review the Five Questions for Analysis on pages 17-18 or in the Chapter 1 slides. Which of these do you think you usually have the most trouble in utilizing or otherwise dealing with in your communications?
In my experience, I have occasionally entertained thoughts similar to those mentioned in the feature "I'll Never Have to Write Because..." on page 6 of the text.
The idea of avoiding writing or assuming it won't be a significant part of my responsibilities is something that can occur to anyone. However, it's important to recognize that effective communication, including writing, is often a crucial skill in various professional settings. One instance where I unexpectedly had to write extensively was during a volunteer project at a nonprofit organization. Initially, I thought my role would primarily involve hands-on tasks, but I soon realized that I needed to draft project proposals, reports, and fundraising letters. While it was unexpected, I understood the importance of clear and persuasive written communication in conveying the organization's mission and soliciting support. Looking ahead to my future career, I anticipate spending a substantial amount of time writing interpersonal direct communications, such as emails and memos. Effective written correspondence plays a vital role in conveying information, clarifying expectations, and maintaining professional relationships. Additionally, I expect to engage in writing reports or other statistical information reporting, as providing accurate and concise data analysis is often crucial in decision-making processes.
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Given, Goods Market: Consumption function, C=60+0.8y Investment function, I=116−2i Money Market: Money Demand, Mᵈ,L=0.2y−5i Money supply, M⁵,M=120 Required:
i) Determine LM & IS equation.
ii) Calculate the equilibrium level of income and interest rate.
Equilibrium level of income (Y) is 880, and equilibrium interest rate (i) is 18.
I) The LM (Liquidity-Cash) condition addresses the harmony in the currency market, and the IS (Speculation Saving) condition addresses the balance in the products market.
LM condition: Mᵈ,L = M⁵,M
0.2y - 5i = 120
IS condition: Y = C + I
Y = 60 + 0.8y + 116 - 2i
ii) To find the harmony level of pay and loan cost, we really want to tackle the synchronous conditions:
Subbing the LM condition into the IS condition:
0.2y - 5i = 120
Y = 60 + 0.8y + 116 - 2i
Improving on the situations, we get:
0.2y - 5i = 120
0.2y - 0.8y = - 176 + 5i
Tackling the conditions at the same time, we find:
y = 880
I = 18
In this manner, the balance level of pay (Y) is 880, and the harmony financing cost (I) is 18.
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According to the revenue recognition principle, revenues should be recognized when of as the company performs acts promised to the customer. For many businesses, this condition is met at the point of delivery of goods or services. The following transoctions occurred in September:
Required: For each of the transactions, if revenue is to be rocognized in Septembet, indicate the amount. (Enter your answers in dollars but not in millions.)
a. Gupple Enterprise Inc. issued $12 million in new common stock
b. Chrome University received $36.270.000 casf for 93.000 five-game-season football tickets. none of the games have been played.
c. Chrome played the first football game referred to to in (b)
d. Melli Construction Company signed a contract with a customer for the construction of a new $660.000 waterhouse; At the signing. Melli received a check for $66.000 as a deposit to be applied against amounts earned during the first phase of construction. Answer from Meli's standpoint.
e. A popular snowboarding magazine company received a total of $2.200 today from subscribers. The subscriptions begin in the next fiscal year. Answer from the magazine company's standpoint.
f. trusToe Communicatios sold a $330 cell phone plan for service in September to a customer who charged the sale on his credit card. Answer from the standpoint of TrusTee Communications.
The revenue recognition principle does not apply to the issuance of common stock, as it is not considered revenue. Therefore, no amount should be recognized.
Since none of the games have been played, revenue should not be recognized in September for the football tickets.
Revenue should be recognized for the football game that was played in September.
From Melli Construction Company's standpoint, the deposit of $66,000 should not be recognized as revenue. It should be recorded as a liability until the amounts earned during the first phase of construction are determined.
The popular snowboarding magazine company should not recognize the $2,200 received from subscribers in September since the subscriptions begin in the next fiscal year.
TrusTee Communications can recognize the revenue for the cell phone plan sold in September, as the service has been provided and the credit card payment has been received.
a. The issuance of common stock does not generate revenue under the revenue recognition principle. It represents an inflow of capital and is recorded as equity on the company's balance sheet.
b. Revenue should not be recognized for the football tickets in September since none of the games have been played. The revenue recognition principle states that revenue should be recognized when the company has performed acts promised to the customer, typically at the point of delivery of goods or services.
c. Revenue should be recognized for the football game that was played in September. The amount would depend on the ticket sales and any other associated revenue from the event.
d. From Melli Construction Company's standpoint, the $66,000 received as a deposit should not be recognized as revenue. It represents a liability to the customer until the company earns the amounts during the first phase of construction.
e. The popular snowboarding magazine company should not recognize the $2,200 received from subscribers in September. Since the subscriptions begin in the next fiscal year, the revenue recognition should align with the period when the service is provided.
f. TrusTee Communications can recognize the revenue for the cell phone plan sold in September. As the service has been provided, and the credit card payment has been received, the revenue recognition principle is met, and the corresponding amount can be recognized.
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On January 1, 2017, Ocasek, Inc. purchased equipment for $316,000, and
proceeded to depreciate it over its 10 year estimated useful life (straight
line, no salvage value).
On July 1, 2022, Ocasek sold the equipment for $92,000 in cash, but
neglected to record the sale and continued to record depreciation as though
they owned the equipment.
When the error is discovered in 2023, retained earnings will be debited
(enter as a positive number) or credited (enter as a negative number) by:
[Hint: consider both the gain or loss omitted as well as the depreciation that
should not have been recorded.l
When the error of neglecting to record the sale of the equipment is discovered in 2023, Ocasek, Inc. will need to credit retained earnings by $34,400 to correct for the loss on the sale and the depreciation that should not have been recorded.
To determine the impact on retained earnings when the error is discovered in 2023, we need to consider both the gain or loss omitted from the sale and the depreciation that should not have been recorded.
Equipment purchase price: $316,000
Useful life: 10 years
Straight-line depreciation method
No salvage value
Equipment sold on July 1, 2022, for $92,000
Depreciation expense per year = Equipment purchase price / Useful life
Depreciation expense per year = $316,000 / 10 = $31,600
Since the error was made in 2022 and the equipment was sold, the depreciation expense for 2023 should not have been recorded.
To calculate the impact on retained earnings:
Gain or loss on the sale = Selling price - Book value
Book value = Equipment purchase price - Accumulated depreciation
Accumulated depreciation = Depreciation expense per year * Number of years
Accumulated depreciation = $31,600 * 6 (for 2017-2022) = $189,600
Book value = $316,000 - $189,600 = $126,400
Gain or loss on the sale = $92,000 - $126,400 = -$34,400 (a loss)
When the error is discovered in 2023, retained earnings will be credited by $34,400 (negative number) to correct for the loss that was omitted from the sale and the depreciation that should not have been recorded.
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during a softball game a batter hits a ball upward
During a softball game, a batter hits a ball upward. The trajectory of the ball depends on various factors such as the angle at which it was struck, the force applied, and any external influences like wind.
As the ball leaves the bat, it follows a parabolic path due to the forces of gravity and air resistance. The ball ascends until it reaches its maximum height, known as the apex, and then descends back towards the ground. The flight of the ball can be affected by factors like spin, the ball's initial velocity, and the batter's technique. Fielders and the opposing team will then attempt to catch or field the ball to make an out.
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With the aid of a diagram, explain the SIX steps of continual
service improvement (CSI) approach.
1. Understand the Vision and Goals: Identify the improvement strategy, gather relevant data, and define the desired future state.
2. Where Are We Now? Assess the current state and analyze the collected data.
3. Where Do We Want to Be? Set improvement targets and agree on actions to achieve them based on the analyzed data.
4. How Do We Get There? Plan the actions required to implement improvements and create a detailed improvement plan.
5. Implement the Improvement: Execute the improvement plan, review the results, and collect data on the implemented changes.
6. Did We Get There? Check the results against the set targets, take necessary actions based on the review, and embed the learning into the organization.
The Continual Service Improvement approach involves understanding the vision and goals of improvement, assessing the current state, and setting targets for the desired future state. A detailed plan is then created to implement the necessary actions. The improvement plan is executed, and the results are reviewed and compared against the set targets. Based on the review, further actions are taken to improve the process. Finally, the organization embeds the learning from the improvement process into its practices for ongoing enhancement.
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"Covered call writing" is the name given to the following strategy: one sells a call option and simultaneously buys a share of underlying stock. Referring to whether the option was in-the-money or out-of-the-money when the writing was initially established, we classify two types of covered call writing: in-the-money covered call writing and out-of-the-money covered call writing. "Protective Put" is the name given to the following strategy: one buys a put option and simultaneously hold a share of underlying stock. Question C1 (Covered Call Writing v.s. Protective Put). Discuss the difference and similarity between covered call writing and protective put. (Words limit: 600;25 Marks)
Covered call writing and protective put are both option strategies used by investors to manage risk and enhance returns in their stock holdings.
Covered Call Writing:
Covered call writing involves selling a call option while simultaneously owning the underlying stock. The call option gives the buyer the right to purchase the stock at a predetermined price (strike price) within a specific time period. By selling the call option, the investor collects a premium, which provides additional income.
The strategy is typically used when the investor expects the stock price to remain relatively stable or slightly increase. If the stock price remains below the strike price, the investor keeps the premium and the stock. However, if the stock price rises above the strike price, the investor may be obligated to sell the stock at the strike price, limiting potential gains.
Protective Put:
Protective put involves buying a put option while holding the underlying stock. A put option gives the buyer the right to sell the stock at a predetermined price within a specific time period. The purpose of buying a put option is to protect the investor against a decline in the stock's price.
If the stock price falls below the put option's strike price, the investor can exercise the put option, selling the stock at the higher strike price. This limits the investor's potential losses. However, if the stock price remains stable or increases, the investor can still benefit from the stock's appreciation.
Differences:
Objective: Covered call writing aims to generate income through the sale of call options while retaining ownership of the stock. Protective put, on the other hand, is primarily focused on hedging against potential downside risk.Risk Profile: Covered call writing has limited potential gains as the investor may be obligated to sell the stock at a predetermined price if it rises above the strike price. Protective put provides downside protection, limiting potential losses if the stock price declines.Similarities:
Use of Options: Both strategies involve the use of options contracts to manage risk and enhance returns.Combination with Underlying Stock: Both strategies involve owning the underlying stock as part of the options strategy. This allows investors to benefit from any potential stock price movements.Learn more about Covered call writing here:
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Elegant Bank takes large positions in Canadian Dollar (CAD). The bank's current exposure to CAD is $710 million. The bank's CEO is concerned about potential loss to the bank in the event of a decline in the value of CAD. The spot rate is $1.49/CAD and the standard deviation based on daily spot price changes in the currency is 0.66%. What is the 15-day VaR of the bank's exposure to CAD based on adverse changes at the 99 th percentile? (Please round your answer to two decimal places in terms of millions of dollars. Please do not show a $ sign or a minus sign in the answer (e.g. if the answer is −$2.13 million, enter 2.13) ) Answer:
Given data,Current exposure to CAD = $710 million Spot rate = $1.49/CADStandard deviation = 0.66%Period = 15 days
The 15-day VaR of the bank's exposure to CAD based on adverse changes at the 99th percentile can be calculated using the following formula:$$\text{VaR} = \text{Current Exposure} \times Z \times \sigma \times \sqrt{\text{Time Period}}$$whereZ = the Z-statistic, which is the number of standard deviations corresponding to the confidence level (99th percentile)σ = standard deviation of the spot rate.
Time period is taken as 15 days.99th percentile corresponds to the Z-statistic of 2.33 (as the normal distribution is used here).Now we can calculate the VaR as follows:$$\text{VaR} = 710 \times 2.33 \times 0.66\% \times \sqrt{15} = 710 \times 2.33 \times 0.0066 \times 3.87298 = 12.9937 \approx 13.00 \ \text{million dollars}$$
Therefore, the 15-day VaR of the bank's exposure to CAD based on adverse changes at the 99th percentile is approximately $13.00 million.
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