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Homework answers / question archive / 1)Two of your acquaintances (Mercy and Dennis) approach you seeking investment advice
1)Two of your acquaintances (Mercy and Dennis) approach you seeking investment advice. Each of them had K100 000 of savings to invest. Both invested in LSK Lid shares which were trading at K20 per share. Mercy used her entire savings to purchase LSK Lad shares. Dennis felt that LSK Ltd shares would perform well so he approached a broker and took up a margin transaction with a 55% initial requirement. The broker charged Dennis 10% annual interest, and commissions of 3% of the total stock value on both the purchase and sale. The dividend at the end of year was 0.50 per share and the shares trade at K27 at the end of the year. Required: A. How many shares did Mercy buy? B. How many shares did Dennis buy? C. Calculate Mercy's percentage return on investment. D. Calculate Dennis's percentage return on investment. E. Who made a better investment decision?
2)
Match the following components of a business plan to the description that best describes the component. The answer is provided for the first item to show you how to format your answer (simply provide the letter to the left of the term).
___ Executive summary
___ Description of proposed business
___ Industry analysis
___ Mission statement and Core Values
___ Management plan
___ Goods, service, and production process
___ Marketing
___ Global issues
___ Financial plan
___ Appendices
(a) Report on the cash needed for start-up and initial operations, proposed funding sources, and plan for repaying debt.
(b) Statement indicating the fundamental beliefs about what is important and what is appropriate in conducting company business.
(c) Description of the company’s involvement, if any, in international markets.
(d) Brief description of the company which includes what the proposed company will do, what goods or services it will provide, and who it will serve.
(e) Brief overview emphasizing the key points of the business plan.
(f) Short introduction to the industry in which you propose to operate.
(g) Supplemental information that may be of interest to the reader.
(h) Description of plans for target market, pricing, distribution, and promotion.
(i) Description of goods and services that the company will provide in the marketplace.
(j) Includes information about management team qualifications and responsibilities.
3)Suppose a ten-year, $1,000 bond with an 8.9% coupon rate and semiannual coupons is trading for $1,035.05. a. What is the bond's yield to maturity (expressed as an APR with semiannual compounding)? b. If the bond's yield to maturity changes to 9.9% APR, what will be the bond's price?Suppose a? ten-year, $1000 bond with an 8.9% coupon rate and semiannual coupons is trading for $1035.05
4)Use the following example to illustrate Adam Smith's principle of absolute advantage in international trade. a. Construct transformation or production possibilities frontiers for each country, b. identify each country's absolute advantage, c. determine a barter exchange rate that would lead to mutually beneficial trade, d. construct the trading line for each country to reflect this barter exchange rate, e. illustrate potential trade triangles for each country. Argentina Brazil Output per worker Wheat 1.5 ! Autos 0.5 Total labor supply 12 12 The numbers in the table are Output per worker 2. Use the following example to illustrate David Ricardo's principle of comparative advantage, repeating each step of the process outlined in Question 1. Explain also how both countries can gain from trade, even though Brazil has the absolute advantage in both wheat and autos. Brazil Output per worker Wheat Autos Total labor supply Argentina 1.5 0.5 12 12
5)Use the following example to illustrate David Ricardo's principle of comparative advantage, repeating each step of the process outlined in Question 1. Explain also how both countries can gain from trade, even though Brazil has the absolute advantage in both wheat and autos. 1.5 0.5 Argentina Brazil Output per worker Wheat Autos Total labor supply 12 12 3. Construct a table showing feasible choices for consumption of wheat and autos in Argentina and in Brazil before trade, and use this table also to show how specialization according to comparative advantage would enable each nation to consume both more wheat and more autos than was possible without trade. [Hint: Use the terms of trade that you selected to represent the gains from trade in Question 2 to determine the amount of imports which each nation could acquire for a given level of exports.)
1.
A. total number of shares bought by mercy=total number of savings of mercy/ k20
=k100000/k20
=5000 shares
B. total number of shares bought by dennis = k100000 + k100000 * 55% /k20
=k155000/ k20
=7750 shares.
C.mercy's percentage return on investment= gain-cost/cost (per share)
=27.5-20/20
=0.375
=37.5%
D.dennis's percentage return on investment= gain-cost/cost
[gain = total shares*selling price= 7750*27.5= 213125
cost= 155000+ 10% of 55000 + 3% of 155000 + 3% of 213125 = 155000+5500+4650+6393.75 = 171543.75]
=213125 - 171543.75 / 171543.75
=0.2423
=24.23%
E.mercy made a better investment decision as mercy's return on investment is more than dennis's return on investment.
2.
(e)___ Executive summary
(d)___ Description of proposed business
(f)___ Industry analysis
(b)___ Mission statement and Core Values
(j)___ Management plan
(i) ___ Goods, service, and production process
(h) ___ Marketing
(c) ___ Global issues
(a)___ Financial plan
(g) ___ Appendices
Please use this google drive link to download the answer file.
answer 3.https://drive.google.com/file/d/1zHgL7_FNxJe-775upmRzaNCVxag6KOWz/view?usp=sharing
answer 4.https://drive.google.com/file/d/1DRLkFITcX2h2lHxEG1RT49cV9YRQVbq8/view?usp=sharing
answer 5.https://drive.google.com/file/d/1U2B5F3S9gUHR3oyW28mCOI-ewEPkVo0_/view?usp=sharing
Note: If you have any trouble in viewing/downloading the answer from the given link, please use this below guide to understand the whole process.
https://helpinhomework.org/blog/how-to-obtain-answer-through-google-drive-link
4.
Scince 1 labour in Argentina producing 1.5 units of Wheats and 1 labour in Brazil is producing 2 units of Wheats, hence Brazil have absolute advantage in Wheat.
similarlry, 1 labour in Argentina is producing 0.5 units of Autos whereas in Brazil it is producing 1 units of Autos, hence Brazil have absolute advantage in Autos.
Therefore Brazil have absolute advantage in both the products.
Accourding to Adam smith absolute advantage theory, trade will not take place but if we look at David ricardo theory of comparative advantage theory trade will take place.
David ricardo theory of comperitive advantage states that even if one country has absolute advantage in both the product still trade will take place if their is difference in oppoutunity cost.
opportunity cost Argentina Brazil
Wheat 1.33 0.75
Autos 2 0.5
clearly , Argentina have comparitive advantage in Wheat where as Brazil have comparitive advantage in Autos. therefor, all 12 labour in Argentina will produce Wheat i.e, total wheat produce by Argentina is 18 units, and all 12 labour inBrazil will produce Autos i.e, total Autos produced by Brazil is 12 units.
Now, we can see that if that one labour that produce Auto in Brazil would have produced Wheat than brazil would have 2 units of wheat, i.e, Brazil will come into trade if it will be having more than 2 units of Wheat in exchange of 1 unit of Auto.
similarly we can see that if Argentina has to produce 1 unit of Auto than it will required 2 labour, with which he is now producing 3 units of Wheat. therefore he will come in trade if he has to give less than 3 units of Wheat.
therefor barter exchange rate that will be beneficial for both the country is 1 unit of Auto to any number between 2 and 3 unit of Wheat. like 1 unit of Auto = 2.5 unit of Wheat (any number greater than 2 and less than 3).
