Tutor profile: Omar W.
What are the conditions for consumer's equilibrium in indifference curve analysis?
A consumer reaches point of equilibrium when he maximizes his utility, given his income and the market prices. Moreover, In order to reach equilibrium two conditions must be met 1) A given budget line must be tangent to an indifference curve 2) The indifference curve must be convex to the origin at the point of tangency or marginal rate of substitution of X for Y must be diminishing.
Sam, a fund manager, is interested in a bond issued by ABC corporation. Each ABC bond has a face value of $1000. 10 year maturity and coupon rate of 10% per annum. Coupon is paid annually. The yield to maturity is 8% per annum. What's the maximum price Sam would pay for this bond?
Bond Price = PMT x [1 - (1+r)^-n)]/r + FV (1+r)^-n Outline the inputs m=1 FV=1000 PMT= coupon x face value/m =0.10 x 1000/1 =$100 r=0.08 n=10 Bond Price= 100 x [ 1 - (1+0.08)^-10]/0.08 + 1000 x (1+0.08)^-10 Bond Price= 100 x ( 1 -0.4631)/ 0.08 + 1000 x 0.4631 =100 x 6.71008 + 463.193 = 671.00814 +463.193 = 1134.20 Sam should pay no more than $1134.20
How are the balance sheet and income statement connected?
The main connection between Income statement and Balance sheet is developed due two main reasons. The first is because of the use of double entry accounting and the accounting equation that is Assets = Liabilities + Owner's Equity To show the association between the balance sheet and income statement, we assume that an organization's owner equity was $30,000 toward the start of the year, and it was $75,000 toward the year's end. We should likewise expect that the proprietor did not contribute or pull back business assets during the year. Accordingly, the $25,000 increment in proprietor's value is likely the organization's overall gain earned for the year. The details for the $45,000 (incomes, costs, gains, losses) will be accounted on the company's income statement for the year. Bookkeepers refer to the income statement accounts (revenues, expenses, gains, losses) as temporary records because their balances will be closed and transferred to the owner's capital account at the end of the year.
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