CHAPTER
3
Demand and Supply
After studying this chapter you will be able to Describe a competitive market and think about a price as an opportunity cost Explain the influences on demand Explain the influences on supply Explain how demand and supply determ
Interest rate, i
Hs
i
i
Hd=Cud+Rd
Hd=Cud+Rd
H
Central bank money, H
Interest rate, i
LM (M/P<M/P) LM (M/P) A D i A IS Y Y Output, Y
i
Price level, P
AS
A P=PT
A P<PT AD
AD Y Y Output, Y
Interest rate, i
Hs
Hs
i
i
Hd=Cud+Rd
Hd=Cud+Rd
H
Central bank money,
Sub prime crisis caused Aus major banks losing $ in the US market, People here observe this and lose confidence about banks (whether or not they will be repaid if they lend $ to banks), so they choose to hold more cash, c increase => 1/ [c+thita(1-c)] dec
Use Useful Formulas Variance of a random variable 2 2 V [ X ] = E ( X E [ X ] ) = E X 2 ( E [ X ] ) Variance of several random variables V [ aX + bY + cZ] = a 2 V [ X ] + b 2 V [ Y ] + c 2 V [ Z] + 2ab cov [ X, Y ] + 2ac cov [ X, Z] + 2bc cov [ Y, Z]
Samp
Solutions for Tutorial 7
12.7 Per-unit contribution is critical to break-even analysis in order for a company to determine how many units are required to be sold to cover the companys fixed costs. The underlying known variable is the dollar amount of the
AFC2140 Corporate Finance Tutorial 1: Investors, Firms and Markets
The point of this exercise is to familiarise the students with the Australian Financial Review (AFR), and to get them thinking about some basic finance concepts. 1. See attached excel shee
Solutions for Tutorial 6
11.1 Accounting earnings can differ from cash flows for a number of reasons, making accounting earnings an unreliable measure of the costs and benefits of a project. For example, ease of manipulating earnings components such as ac
Solutions for Tutorial 5
10.3 Initial investment = $3,300,000 Length of project = n = 5 years Required rate of return = k = 18%
NPV
NCFt t t 0 (1 k ) $875,123 $966,222 $1,145,000 $1,250,399 $1,504,455 (1.18)1 (1.18) 2 (1.18)3 (1.18) 4 (1.18)5
n
$3,300,0
Solutions for Tutorial 3
5.1
FV10 = PV (1 + i ) n = 25000 (1.08)10 = $53973.12
5.6
i FV2 PV 1 m $1153.41
mn
0.072 1000 1 4
4 2
5.25
FVn PV (1 g ) n 2 1.3 (1.12) n 2 1.5385 1. 3 n ln(1.12) ln(1.5385) (1.12) n n ln(1.5385) 3 .801 years ln(1.12)
5.32 a. In
Solutions for Tutorial 2
1.1 1.4 The two basic sources of funds for all businesses are debt and equity. Financial managers are most concerned about the capital budgeting decision, the financing decision, and the working capital decision. A company should
Living standards = output per capita in general Y = F (K, N, A) Assume N is constant, so not enough improvements in K (capital) and A (technology) The first point in the background article is related to domestic K and A, and it fails because (1) K: lack o