Should all of my decisions in life be made by using the Expected Value criterion?
No. The Expected Value criterion does not take into account the risk of the alternatives. For instance,
suppose Alternative 1 has a 50/50 chance of winning $100 versus losin

Discount Factors, Present Values, and Future Values
Direct Calculation of Pits and His:
FV
1. PV = (1 +r)" Use of Discount Factors:
2. FV = PV - (1+I‘)”
r = Annual compounding rate
n = Number of years
Depicted in the image above are the formulas to

1I.I'llhen transforming the outcomes on the wheel into a probability.r tree, what is the
probability.r that should be placed on the blue branch of the tree?
A. 1M
B. H3
1: C. 11'2
D. HE
Your answer is correct.

Why Is It Important that Assets = LIaDIIItIes + owners‘ IZQUIty'!
This basic Accounting Equation says that if a company owns an asset, it had to pay for it somehow,
either by getting the asset on credit and promising to pay later—that's the liabilities pa

Why would average cost increase with output?
Average cost increases with output for two main reasons. As the firm bumps up against the capacity
of its production facilities, the productivity of additional workers that it hires, or the additional raw
mater

What is the difference between cash and retained earnings?
Yes, this can be confusing. Cash is an asset, so it is listed on the left side of the Balance Sheet. In
contrast, retained earnings are not an asset. It is the lifetime earnings of the company tha

What is a bond?
A bond is a form of debt. It is a contractual obligation, whereby the issuer (borrower) agrees to make
interest payments at stated times and repay the principal on the maturity date. Bonds may be issued
in a wide number of variations, and

Introduction to Describing a Variable
This course will teach you how to effectively employ statistics to make informed business
decisions. We begin by studying probability and probability distributions as a way to help
describe and quantify the uncertaint

What are the differences between debt securities and common stock?
Common Stool:
No stated mamrirv
inmost payments aro Dividends not legal obligation
liability of issuer until declared by issuer
interest payinemx are tax. I iuidends no! tax-daduoti ble
de

What variables impact the Discount Rate?
The starting point for determining what Discount Rate to use is the market interest rate for the
appropriate time horizon involved. Typically, the Discount Rate needs to be adjusted further for risks
such as:
. Cre

Debt securities
Location
of
Manner of Method of
Debt Issue Debt Issue
Types of Seniority in Secure or
Interest Liquidation Unseeure
To avoid diluting the ownership of the company, N-Style L M
may issue debt securities. These securities may take the evﬁl

Suppose that when the price of a certain model of television rises from $1 EIEIEI to $1300,
the demand falls from ssoo to 3000 televisions. 1What is the price elasticity.r of this model
of television?
A. —D_6593
B. DATIBE
C. res?
" D. 414332
Your anmver i

If the variance of a certain set of data is 900, what is the standard deviation?
4* A. 30
B. 300
C. 810,000
0. There is not information to determine the standard deviation
t’our answer is correct.
Answer: a
The standard deviation is equal to the square ro

Adding Expected Value to the Decision Tree
$15.00
Option 1
Option 2
Expected Value:
Dption1: 1/2($50) + 1/3(-$40) + 1l6($20) = $15.00
Option 2: 1/2($20) + 1/3(-$80) + 1/6($200) = $16.67
A decision tree model is helpful in two ways. First, it
v

Wl'ly WOUICI average cost decrease With output?
Average cost could decrease with output for several reasons. First, if the ﬁrm has fixed costs, and
output increases, the fixed costs are distributed over more and more units of output, so the average
fixed

Average Cost and Marginal Cost
Average Cost Curve for Pepsi-Cola
_\
O
F”
to
.5
AC(Q)
Average Cost
(dollars per unit)
M
Economies of Scale 5 . .
‘—’; IDrseconomles of ScaleI
0 1O 20 30 40
Q (millions of units per quarter)
Now that we know how to distin

If you invest $300,000 in an investment that pays 0% compounded annually, 1.nrhat will
1,rou have at the end of year 5?
A. $42o,rss_so
* a. $44o,rss_42
o. sassszsso
o. $5,668,?04
‘i’our answer is correct.
Answer: b
Tutoring: The correct formula to use is

Reconciling The Balance Sheet and the Income Statement
Balance Sheet Balance Sheet Income Statement
_ . , _ For the Perlocl 1I1 thru 3/31
Liabilities
ASSETS Accounts Payable S 500 R “0005)
Notes Payable 500 gvlenue $2 500
Wages Payable

What is the equation of the line shown on the graph?
c: A.y=1i‘2x—2
c: 33:22“:
c: C_yr+1i‘4x—4
'1!) D_yr=1i‘2x+2
Your answer is correct.
Answer: :1
The general linear equation is '3': not + I). Since the slope of this line is 1.12
and it intersects the yr

In order to model both the uncertain events and the actual decisions that are under the
control of the decision maker, a decision tree is used.
‘ True
False
Your answer is correct.
Answer: a
Decision trees [which encompass probabilityr trees} model both t

What is the net gain ifyou land on yellow, where you have M invested and the payoff
factor is 3?
A. $1213
(i- C-
B. $2C|
C.$4ﬂ
[1.5950
C: C-
Your answer is correct.
Answer: h
Since you have invested 364-0 and the payoff factor is 3, you would receive
$120

{Ira-Irm- '35”
1What is the Expected Value of this probability.r tree?
A. $50
* B. $10
C. $160
D. —%10
‘r’our answer is correct.
Answer: b
The Expected Value is equal to the average net gain. Therefore, the
Expected Value = 1!2[$40} + 1iﬁl60} + him—$60}

When rolling two dice, the probability of rolling a 5 is:
a} greater than rolling a 9.
b} less than rolling a 9.
O
:1} equal to rolling a 9.
d} 1A,
Your answer rs correct.
Answer: c:
There are four ways to roll a 5: 4 and 1, 3 and 2, 2 and 3, and 1 and 4.

The biggest advantage of debt financing is that it is
relatively cheap. The lender does not share in the upside
earnings potential of the company, and interest paid on
debt is tax deductible. Additional advantages include the
following.
. Debt has a speci

'I'IU
412
FutureValue=408,0lJO 408
404
Present Value = 400,000 400
Discount Rate (p.a.) : I I l I I I I I
Mouse over the Discount Rates in the graph above to reveal the Future Value
All amounts U.S. Dollars (USD)
What if N-Style earned an interest rate

*Exercise 4-3 (Part Level Submission)
The adjusted trial balance columns of the worksheet for Albanese Company are as follows. No
common stock was issued during April.
ALBANESE COMPANY
Worksheet (partial)
For the Month Ended April 30, 2014
Adjusted Trial

*Exercise 8-6
Your answer is correct.
On December 31, 2013, Russell Co. estimated that 3% of its net sales of $407,600 will become
uncollectible. The company recorded this amount as an addition to Allowance for Doubtful Accounts. On
May 11, 2014, Russell

*Exercise 8-12
Your answer is partially correct.
Bieber Company had the following select transactions.
May 1, 2014
July 1, 2014
Accepted Crane Companys 1-year, 10% note in settlement of a $62,000
account receivable.
Loaned $71,000 cash to Sam Howard on a

*Problem 4-6A (Part Level Submission)
Sara Yu, CPA, was retained by Info Cable to prepare financial statements for April 2014.Yu accumulated
all the ledger balances per Infos records and found the following.
INFO CABLE
Trial Balance
April 30, 2014
Debit
$

*Problem 5-2A (Part Level Submission)
Shmi Distributing Company completed the following merchandising transactions in the month of April.
At the beginning of April, the ledger of Shmi showed Cash of $8,910 and Common Stock of $8,910.
Apr. Purchased mercha

If is not given, choose a value.
Question #1:
Larimer County estimated that their second quarter unemployment rate in 2016 was 2.7%.
a) Calculate the confidence interval for Larimer Countys unemployment rate assuming a sample
size n = 568 and use a 90% co

(a) https:/fred.stlouisfed.org/graph/fredgraph.png?g=7e3v
b) https:/fred.stlouisfed.org/graph/fredgraph.png?g=7e21
c) https:/fred.stlouisfed.org/graph/fredgraph.png?g=7dYl
(d) https:/fred.stlouisfed.org/graph/fredgraph.png?g=7e0e
(e) https:/fred.stlouisfe

1.
a.
The optimal consumption bundles strongly suggest that the price of oranges is
more expensive than that of apples, and therefore Devin cant afford to buy this
instead he looks for alternative which is apple.
b.
2. Marginal rate of substitution is equ

ECO 305: Problem Set 1
Gabriel Mihalache
Due September 19th at the start of recitation
1
Measurement of Economic Activity
1. Go to the website of the bureau of economic analysis and find
the growth rate of real GDP for the most recent quarter. Go to
the w

1. Economic policy debates- is the discussion of fluctuations in key aggregate measures
notably, national income, interest rates, inflation rates, unemployment, trade imbalances,
exchange rates and various wealth series.
2.
a) Macroeconomics- Macroeconomi