The Sensitivity Report of Problem 27 in Chapter 7 is available: Based on the rep
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Question
The Sensitivity Report of Problem 27 in Chapter 7 is available: Based on the report: What is the best recommendation of Internet investment and Blue Chip investment? What is the total annual return? If the annual return of Internet changed to 0.1 instead of 0.12, will your investment change? What would the annual return be? If the annual return of Blue Chip decreased to 0.07, will the investment change? What is the non-binding constraint? How much more would the annual return be if you have additional $5,000 to invest (hint: the change is in the first constraint)?Explanation / Answer
A)A stock that sells at a high price because of public confidence in its long record of steady earnings.
An extremely valuable asset or property.
Games. A blue poker chip of high value.
A nationally recognized, well-established and financially sound company. Blue chips generally sell high-quality, widely accepted products and services. Blue-chip companies are known to weather downturns and operate profitably in the face of adverse economic conditions, which helps to contribute to their long record of stable and reliable growth.
Investopedia Says:
The name "blue chip" came about because in the game of poker the blue chips have the highest value.
Blue-chip stock is seen as a less volatile investment than owning shares in companies without blue-chip status because blue chips have an institutional status in the economy. The stock price of a blue chip usually closely follows the S&P 500.
B)the interest formula I = Prt, where I stands for the interest on the original investment, P stands for the amount of the original investment (called the "principal"), r is the interest rate (expressed in decimal form), and t is the time.
P= 0.1 r= 20 t=0.12
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