## Discuss what the pure expectations theory would imply about the yield curve.

Discuss what the pure expectations theory would imply about the yield curve..

Part One: Quantitative Exercises

Barbow Enterprises, Inc., is considering an expansion in their operations. One of the first items they want to examine is their cost of capital. According to the accounting department, the following items and their respective costs have been identified:

• The cost of Common Equity: 15%
• The before tax cost of debt: 12%
• No Preferred stock

They have also calculated the marginal tax rate to be 40% and the stock sells at its book value.

 Barbow Enterprises Inc. Balance Sheet Assets Liabilities and Owners Equity Cash \$240 Long Term Debt \$2,304 Accounts Receivable 480 Equity 3,456 Inventories 720 Net P&E 4,320 Total Assets \$5,760 Total Liabilities and owners Equity \$5,760

Required:

Calculate Barbows after-tax weighted average cost of capital, using the data in the balance sheet above.

Part Two:  Final Project 3: Government Securities

In this part of your Final Project, you will research and analyze current information (that is, within the past two months) on government securities.

Step 1: Go to a financial Web site to do your research. The following are three suggested sites, but you may use others. Be sure to cite your sources!

Step 2: Research current information (within the last two months) on the yields and maturity for:

1. U.S. treasuries
2. Municipal bonds
3. Corporate bonds

Required:

• Discuss what the pure expectations theory would imply about the yield curve.
• Compare and contrast the yields and maturities for each of the securities.
• Discuss which you would hold and why relative to interest rate risk
•   submission may be in a 36 page Microsoft Word or Excel document. Include a Microsoft Excel document that illustrates your calculations. You may use the formulas embedded in Microsoft Excel and/or a financial calculator for these calculations.

Discuss what the pure expectations theory would imply about the yield curve.

## Do pure monopolies exist Essay

Do pure monopolies exist Essay.

“No firm is completely sheltered from rivals; all firms compete for consumer dollars. If that is so, then pure monopoly does not exist. Do you agree? ” (Brue, McConnell, Flynn, 2010). I would have to agree with this statement. I do not believe that there is such a thing as a pure monopoly. There are always alternatives or substitutes available when choosing to purchase products or services from firms.

Pure monopoly exists when “a single firm is the sole producer of a product for which there are no close substitutes” (Brue, McConnell, & Flynn, 2010).

There are less pure forms of monopoly and near-monopolies, but not totally pure monopolies. There are several main characteristics that must be present in order for a pure monopoly to exist. These are: single seller, no close substitutes, price maker, and blocked entry. A pure monopoly is an industry in which a single firm is the sole producer of a specific good or the sole supplier of a service.

Their product is unique in that there are no close substitutes, therefore, consumers who decide not to purchase the monopolized product must do without it. Many people will argue that electric companies are pure monopolies. I disagree because there are alternatives available: oil, propane, natural gas, solar, and wood are substitutes that can be used as sources of light and heat. The pure monopolist controls the total quantity supplied and as a result has considerable control over price; it is a price maker.

The pure monopolist confronts the usual downward-sloping product demand curve and can change its product price by changing the quantity of the product it produces. A pure monopolist faces no immediate competition because certain barriers keep potential competitors from entering the industry. Those barriers may be economic (economic of scale), technological, legal (patents and licenses), or of some other type. In a pure monopoly entry is totally blocked.

All firms compete with rivals for product sales, whether they control the entire market for a product or not. The control over a market and product does not necessarily mean there is not competition. Even if one single firm were to control an entire market and their product, there is always another firm that can produce a product that holds the same qualities and is closely related to the other. The post office is usually our first choice when we want to send a letter or package, but it also has competition from FedEx, UPS, and DHL.

If there were a situation where there was a market that did not have to compete with another market over product sales, there would always be competition when it comes to the amount of money they need to bring in. Many characteristics must be present to classify firms as pure monopolies. There may be less pure forms such as: the water company, the cable TV company, and the local telephone company, and near-monopolies such as: Intel, First Data Corporation, and De Beers, however, I do not believe that pure monopoly exists.

All firms compete with rivals for product sales, whether they control the entire market for a product or not. When choosing to purchase products or services from firms there are always alternatives or substitutes available even though they may not be our first choice.

References Brue, S. L. , McConnell, C. R. , & Flynn, S. (2010). Essentials of Economics (Ashford Custom 2nd ed. ). New York: McGraw-Hill/Irwin.

Do pure monopolies exist Essay

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