Notes, summaries, assignments, exams, and problems for Economy

Ad Valorem Tax Calculation

The annual ad valorem tax is calculated by multiplying the assessed value of a property by its tax rate: assessed value x tax rate = annual tax.

To determine the daily tax, divide the annual tax by the number of days in the year: annual tax / days in year = daily tax.

Finally, the ad valorem tax owed is calculated by multiplying the daily tax by the number of days the property was owned: daily tax x # of days property owned = ad valorem tax.

Annual Property Tax

The annual property tax is determined by: assessed value x tax rate.

Financial Calculations

• Part/Percentage: part / percentage = total
• Total x Percentage: total x percentage = part
• Percentage: part / total = percentage

Measurements

• 1 yard = 3 feet
• 1 mile = 5,280 feet
• 1

Managing in the Global Marketplace

When companies conduct business in other countries, managers must understand that international business is fundamentally different from local (domestic) business.

The primary reason is that countries are inherently different. They possess distinct cultures, laws, political systems, economies, and levels of development. These significant differences necessitate adjustments in how companies operate globally.

For example:

• Selling a product in Brazil is not the same as selling it in Germany.

• Managing American workers is very different from managing Japanese workers.

• In Mexico, fostering strong government relationships may be crucial, whereas in Britain, it might be less significant.

Managers also need to address critical... Continue reading "Global Market Management: Strategy & Opportunity" »

Study of Socioeconomic Problems and Needs: D: An analysis of socioeconomic needs is conducted to identify the issues that public funds should address.R: It is crucial to ensure that funds are allocated to areas that truly need them, aligning program objectives with the real needs of society.Issuance of Call for Proposals Terms and Conditions:D: Objectives, beneficiaries, eligible concepts, and deadlines of the call are defined.R: This stage ensures transparency and clarity in eligibility criteria and program objectives, facilitating the participation of companies and other interested parties.Publication of the Call:D: The call is made public so that interested parties can submit their applications.R: It is fundamental to ensure that all stakeholders... Continue reading "Public Funding Program Lifecycle: From Needs Analysis to Impact Assessment" »

Income from Other Sources: Key Questions and Answers

Q1. What is the name of the fifth head of income?

Ans: Income from other sources.

Q2. What are the essential conditions for chargeability of income under the head 'Income from Other Sources'?

Ans: The following conditions must be satisfied:

• (i) There must be an income that is not exempted from tax.
• (ii) The income must not be chargeable under any of the first four heads (i.e., other than the head 'Income from Other Sources').

Q3. Write two examples of income that are chargeable under the head 'Income from Other Sources'.

Ans:

• (i) Winning from lotteries
• (ii) Winning from crossword puzzles

Q4. Under which head is the salary of MP/MLA charged?

Ans: Income from other sources.

Q5. Define the term 'security'

What are the Three Fundamental Reasons for the Welfare State's Existence?

The three fundamental reasons for the existence of the welfare state are:

• To assist the economically disadvantaged.
• To address market failures, such as inefficiencies in private insurance and pension systems.
• To support economic growth.

What is the Difference Between Risk and Uncertainty, and How Does the Welfare State Address Both?

Risk refers to situations where the probabilities of possible outcomes are known, while uncertainty is when these probabilities are unknown. The welfare state copes with both scenarios by collectively spreading the risk across a large number of people and adjusting contributions as necessary. This differentiates it from private insurance, which... Continue reading "Welfare State Evolution: Foundations, Challenges, and Policy Solutions" »

Chapter 3: Business Organizations

There are five main forms of business organizations in the private sector:

1. Sole Traders
2. Partnerships
3. Private Limited Companies (PLCs)
4. Public Limited Companies (Ltd.)
5. Co-operatives

Key Business Terms

Limited Liability: This term refers to the owners of a company (shareholders). They are not held responsible for the debts of the company they own. Their liability is limited to the investment they made in buying the shares.

Partnership Agreement: A written and legal agreement between business partners. While not essential, it is always recommended.

Sole Traders: The most common form of business organization. It is a business owned and operated by one person.

Partnerships: A group or association between 2 and 20 people who... Continue reading "Business Organizations: Structures & Key Concepts" »

Municipal Bond Yield Calculations

Equivalent Taxable Yield (ETY)

A municipal bond carries a coupon rate of 6.00% and is trading at par.

Required Calculation 1: ETY for a 38% Tax Bracket

What would be the equivalent taxable yield of this bond to a taxpayer in a 38% combined tax bracket?

The formula for Equivalent Taxable Yield ($r$) is:

$$r = r_m / (1 - t)$$

• $r$: Equivalent Taxable Yield
• $r_m$: Municipal Bond Yield (6.00% or 0.06)
• $t$: Tax Rate (38% or 0.38)

Calculation:

$$0.06 / (1 - 0.38) = 0.096774 \rightarrow \mathbf{9.68\%}$$

Required Calculation 2: Municipal Yield Preference

An investor is in a 40% combined federal plus state tax bracket. If corporate bonds offer 7.75% yields, what yield must municipals offer for the investor to prefer them to corporate... Continue reading "Financial Calculations: Yields, Index Returns, and Security Pricing" »

Hedging with S&P 500 Index Futures

SIF hedging: NF = V_F(antiguo) = F_o x Z. NF (Number of contracts) = V_p (portfolio value) / (V_F x B_p) (Beta). With this hedge, risk is removed. If the index goes up, the profit in the portfolio will be offset by losses in SIFs contracts and vice versa.

Example: S&P 500 falls 5%:

• In the portfolio: R_p = B_p x (-5%) = -10% of a portfolio of $10M, resulting in $9M (Final Value).
• In the SIFS contracts: S_i = 980 (S&P 500 value given) x 0.95 (100% - 5%) = 931. F_i = 931 x (1 + 0.04 x 5/12 (next month timeframe)) = 946.52. V_F = NF x (F_i - F_o) x Z (250).
• Gain on futures: V_F(New) / Equity portfolio value.
• Outcome stock portfolio: 2 x (-5%) = -10%.
• Final Value portfolio: $10M - $1M + V_F(New).

Margin Payments

Margin payments... Continue reading "Hedging and Speculation with Futures and Options" »

Defining "Person"

A "person" can refer to various legal entities:

1. Individual: A natural human being.
2. Hindu Undivided Family (HUF): A family unit with common ancestors, treated as a single entity for tax purposes (India).
3. Company: A corporate entity registered under the Companies Act or similar law.
4. Firm: Partnership firms and limited liability partnerships (LLPs).
5. Association of Persons (AOP) or Body of Individuals (BOI): A group with a common purpose, with or without a formal partnership.
6. Local Authority: Municipal corporations, panchayats, and other local governance bodies.
7. Artificial Juridical Person: Entities like trusts, universities, or temples, recognized by law.

Defining "Assessee"

An "assessee" is a person liable to pay taxes:

1. Ordinary Assessee:

International Financial Institutions

International Monetary Fund (IMF)

• Lender of Last Resort: Provides financial assistance to countries facing balance of payments problems.
• Public Goods: Contributes to global financial stability.
• Conditional Loans: Loans are often tied to economic policy reforms.
• Quotas: Determine a member country's financial contribution and voting power.

World Bank

• Physical Public Goods: Focuses on financing development projects and infrastructure in developing countries.

International Trade Theories

Interindustry Trade

• Trade of different goods between different countries.
• Ricardian Theory: Explains trade based on comparative advantage, where countries specialize in goods with lower opportunity costs.

Intraindustry Trade

• Trade of similar