Answer:
See below
Explanation:
1. Calculation of taxable income
Wages + interest earned
= $55,000 + $142
= $55,142
What best describes the example/instance for building a model to identify cross-sell opportunities (trying to convince people to adopt a new product category - say jewelry - that they have not bought in before)
Answer:
d) All current customers who up to a certain point in time have NOT bought in the jewelry category but did buy jewelry in the next time frame
Explanation:
Cross-sell opportunities are employed by online and in-person marketers with the aim of convincing buyers to chose another product from a product category that they are interested in. For example, if the customer bought a necklace, the site might suggest that users who bought a necklace also bought a pendant. The aim of this suggestion is to convince the consumer to purchase an item that might be useful to him judging from the products he just indicated interest in.
Therefore, a good cross-sell model will identify customers who bought jewelry but not from a particular jewelry category.
If the percentage increase in the quantity supplied equals the percentage increase in the price, the supply:
Answer: is unit elastic
Explanation:
If the percentage increase in the quantity supplied equals the percentage increase in the price, the supply will be said to be unit elastic.
In the unit elastic supply, it should be noted that supply responds perfectly to the changes in price. This simply means that there'll be an equal change between the price change and the quantity that is supplied.
Assuming a FICA tax rate of 7.65% on the first $117,000 in wages, 1.45% on amounts in excess of $117,000, and a federal income tax rate of 20% on all wages, what would be an employee's net pay for the year if he earned $180,000 for the year
Answer:
Net pay $134,136
Explanation:
The computation of the net pay for the year is given below:
Gross Pay $180,000
Less:
FICA taxes
On $117000 = 7.65% $8,950.5
On (($180,000 - $117,000) × 1.45%) $913.5
Federl income tax (20% of $180,000) $36,000
Net pay $134,136
Cullumber Construction is constructing an office building under contract for Cannon Company and uses the percentage-of-completion method. The contract calls for progress billings and payments of $2150000 each quarter. The total contract price is $25800000 and Cullumber estimates total costs of $18350000. Cullumber estimates that the building will take 3 years to complete, and commences construction on January 2, 2021. At December 31, 2022, Cullumber Construction estimates that it is 75% complete with the building; however, the estimate of total costs to be incurred has risen to $18600000 due to unanticipated price increases. Cullumber Construction completes the remaining 25% of the building construction on December 31, 2023, as scheduled. At that time the total costs of construction are $19350000. What is the total amount of Revenue from Long-Term Contracts and Construction Expenses that Cullumber will recognize for the year ended December 31, 2023
Answer:
See bow
Explanation:
With regards to the above
the revenue to be recognized at the year end is
= 25% × $25,800,000
= $6,450,000
The cost to recognized is
= 25% × $19,350,000
= $4,837,500
Okaboji Manufacturing Company reported the following materials data for the month ending November 30: Materials purchased $176,700 Materials inventory, November 1 55,800 Materials inventory, November 30 46,500 Determine the cost of direct materials used in production by Okaboji during the month ended November 30.
Answer:
Direct material used= $186,000
Explanation:
Giving the following information:
Materials purchased= 176,700
Materials inventory, November 1= 55,800
Materials inventory, November 30= 46,500
To calculate the direct material used, we need to use the following formula:
Direct material used= beginning inventory + purchases - ending inventory
Direct material used= 55,800 + 176,700 - 46,500
Direct material used= $186,000
The annual report of Oracle Corporation included the following information relating to their allowance for doubtful accounts: Balance in allowance at the beginning of the year $323 million, accounts written off during the year of $145 million, balance in allowance at the end of the year $296 million. What did Oracle Corporation report as bad debt expense on the income statement for the year
Answer:
Oracle Corporation reported $118 million as bad debt expense on the income statement for the year.
Explanation:
This can be calculated using the following formula:
Balance in allowance at the end of the year = Balance in allowance at the beginning of the year + Bad debt expense - Accounts written off during the year ......................... (1)
Where:
Balance in allowance at the end of the year = $296 million
Balance in allowance at the beginning of the year = $323 million
Bad debt expense = ?
Accounts written off during the year = $145 million
Substituting the values into equation (1) and solve for Bad debt expense, we have:
$296 million = $323 million + Bad debt expense - $145 million
Bad debt expense = $296 million - $323 million + $145 million
Bad debt expense = $118 million
Therefore, Oracle Corporation reported $118 million as bad debt expense on the income statement for the year.
What is the weighted average cost of capital for a corporation that finances an expansion project using 25% retained earnings and the rest as debt capital
Answer:
The weighted average cost is 24.50%
Explanation:
The weighted average cost of capital ( WACC ) is the cost incurred to finance a project or business as a whole. This rate based on the weights of each financing option.
Use the following formula in order to calculate the weighted average cost of capital
Weighted average cost of capital ( WACC ) = ( Weight of equity financing x Cost of Equity financing ) + ( Weight of Debt financing x Cost of Debt financing )
Where
Weight of equity financing = 25%
Weight of Debt financing = 100% - 25% = 75%
Cost of Equity financing = 11%
Cost of Debt financing = 29%
Placing values in the formula
Weighted average cost of capital ( WACC ) = ( 25% x 11% ) + ( 75% x 29% )
Weighted average cost of capital ( WACC ) = 2.75% + 21.75%
Weighted average cost of capital ( WACC ) = 24.50%
Suppose that a sales consulting firm notices a correlation between the sale of house paint and number of home sales in an area. As the number of home sales increases, the sale of house paint increases, and vice versa. The consulting firm concludes that buying a home causes the new owners to purchase house paint. What method did the consulting firm use in drawing this conclusion
Answer:
The consulting firm used reasoning to draw the conclusion.
Explanation:
Reasoning refers to the process of using information that we are given (sale of house paint), compare it to what we already know (the number of home sales in an area), and then come up with a conclusion, like "buying a home causes the new owners to purchase house paint." It is sometimes described as deductive reasoning.
Given a prior forecast demand value of 230, a related actual demand value of 250, and a smoothing constant alpha of 0.1, what is the exponential smoothing forecast value for the following period
Answer:
232
Explanation:
Calculation for what is the exponential smoothing forecast value for the following period
Exponential smoothing forecast value=230 + 0.1 * (250-230)
Exponential smoothing forecast value=230 + 0.1*20
Exponential smoothing forecast value = 232
Therefore the exponential smoothing forecast value for the following period will be 232
A preferred stock that pays an annual dividend of $10, has a par value of $100, and has a required return of 5% will be valued at $200. Group of answer choices True False
Answer:
The answer is true
Explanation:
Vo = D/Kp
Vo is the value of preferred stock/shares
D is the dividend
Kp is the cost of preferred stock/share
To confirm whether the value of stock is actually $200, we perform the following:
D = $10
Kp = 5% or 0.05
10/0.05
=$200.
The answer is true
Explain which information you would need to take into consideration when deciding to receive $5,000 today or $5,500 one year from today.
Answer:
You should take into consideration the time value of money, inflation rates, and real and nominal interest rates.
Explanation:
Money today tends to be more valuable than money in the future if it does not earn interest, because of inflation. $5,000 dollars today are worth more than $5,000 dollars 5 years from now.
You should also take into account inflation rates. As we can see, $5,500 is 10% higher than $5,000, so if inflation in one year is less than 10%, you will be obtaining more purchasing power by receiving the $5,500 in one year. However, if inflation ends up being higher than 10%, you will be better off with the $5,000 today.
Finally, nominal and real interest rates should also be taken into account. Nominal interest rate is the rate that is agreed upon the investment without taking into account inflation, while real interest rates is nominal interest rates minus inflation.
An argument for ______________________________________________ is that this may be a more efficient way of maintaining and growing a business than just trying to attract new customers.
Answer:
Relationship marketing.
Explanation:
A marketing mix is made up of the four (4) Ps;
1. Products: this is typically the goods and services that gives satisfaction to the customer's needs and wants. They are either tangible or intangible items.
2. Price: this represents the amount of money a customer buying goods and services are willing to pay for it.
3. Place: this represents the areas of distribution of these goods and services for easier access by the potential customers.
4. Promotions: for a good sales record or in order to increase the number of people buying a product and taking services, it is very important to have a good marketing communication such as advertising, sales promotion, direct marketing etc.
Relationship marketing is more focused on providing satisfaction to the customers of a business firm, as well as retention of customers in the long-run.
An argument for relationship marketing is that, this may be a more efficient way of maintaining and growing a business than just trying to attract new customers.
Hence, the main purpose of relationship marketing is to achieve substantial level of customer satisfaction as well as using the organization's limited financial resources efficiently in order to boost the effective promotion and sales of its products.
Preston Woods has 17,500 shares of stock outstanding along with $408,000 of interest-bearing debt. The market and book values of the debt are the same. The firm has sales of $697,000 and a profit margin of 6.8 percent. The tax rate is 21 percent, the debt-equity ratio is 40 percent, and the price-earnings ratio is 11.8. The firm has $130,000 of current assets of which $41,200 is cash. What is the enterprise value?
Answer:
The enterprise value is $926,450
Explanation:
First, we need to calculate Earnings per share (EPS) as follow
EPS = Net profit / Numbers of outstanding shares = (
Where
Net Profit = Sales x Profit Margin = $697,000 x 6.8% = $47,396
Numbers of outstanding shares = 17,500 shares
Placing values in the formula
EPS = $47,396 / 17,500 shares = $2.71 per share
Now calculate market capitalization as follow
Market Capitalization = Price of stock x Numbers of outstanding shares
where
Price of stock = Price earning ratio x earning per share = 11.8 x $2.71 = $31.98
Numbers of outstanding shares = 17,500 shares
Placing values in the formula
Market Capitalization = $31.98 x 17,500 = $559,650
Enterprise value can be calculated using the following formula
Enterprise Value = Market capitalization + Value of debt - Cash
Where
Market capitalization = $559,650
Value of debt = $408,000
Cash = $41,200
Placing values in the formula
Enterprise Value = $559,650 + $408,000 - $41,200
Enterprise Value = $926,450
Think about the television programs and films you've seen recently in which business was portrayed in some way. How were business and business people portrayed
Answer:
I have recently watched a movie which portrayed the businessmen. The businessmen was involved in unethical activities to make unfair profits. The main motive of the businessmen was to make excessive profits to maintain his luxury lifestyle and he was not concerned with the harms that was caused by the toxic waste which was released in the environment.
Explanation:
The management was concerned about the going concern status of the business as the government may impose fines and heavy penalties on the business which could cease business activities. But the businessmen was not concerned with the management advice.
A potential future negative impact to value and/or cash flows is often discussed in terms of probability of loss and the expected magnitude of the loss. This is called
Answer:
Risk.
Explanation:
A potential future negative impact to value and/or cash flows is often discussed in terms of probability of loss and the expected magnitude of the loss. Thus, this is called risk.
Risk management can be defined as the process of identifying, evaluating, analyzing and controlling potential threats or risks present in a business as an obstacle to its capital, revenues and profits. This ultimately implies that, risk management involves prioritizing course of action or potential threats in order to mitigate the risk that are likely to arise from such business decisions.
An effective and efficient way to mitigate risk in business is through the use of internal controls.
Hence, internal controls if properly executed helps to increase operational efficiency, protect and safeguard assets, provides accurate financial information, prevents fraudulent or unlawful behaviors, timeliness of financial records and reporting.
You are considering working for United Way upon graduation. Explain how the marketing goals, strategies, and markets for the nonprofit differ from a for-profit organization
Explanation:
Remember, the term 'marketing', could be defined in general terms as the activities carried out by a company (non-profit or for-profit) in other to promote their cause (which can be their products or services).
For example, unlike a for-profit company which may have a marketing goal of achieving a set amount of sales in the first half of the year, a non-profit on the other hand may have a marketing goal of raising the needed amount to fund their school feeding program.
Also, in terms of strategies used, while a for-profit company may use paid marketers, a non-profit may solicit the help of volunteers.
You win a lottery that pays $10,000 each year for the next 5 years beginning next year. How much are your winnings worth today
Answer:
$43,294.77
Explanation:
Here is the full question used in answering this quetion :
You win a lottery that pays $10,000 each year for the next 5 years beginning next year. How much are your winnings worth today if the market interest rate is 5%?
Present value is the sum of discounted cash flows
PV can be calculated with a financial calculator
Cash flow in year 1 - 5 = $10,000
i = 5%
PV = $43,294.77
To find the PV using a financial calculator:
1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.
2. after inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.
3. Press compute
g The Morrit Corporation has $960,000 of debt outstanding, and it pays an interest rate of 8% annually. Morrit's annual sales are $6 million, its average tax rate is 25%, and its net profit margin on sales is 5%. If the company does not maintain a TIE ratio of at least 5 to 1, then its bank will refuse to renew the loan, and bankruptcy will result. What is Morrit's TIE ratio
Answer:
6.21%
Explanation:
The computation of the times interest earned ratio is given below:
As we know that
Times interest earned ratio = EBIT ÷ Interest
Now for determining this, following calculations must be done:
The interest is
= $960,000 × 8%
= $76,800
Net profit
= Annual sales × net profit margin
= $6,000,000 × 0.05
= $300,000
Now the pre tax income is
= net income ÷ ( 1 - tax rate)
= $300,000 ÷ (1 - 0.25)
= $400,000
Now the EBIT is
= Pre tax income + interest expense
= $400,000 + $76,800
= $476,800
So, the TIE ratio is
= $476,800 ÷ $76,800
= 6.21%
Bob works for Allies Electronics making switches. He is paid $0.40 per switch. Last week he made 635 switches on regular time and 126 switches during overtime. Find his gross earnings for the week if time-and-a-half per switch is paid for overtime.
Answer:
Total earnings= $329.6
Explanation:
Giving the following information:
He is paid $0.40 per switch. Last week he made 635 switches on regular time and 126 switches during overtime.
We need to calculate the total earnings:
Regular time= 635*0.4= $254
Overtime= 126*(0.4*1.5)= $75.6
Total earnings= $329.6
Manchester Company sells equipment on June 1, 2021, for $222,400 cash. Manchester incurred $1,280 of removal and selling costs on disposal. The equipment cost $400,000 when it was purchased on January 2, 2018. Its estimated residual value and useful life were $64,000 and 10 years, respectively. Manchester uses straight-line depreciation and records annual depreciation on each December 31.
Required:
a. Prepare the journal entries needed to record the asset disposal on June 1, 2021.
b. Record the journal entries if the equipment were abandoned (zero fair value) on June 1, 2021.
Answer and Explanation:
The journal entries are as follows:
But before that the accumulated depreciation for 3 years is as follows:
Cost $400,000
Less: Residual value $64,000
Depreciable cost $336,000
Divide by Useful life 10
Annual Depreciation $33,600
Accumulated depreciation for 3 years $100,800 ($33,600 × 3 years)
Now the journal entries are as follows:
a.
On June 1, 2021
Depreciation expense $14,000 ($33,600 × 5 months ÷ 12 months)
To Accumulated Depreciation $14,000
(Being depreciation expense is recorded)
On June 1,2021
Accumulated Depreciation $114,800 ($100,800 + $14,000)
Cash $221,120 ($222,400 - $1,280)
Loss on Disposal $64,080
To Equipment $400,000
(Being the disposal of an asset is recorded)
b.
On June 1, 2021
Depreciation expense $14,000 ($33,600 × 5 months ÷ 12 months)
To Accumulated Depreciation $14,000
(Being depreciation expense is recorded)
On June 1,2021
Accumulated Depreciation $114,800 ($100,800 + $14,000)
Loss on Disposal $285,200 ($221,120 + $64,080)
To Equipment $400,000
(Being the disposal of an asset is recorded)
According to the elasticity computation of 0.50, by how much would popcorn sales fall if the price increased by:
Answer:
a. Popcorn sales would fall by 10%.
b. Popcorn sales would fall by 25%.
Explanation:
Question wants to know how much popcorn sales would fall by if the price increased by 20% and 50%.
a. Price increased by 20%
Price elasticity measures the change in quantity demanded as a result of a change in price. For normal goods it is assumed that the elasticity is negative which means that an increase in price leads to a decrease in quantity demanded:
Change in quantity demanded = elasticity * change in price
= 0.5 * 20%
= 10%
Popcorn sales would fall by 10%.
b. Price increased by 50%:
= 0.5 * 50%
= 25%
Popcorn sales would fall by 25%.
The Alpine House, Inc., is a large retailer of snow skis. The company assembled the information shown below for the quarter ended March 31:
Amount Sales $1,188,000
Selling price per pair of skis $440
Variable selling expense per pair of skis $47
Variable administrative expense per pair of skis $20
Total fixed selling expense $155,000
Total fixed administrative expense $105,000
Beginning merchandise inventory $75,000
Ending merchandise inventory $120,000
Merchandise purchases $310,000
Required:
a. Prepare a traditional income statement for the quarter ended March 31.
b. Prepare a contribution format income statement for the quarter ended March 31.
c. What was the contribution margin per unit?
Answer:
a) traditional format income statement
Sales revenue $1,188,000
COGS ($355,000)
Gross profit $833,000
Expenses:
Selling expenses $281,900Administrative expenses $159,000 ($440,900)Operating income $392,100
b) contribution format income statement
Sales revenue $1,188,000
Variable costs:
COGS $355,000Selling expense $126,900Administrative expense $54,000 ($535,900)Contribution margin $652,100
Fixed expenses:
Selling expenses $155,000Administrative expenses $105,000 ($260,000)Operating income $392,100
c) contribution margin per unit = $652,100 / 2,700 units = $241.52
Zach sold a restaurant to Shane for $295,000. As part of the agreement, Zach promised not to open another restaurant business for three years within a 50-mile radius of the one sold. What is the name of this clause?
Answer:
Non-compete clause
Explanation:
The name of this clause is Non-compete clause. It is is a clause under which one party agrees not to enter into or start a similar profession or trade in competition against another party. By prudence of this non compete clause, the worker attempts and gives his acknowledgment to the state of the business that over the span of the work or significantly after the representative leaves the administrations/occupation of the business, he will not be the contender of the business in the structure and nature of the work of the business.
Vaughn Manufacturing purchased equipment for $39200. Sales tax on the purchase was $2352. Other costs incurred were freight charges of $588, repairs of $343 for damage during installation, and installation costs of $657. What is the cost of the equipment
Answer:
the cost of the equipment is $42,979
Explanation:
The computation of the cost of the equipment is as follows:
= Purchase value of an equipment + sales tax on the purchase + other cost incurred + installation cost
= $39,200 + $2,352 + 588 + $657
= $42,979
Hence, the cost of the equipment is $42,979
Put the following steps of the problem solving process in correct order. Question 2 options: Implement the Model Identify what is the problem Develop the model / Acquire the data Do the results look right
Answer:
I. Identify what is the problem
II. Acquire the data
III. Develop the model
IV. Implement the Model.
V. Do the results look right.
Explanation:
The problem-solving process can be defined as the systematic approach used to identify and determine the solution to a particular problem.
The steps involved in the problem-solving process are;
1. Identify and define the problem: this is the first step to be taken in solving a problem. This is to ensure that, the focus is on the main issue or situation and all efforts is channeled in the right direction rather than the symptoms.
2. Gathering of information: this helps to consider the options available in solving a problem effectively.
3. Consider your options: this helps to compare the available and viable solutions to the problem.
4. Weigh disadvantages and evaluate a solution: you weigh the disadvantages of each solution, before choosing the one with the least disadvantages.
Hence, the fundamental steps of the problem solving process in the correct order are;
I. Identify what is the problem
II. Acquire the data
III. Develop the model
IV. Implement the Model.
V. Do the results look right.
How many new retail accounts must the company acquire to break even on this tactic?
Question:
Tyson Foods is the largest U.S. beef and chicken supplier, processing more than 100,000 head of cattle and 40-plus million chickens weekly. Their primary distribution channels are supermarket meat departments. However, the company is now expanding distribution into convenience stores. There are almost 150,000 gas stations and convenience stores where the company would like to sell hot Buffalo chicken bites near the checkout. This is a promising channel, as sales are growing considerably at these retail outlets and pro´t margins on prepared foods are higher than selling raw meat to grocery stores. Tyson will have to hire 10 more sales representatives at a salary of $45,000 each to expand into this distribution channel because many of these types of stores are independently owned. Each convenience store is expected to generate an average of $50,000 in revenue for Tyson. Refer to Appendix 2: Marketing by the Numbers to answer the following questions.
1.If Tyson’s contribution margin is 30 percent on this product, what increase in sales will it need to break even on the increase in fixed costs to hire the new sales reps?
2.How many new retail accounts must the company acquire to break even on this tactic?
3. What average number of accounts must each new rep acquire?
Answer:
Tyson Foods
1. When the company breaks even the margin resulting from the increase in sales = salary of sales reps 0.30x = 10 * $45000 x= $150,0000.
Therefore, the increase in sales = $150,0000
2. The number of retail accounts
= Increase in sales/ revenue from one store
= 150,0000/50000
= 30 retail stores.
3. There are 10 reps, therefore the average number of accounts for each sales rep
= 30/10
= 3 accounts.
Explanation:
Breakeven in sales dollars and units are achieved when the total cost = the total revenue. At this point, there is no loss and no profit. When the company achieves more sales above the break-even point, it makes a profit. If it does not reach the point, it incurs some loss.
Juan is temporarily between jobs while searching for a new one. This type of short-term unemployment is called __________ unemployment.
Answer:
frictional unemployment
Explanation:
Scot and Vidia, married taxpayers, earn $246,000 in taxable income and $5,000 in interest from an investment in City of Tampa bonds. (Use the U.S. tax rate schedule for married filing jointly). Required: If Scot and Vidia earn an additional $81,200 of taxable income, what is their marginal tax rate on this income
Answer:
Currently (assuming a 2020 tax schedule), Scott and Vidia's tax liability = $29,211 + [24% x ($246,000 - $171,050)] = $47,199*
municipal bonds are not taxed by the federal government, so they do not pay any taxes on the interests earned on the City of Tampa bonds.
if they earn an additional $81,200, then their tax liability will be:
$66,543 + [32% x ($327,200 - $326,600)] = $66,735
their marginal tax rate = 32%
What is your assessment of the strength of competitive pressures stemming from the threat of entry of new competitors into the North American wholesale club market
Incomplete question. Assumed you are referring to this article;
Six years after turning the leadership of Costco Wholesale over to the then- president, Craig Jelinek, Jim Sinegal, Costco’s co-founder and chief executive officer (CEO) from 1983 until year-end 2011, had ample reason to be pleased with the company’s ongoing revenue growth and competitive standing as one of the world’s biggest and best consumer goods merchandisers. Sinegal had been the driving force behind Costco’s 35-year evolution from a startup entrepreneurial venture into the largest retailer in the United States, the seventh-largest retailer in the world, and the undisputed leader of the discounted warehouse and wholesale club segment of the North America retailing industry. Since January 2012, when Craig Jelinek took reins as Costco Wholesale’s president and CEO, the company had prospered growing from annual revenue of $89 billion and 598 membership warehouse at year-end fiscal 2011 to annual revenues of $126.2 billion and 741 membership warehouse at year-end fiscal 2017. Costco’s growth continued in the first nine months of fiscal 2018. 9-month revenue was $95.0 billion, up 12.0 percent over 9 months of fiscal 2017, and the company had opened four additional warehouses. As of June 2018, Costco ranked as the second-largest retailer in both the United States and the world.
Explanation:
Note, the threat arising from new competitors into a particular market refers to the likelihood that this company or business would overtake existing ones in their market share.
However, recall that we are told that Costco has been in the business for up to 35 years, and has become "the undisputed leader of the discounted warehouse and wholesale club segment of the North America retailing industry," this fact alone makes us and the new competitors weary of how difficult to acquire part of the market. This thus puts Costco at a competitive advantage.
Suppose now the same client as in the previous problem prefers to invest in your portfolio a proportion (y) that maximizes the expected return on the overall portfolio subject to the constraint that the overall portfolio's standard deviation will not exceed 20%. What is the maximum investment proportion, y, for the risky portfolio
Answer:
P = 74.07%
Explanation:
Note: An important data is missing in this question to solve for the maximum investment proportion y for the risky portfolio. I have found the similar question on the internet and I am including that missing data to complete this question in order to solve for the sack of understanding and concept.
Required: Maximum investment proportion y for the risky portfolio.
Let's denote this requirement as P for proportion.
Given Data:
Standard Deviation of investor's portfolio = 20% = 0.20
According to the formula to calculate the proportion of investment that investor wants to do in the risky portfolio, we need to have standard deviation of the risky portfolio, which is missing in this question. I have found it on the internet
Standard Deviation of the risky portfolio = 27% = 0.27
So, the formula is:
Standard deviation of the investors portfolio = Investment Portfolio x Standard deviation of the risky portfolio.
Let's suppose,
[tex]SD_{IP}[/tex] = Standard deviation of the investors portfolio
[tex]SD_{RP}[/tex] = Standard deviation of the risky portfolio.
P = Investment Proportion
So,
[tex]SD_{IP}[/tex] = P x [tex]SD_{RP}[/tex]
Solving for P
P = [tex]SD_{IP}[/tex]/[tex]SD_{RP}[/tex]
Plugging in the values.
P = 0.20/0.27
P = 0.7407 x 100
P = 74.07%
Hence, we can conclude that, investor can invest 74.07% of his investment in the risky portfolio for not exceeding the standard deviation 20% of the investor portfolio.
