Suppose net investment income is N II = 100, the international asset position is A = 3000,
Question:
Suppose net investment income is N II = 100, the international asset position is A = 3000, the international liability position is L = 4000, and the rate of return is 5 percent, r = 0.05.
(a) Economist John Green, a strong advocate of the dark matter hypothesis, believes that A is not accurately recorded. Calculate the amount of dark matter and the "true" international asset position, which we will denote T A, consistent with Green's view.
(b) Financial analyst Nadia Gonzalez does not believe in the dark matter hypothesis. Instead, she believes that A is accurately measured. In her view 5 percent is actually the rate of return on assets r A = 0.05, and the rate of return on the country's international liabilities, r L, is different. Find the value of r L consistent with Gonzalez's view.
Intermediate Accounting
ISBN: 978-1118300855
10th Canadian Edition Volume 2
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Nicola M. Young, Irene M. Wiecek, Bruce J. McConomy