chapter15答案
Chapter15干洗

Part Ⅳ
Situation Dialogue 2
Things: a pair of trousers Ways: dry cleaned Time: by next Monday
pants
Making short dialogues
C: I want this shirt dry-cleaned. Can you get this stain out (off ……)? S: All right. I think it’ll come off. C: When can I pick ……up? S: How about ……? C: Will you iron it for me? S: Yes, of course. In fact, we’ll deliver to your home after dry cleaning. C: Great!
dry cleaner
iron
detergent
washing machine
handwash
care label
hanger
dry clean
2.dry cleaner’s
A
3. Washing machine
C
5.iron
B
Match
F E D
6.stain
1.trousers
4.coat
Guess
Do you know how it should be cleaned?
hand wash
machine washable
dry clean
Pair work
Conversation
S: All right.
Chapter_15 The Demand for Money(宏观经济学,多恩布什,第十版)

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The more money a person holds, the less likely he or she is to incur the costs of illiquidity
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The more money a person holds, the more interest he/she will give up → similar tradeoff encountered with transactions demand for money
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Standard of deferred payment
Money units are used in long term transactions (ex. loans)
15-5
The Demand for Money: Theory
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The demand for money is the demand for real money balances → people hold money for its purchasing power
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As liquidity of an asset decreases, the interest yield increases
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A typical economic tradeoff: in order to get more liquidity, asset holders have to sacrifice yield
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At the end of 2005, M1 = $4,596 per person Debate whether broader measure, M2, might better meet the definition of money in a modern payment system
克鲁格曼第八版-国际金融下答案Chap15

Chapter 15Price Levels and the Exchange Ratein the Long RunChapter OrganizationThe Law of One PricePurchasing Power ParityThe Relationship Between PPP and the Law of One PriceAbsolute PPP and Relative PPPA Long-Run Exchange-Rate Model Based on PPPThe Fundamental Equation of the Monetary ApproachOngoing Inflation, Interest Parity, and PPPThe Fisher EffectEmpirical Evidence on PPP and the Law of One PriceBox: Some Meaty Evidence on the Law of One PriceExplaining the Problems with PPPTrade Barriers and NontradablesDepartures from Free CompetitionDifferences in Consumption Patterns and Price Level MeasurementPPP in the Short Run and in the Long RunBox: Sticky Prices and the Law of One Price: Evidence From Scandinavian Duty-free ShopsCase Study: Why Price Levels are Lower in Poorer CountriesBeyond Purchasing Power Parity: A General Model of Long-Run Exchange RatesChapter 15 Price Levels and the Exchange Rate in the Long Run 71The Real Exchange RateDemand, Supply, and the Long-Run Real Exchange RateNominal and Real Exchange Rates in Long-Run EquilibriumInternational Interest Rate Differences and the Real Exchange RateReal Interest ParitySummaryAppendix: The Fisher Effect, the Interest Rate, and the Exchange Rate under the Flexible-PriceMonetary Approach72 Krugman/Obstfeld •International Economics: Theory and Policy, Eighth EditionChapter OverviewThe time frame of the analysis of exchange rate determination shifts to the long run in this chapter. An analysis of the determination of the long-run exchange rate is required for the completion of the short-run exchange rate model since, as demonstrated in the previous two chapters, the long-run expected exchange rate affects the current spot rate. Issues addressed here include both monetary and real-side determinants of the long-run real exchange rate. The development of the model of the long-run exchange rate touches on a number of issues, including the effect of ongoing inflation on the exchange rate, the Fisher effect, and the role of tradables and nontradables. Empirical issues, such as the breakdown of purchasing power parity in the 1970s and the correlation between price levels and per capita income, are addressed within this framework.The law of one price, which holds that the prices of goods are the same in all countries in the absence of transport costs or trade restrictions, presents an intuitively appealing introduction to long-run exchange rate determination. An extension of this law to sets of goods motivates the proposition of absolute purchasing power parity. Relative purchasing power parity, a less restrictive proposition, relates changes in exchange rates to changes in relative price levels and may be valid even when absolute PPP is not. Purchasing power parity provides a cornerstone of the monetary approach to the exchange rate, which serves as the first model of the long-run exchange rate developed in this chapter. This first model also demonstrates how ongoing inflation affects the long-run exchange rate.The monetary approach to the exchange rate uses PPP to model the exchange rate as the price level inthe home country relative to the price level in the foreign country. The money market equilibrium relationship is used to substitute money supply divided by money demand for the price level. TheFisher relationship allows us to substitute expected inflation for the nominal interest rate. The resulting relationship models the long-run exchange rate as a function of relative money supplies, the inflation differential and relative output in the two countries;E (M/M *) l(p e–p*e, (Y*/Y))The l function represents the ratio of foreign to domestic money demand; thus, both the difference in expected inflation rates and the output ratio enter the function with aChapter 15 Price Levels and the Exchange Rate in the Long Run 73positive sign. An increase in inflation at home means higher home interest rates (through the Fisher equation) and lower home money demand. An increase in foreign output raises foreign money demand.One result from this model that students may find initially confusing concerns the relationship between the long-run exchange rate and the nominal interest rate. The model in this chapter provides an example of an increase in the interest rate associated with exchange rate depreciation. In contrast, the short-run analysis in the previous chapter provides an example of an increase in the domestic interest rate associated with an appreciation of the currency. These different relationships between the exchange rate and the interest rate reflect different causes for the rise in the interest rate as well as different assumptions concerning price rigidity. In the analysis of the previous chapter, the interest rate rises dueto a contraction in the level of the nominal money supply. With fixed prices, this contraction of nominal balances is matched by a contraction in real balances. Excess money demand is resolved through a rise in interest rates which is associated with an appreciation of the currency to satisfy interest parity. In this chapter, the discussion of the Fisher effect demonstrates that the interest rate will rise in response to an anticipated increase in expected inflation due to an anticipated increase in the rate of growth of the money supply. There is incipient excess money supply with this rise in the interest rate. With perfectly flexible prices, the money market clears through an erosion of real balances due to an increase in the price level.This price level increase implies, through PPP, a depreciation of the exchange rate. Thus, with perfectly flexible prices (and its corollary PPP), an increase in the interest rate due to an increase in expected inflation is associated with a depreciation of the currency.74 Krugman/Obstfeld •International Economics: Theory and Policy, Eighth EditionEmpirical evidence presented in the chapter suggests that both absolute and relative PPP perform poorly for the period since 1971. Even the law of one price fails to hold across disaggregated commodity groups. The rejection of these theories is related to trade impediments (which help give rise to nontraded goods and services), to shifts in relative output prices and to imperfectly competitive markets. Since PPPserves as a cornerstone for the monetary approach, its rejection suggests that a convincing explanationof the long-run behavior of exchange rates must go beyond the doctrine of purchasing power parity. The Fisher effect is discussed in more detail and accompanied by a diagrammatic exposition in an appendix to the chapter.A more general model of the long-run behavior of exchange rates in which real-side effects are assigned a role concludes the chapter. The material in this section drops the assumption of a constant real exchange rate, an assumption that you may want to demonstrate to students is necessarily associated with the assumption of PPP. Motivating this more general approach is easily done by presenting students with a time series graph of the recent behavior of the real exchange rate of the dollar which will demonstrate large swings in its value. The real exchange rate, q, is the ratio of the foreign price index, expressed in domestic currency, to the domestic price index, or, equivalently, E q (P/P *). The chapter includes an informal discussion of the manner in which the long-run real exchange rate, q, is affected by permanent changes in the supply or demand for a country’s products.Answers to Textbook Problems1. Relative PPP predicts that inflation differentials are matched by changes in theexchange rate.Under relative PPP, the franc/ruble exchange rate would fall by 95 percent withinflation rates of 100% in Russia and 5% in Switzerland.Chapter 15 Price Levels and the Exchange Rate in the Long Run 752. A real currency appreciation may result from an increase in the demand fornontraded goodsrelative to tradables which would cause an appreciation of the exchange rate since the increase inthe demand for nontradables raises their price, raising the domestic price level and causing the currency to appreciate. In this case exporters are indeed hurt, as one can see by adapting the analysis in Chapter 3. Real currency appreciation may occur for different reasons, however, with different implications for exporters’ incomes. A shift in foreign demand in favor of domestic exports will both appreciate thedomestic currency in real terms and benefit exporters. Similarly, productivity growth in exports is likely to benefit exporters while causing a real currency appreciation. If we consider a ceterus paribus increase in the real exchange rate, this is typically bad for exporters as their exports are now more expensive to foreigners which mayreduce foreign export demand. In general, though, we need to know why the real exchange rate changed to interpret the impact of the change.3. a. A tilt of spending towards nontraded products causes the real exchange rate toappreciate as the price of nontraded goods relative to traded goods rises (thereal exchange rate can be expressed as the price of tradables to the price ofnontradables).b. A shift in foreign demand towards domestic exports causes an excess demandfor the domestic country’s goods which causes the relative price of these goods to rise; that is, it causes the real exchange rate of the domestic country toappreciate.4. Relative PPP implies that the pound/dollar exchange rate should be adjusted tooffset the inflation difference between the United States and Britain during the war.Thus, a central banker might compare the consumer price indices in the UnitedStates and the U.K. before and after the war. If America’s price level had risen by 10%, while that in Britain had risen by 20%, relative PPP would call for apound/dollar exchange rate 10% higher than before the war—a 10% depreciation of the pound against the dollar.76 Krugman/Obstfeld •International Economics: Theory and Policy, Eighth EditionA comparison based only on PPP would fall short of the task at hand, however, if itignoredpossible changes in productivity, productive capacity, or in relative demands for goods producedin different countries in wake of the war. In general, one would expect largestructural upheavalsas a consequence of the war. For example, Britain’s productivity might have fallen dramatically asa result of converting factories to wartime uses (and as a result of bombing). Thiswould call for a real depreciation of the pound, that is, a postwar pound/dollarexchange rate more than 10% higher than the prewar rate.5. The real effective exchange rate series for Britain shows an appreciation of thepound from 1977 to 1981, followed by a period of depreciation. Note that theappreciation is sharpest after the increasein oil prices starts in early 1979; the subsequent depreciation is steepest after oil prices soften in 1982. An increase in oil prices increases the incomes received by British oil exporters, raising their demand for goods. The supply response of labor moving into the oil sector is comparable to an increase in productivity which also causes the real exchange rate to appreciate. Of course, a fall in the price of oil has opposite effects. (Oil is not the only factor behind the behavior of the pound’s real exchange rate. Instructors may wish to mention the influence of Prime MinisterMargaret Thatcher’s stringent monetary policies.)6. A permanent shift in the real money demand function will alter the long-runequilibrium nominal exchange rate, but not the long-run equilibrium real exchange rate. Since the real exchange ratedoes not change, we can use the monetary approach equation, E (M/M *) {L(R*, Y*)/L(R, Y)}.A permanent increase in money demand at any nominal interest rate leads to aproportional appreciation of the long-run nominal exchange rate. Intuitively, the level of prices for any level of nominal balances must be lower in the long run for money market equilibrium. The reverse holdsfor a permanent decrease in money demand. The real exchange rate, however,depends upon relative prices and productivity terms which are not affected bygeneral price-level changes.Chapter 15 Price Levels and the Exchange Rate in the Long Run 777. The mechanism would work through expenditure effects with a permanent transferfrom Polandto the Czech Republic appreciating the koruna (Czech currency) in real terms against the zloty(Polish currency) if (as is reasonable to assume) the Czechs spent a higher proportion of theirincome on Czech goods relative to Polish goods than did the Poles.8. As discussed in the answer to Question 7, the koruna appreciates against the zloty inreal terms with the transfer from Poland to the Czech Republic if the Czechs spend a higher proportion of their income on Czech goods relative to Polish goods than did the Poles. The real appreciation would lead to a nominal appreciation as well.9. Since the tariff shifts demand away from foreign exports and toward domestic goods,there is a long-run real appreciation of the home currency. Absent changes inmonetary conditions, there is along-run nominal appreciation as well.10. The balanced expansion in domestic spending will increase the amount of importsconsumed in the country that has a tariff in place, but imports cannot rise in thecountry that has a quota in place. Thus, in the country with the quota, there would be an excess demand for imports if the real exchange rate appreciated by the same amount as in the country with tariffs. Therefore, the real exchange rate in the country with a quota must appreciate by less than in the country with the tariff.11. A permanent increase in the expected rate of real depreciation of the dollar againstthe euro leads to a permanent increase in the expected rate of depreciation of the nominal dollar/euro exchange rate, given the differential in expected inflation rates across the U.S. and Europe. This increase in the expected depreciation of the dollar causes the spot rate today to depreciate.78 Krugman/Obstfeld •International Economics: Theory and Policy, Eighth Edition12. Suppose there is a temporary fall in the real exchange rate in an economy, that is,the exchangerate appreciates today and then will depreciate back to its original level in the future.The expected depreciation of the real exchange rate, by real interest parity, causes the real interest rate to rise. If there is no change in the expected inflation rate, then the nominal interest rate rises with the rise in the real exchange rate. This event may also cause the nominal exchange rate to appreciate if the effect of a currentappreciation of the real exchange rate dominates the effect of the expecteddepreciation of the real exchange rate.13. International differences in expected real interest rates reflect expected changes inreal exchange rates. If the expected real interest rate in the United States is 9% and the expected real interest rate in Europe is 3%, then there is an expectation that the real dollar/euro exchange rate will depreciate by 6% (assuming that interest parity holds).14. The initial effect of a reduction in the money supply in a model with sticky prices isan increasein the nominal interest rate and an appreciation of the nominal exchange rate. The real interest rate, which equals the nominal interest rate minus expected inflation, rises by more than the nominal interest rate since the reduction in the money supply causes the nominal interest rate to rise, and deflation occurs during the transition to the new equilibrium. The real exchange rate depreciates during the transition to the new equilibrium (where its value is the same as in the original state).This satisfies the real interest parity relationship which states that the differencebetween the domestic and the foreign real interest rate equals the expecteddepreciation of the domestic real exchange rate—in this case, the initial effect is an increase in the real interest rate in the domestic economy coupled with an expected depreciation of the domestic real exchange rate. In any event,the real interest parity relationship must be satisfied since it is simply a restatement of the Fisher equation, which defines the real interest rate, combined with theinterest parity relationship, whichis a cornerstone of the sticky-price model of the determination of the exchange rate.Chapter 15 Price Levels and the Exchange Rate in the Long Run 7915. One answer to this question involves the comparison of a sticky-price with a flexible-price model.In a model with sticky prices, a reduction in the money supply causes the nominal interest rate torise and, by the interest parity relationship, the nominal exchange rate to appreciate.The real interest rate, which equals the nominal interest rate minus expectedinflation, increases both because of the increase in the nominal interest rate andbecause there is expected deflation. In a model with perfectly flexible prices, anincrease in expected inflation causes the nominal interest rate to increase (while the real interest rate remains unchanged) and the currency to depreciate since excess money supply is resolved through an increase in the price level and thus, by PPP, a depreciation of the currency.An alternative approach is to consider a model with perfectly flexible prices. Asdiscussed in the preceding paragraph, an increase in expected inflation causes the nominal interest rate to increase and the currency to depreciate, leaving theexpected real interest rate unchanged. If there is an increase in the expected real interest rate, however, this implies an expected depreciation of the real exchange rate. If this expected depreciation is due to a current, temporary appreciation, then the nominal exchange rate may appreciate if the effect of the current appreciation (which rotates the exchange rate schedule downward) dominates the effect due to the expected depreciation (which rotates the exchange rate schedule upward).16. If long term rates are higher than short term rates, it suggests that investors expectinterest rates to be higher in the future, that is why they demand a higher rate of return on a longer bond. If they expect interest rates to be higher in the future, they are either predicting higher inflation in the future or a higher real interest rate. We cannot tell which by simply looking at short and long rates.80 Krugman/Obstfeld •International Economics: Theory and Policy, Eighth Edition17. If we assume that the real exchange rate is constant, then the expected percentagechange in the exchange rate is simply the inflation differential. As the question notes, this relationship holds better over the long run. Starting from interest parity, we see that R R * %∆e E. The change in the exchange rate is π–π* when PPP holds, so if PPP holds over a horizon, we can say that R R *π–π*. This means r r*. So, real interest rate differentials at long maturities should be smaller.On the other hand, if the real exchange rate changes or is expected to change, we would say that %∆e E %∆e qπ–π*. In that case, there can be a significant wedge between r and r*. Thus, ifPPP does hold over the long run and people predict this (and consequently are not expecting large changes in the real exchange rate), we would expect to see smaller real interest rate differentials at long maturities.18. If markets are fairly segmented, then temporary moves in exchange rates may leadto wide deviations from PPP even for tradable goods. In the short run, firms may not be able to respondby opening up new trading relationships or distribution channels. On the other hand, if there are persistent deviations from PPP of tradable goods, we would expect firms to try to increase their presence in the high-price market. If they do this, it should reduce prices there and bring pricesback towards PPP.19. PPP for non-tradables would arise if technologies were similar across countries, andthus similar prices for goods in the long run would be consistent with competitive markets and similar labor costs. If the labor costs are similar, then (again assuming similar technologies) the costs of non-tradables should be similar also. Of course, as the chapter notes, differences in productivity thatvary across sector could result in Balassa Samuelson style effects where despitetradables PPP holding, non-tradables are still priced differently across countries.。
FFM(11版) 部分章节答案

Fundamentals of Financial ManagementEleventh Edition SOLUTIONS TO PROBLEMSCONTENTSCHAPTER4 The Valuation of Long-Term Securities CHAPTER5Risk and ReturnCHAPTER15Required Returns and the Cost of Capital CHAPTER16Operating and Financial Leverage CHAPTER17Capital Structure DeterminationCHAPTER18Dividend PolicyCHAPTER41. Price per bond $907.102. Price per bond $904.303. Current price: p0=$80.00Later price: p0=$66.67The price drops by $13.334. Rate of return = 20%5. Present value of stock V=$22.636. a) $37.5b) $30.00c) $37.50Either the present strategy (a) or strategy (c) both result in the same market price per share.7. a) 8 percentb) YTC= 9.64 percentwe solve for YTC by computer8. V=$759. V=$689.4110. a) g = 0.05b) expected dividend yield = 0.07c) expected capital gains yield =g= 0.0511. a) semiannual yield = 0.0402b) 0.0804c) effective annual yield = 0.082012. a) trying a 4 percent semiannual YTM as a starting point for a trial-and-error approach, we getP0 = $ 1,067.55Since $1,067.55 is less than $1,120, we need to try a lower discount rate, say 3 percentP0 = $ 1,223.47To approximate the actual discount rate, we interpolate between 3 and 4 percent,X =0.0066In addition, semiannual YTM= 0.03 +0.0066 = 0.0366, or 3.66 percent. (The use of a computer provides a precise semiannual YTM figure of 3.64 percent.)b) semiannual YTM * 2 = nominal YTMnominal YTM = 0.0732C) effective annual YTM = 0.075413. a) old Chicago’s 12-year bonds should show a greater price change than Red Frog’s bonds. With everything, the same except for maturity, the longer the maturity, the greater the price fluctuation associated with a given change in market required return. The closer in time that you are to the relatively large maturity value being realized, the less important are interest payments in determining the market price, and the less important is a change in market required return on the market price of the security.b) Red Frog:P0 = $1,041Old Chicago:P0 = $1,086.14Old Chicago’s price per bond changes by ($1,086.14-$1,000=$86.14, while Red Frog’s price per bond changes by less than half that amount, or ($1,041-$$1,000) =$4114. a) $36.67b) $31.14c) $44.40CHAPTER 51. a) The standard deviation is 11.36%b) There is a 30 percent probability that the actual return will be zero (prob. E(R) =0 Is 20%) or less (prob. E(R) < is 10%)also, by inspection we see that the distribution is skewed to the left.2. a) For a return that will be zero or less, standardizing the deviation from the expected value of return we obtain (0%-20%)/15%=-1.333 standard deviations. Turning to Table V at the back of the book, 1.333 falls between standard deviations of 1.30 and 1.35. These standard deviations correspond to areas under the curve of 0.0968 and 0.0885 respectively. This means that there is approximately a 9% probability that actual return will be zero or less. (Interpolating for 1.333, we find the probability to be 9.13%)b) 10 percent: Standardized deviation (10%-20%)/15%= -0.667.probability of 10 percent or less return = (approx.) 25 percent.Probability of 10 percent or more return =75 percent.20 percent: 50 percent probability of return being above 20 percent.30 percent: standardized deviation = (30%-20%)/15%=0.667. Probability f 30 percent or more return = (approx.) 25 percent.40 percent: standardized deviation = 1.333probability of 40 percent or more return= (approx.) 9 percent50 percent: Standardized deviation =2.00Probability of 50 percent or more return = 2.28 percent3. The beta is approximately 0.5. This indicates that excess returns for the stock fluctuate less than excess returns for the market portfolio. The stock has much less systematic risk than the market asa whole. It would be a defensive investment.4. Req. (R A) =0.16Req. (R B ) =0.13Req. (R C ) =0.106Req. (R D ) =0.190Req. (R E) =0.1485. Expected return =0.15387. a) Selena’s expected return is 0.1602.b) The expected return on Selena’s portfolio increases to 16.82 percent, because the additional funds are invested in the highest expected return stock.8. Required return =0.154Assuming that the perpetual dividend growth model is appropriate, we get V=$45.459. A) the beta of a portfolio is simply a weighted average of the betas of the individual securities that make up the portfolio.The portfolio beta is 1.115b) Expected portfolio return = 14.69% or 0.1469Solution to Appendix A problem10. E (Rp) =0.121The standard deviation of the portfolio equals to 0.00856Chapter 15Thus, K0 = Ki B/(B+S)+ Ke S/(B+S)2. Ki =8.4 percentKe = 18.14 percentK0 = 15.22 percent3. (January 20x1) K e =21 percent(January 20x2) P0=$57.54. Ke = 12.24 percentFlotation costs of stock = $30,000Total Flotation cost = 34,000NPV= $90,000/0.145-$600,000-$34,000 = -$13,310The proposal should be rejected. Without flotation costs, however, the net present value would have been positive and the proposal acceptable.7. a) cost of equity = 19.68 percentCost of debt = 8 percentWeighted-average required return for the project = 15 percentb) The approach assumes that unsystematic risk is not a factor of importance, which may or may not be the case. It assumes also that the average beta for the oil drilling equipment companies is a good surrogate for the systematic risk of the prospect. Finally, the estimates of the likely return on stocks in general and of the risk-free rate must be accurate. If these assumptions hold, the figure obtained will be a realistic estimate of the project’s required rate of return.8. a) Required Return =15.5 percentb) Minimum Required Return = 15 percentMaximum Required Return = 17 percentc) Expected value of required rate of return = 15.85 percent9. Using the RADR approach we would calculate the project’s net present value at theproject’s IRR and compare it to the RADR, which we would use as a hurdle rate. In this case, the project’s IRR of 13.17 percent is less than the RADR of 15 percent, so we would , once again, reject the project.Solution to Appendix A Problem:11.a. Adjusted beta of 1.45 is appropriate for the new venture if the assumptions of the capital-asset pricing model hold, except for corporate taxes.b. K0= 14.6 percentSolution to Appendix B Problem12. a) APV= $7,550The project is acceptable.b) APV =$180The project is acceptable. ----BUT , barely.Chapter 161. a) FC=$180,000b) Q BE = 3,600 unitsS BE = $ 720,000c) DOL 4,000units =10.DOL 4,400units = 5.5DOL 4,800units = 4.0DOL 5,200units = 3.25DOL 5,600units = 2.8DOL 6,000units = 2.52. a) Q BE = 1,800 unitsb) Q BE = 3,200 unitsc) Q BE = 4,000 units3. a) Q BE = 15 horsesb) EBIT = $ 2,000b.The intercepts on the horizontal axis for the four plans are $0, $240,000, $400,000 and $700,000 respectively.c. Plan #1 dominates up to $800,000 in EBIT, Plan #3 from $800,000 to $1,150,000 in EBIT, and Plan #4 after $1,150,000 in EBIT. The best plan depends upon the likely level of EBIT and the likelihood of falling below an indifference point.5. EPS of present Capital structure , plan #1, plan#2, plan#3, plan#4 is $4.40, $2.93,$3.20,$2.30,$3.04, respectively. (ooo omitted)EBIT 1,2=840,000 Above 840,000 in EBIT , debt is more favorable ; below 840,000 in EBIT, common stock is more favorable.EBIT 1,3=1,380,000 Above 1,380,000 in EBIT, Plan 3 is more favorable; below it plan 1 is more favorable.EBIT1,4=840,000 ,Above it in EBIT Plan 4 is more favorable; below 840,000 plan 1 is more favorable.For plan 2 versus plan 3 comparison , the bond alternative dominates the preferred alternative by $0.9 per share throughout all levels of EBIT.For the Plan 2 versus plan 4 comparison, the indifference point is again $840,000 in EBIT.For the plan3 versus plan4 comparison, the indifference point is 1,740,000.6.a) The level of expected EBIT is only moderately above the indifference point of 840,000. Moreover, the variance of possible outcomes is great and there is considerable probability that the actual EBIT will be below the indifference point. A two-thirds probability corresponds to one standard deviation on either side of the mean of a normal distribution. If the distribution is approximately normal, the standardized difference from the mean to the indifference point is -0.4 looking at a normal distribution table found in most any statistics text, we find that this corresponds to a 34.5 percent probability that actual EBIT will be below 840,000. while the choice of alternatives depends upon one’s risk preferences, the level and variability of EBIT point to the “all-common stock” alternative.b) Here the level of expected EBIT is significantly above the indifference point and the variability is less. IF the distribution is approximately normal ,. The standardized difference from the mean to the indifference point is -3.3the probability of actual EBIT falling below the indifference point is negligible . The situation in this case favors the all bond alternative.7. (000 omitted)a) EPS for common \ debt \ preferred is $2.5 、$2.75、$2.62 respectivelyb) EPS for common \ debt \ preferred is $1.06、$0.98、$0.85 respectively ( EBIT =3 million)EPS for common \ debt \ preferred is $1.54、$1.57、$1.44 respectively ( EBIT =4 million) EPS for common \ debt \ preferred is $3.47、$3.93、$3.80 respectively( EBIT =8 million) c) EPS for common \ debt \ preferred is $2.08、$2.28、$2.10 respectivelyEPS for common \ debt \ preferred is $2.50、$2.84、$2.75 respectivelyEPS for common \ debt \ preferred is $2.76、$2.75、$2.62 respectively8. Boehm-GAO : Interest Coverage= 3.13Debt-service = 1.01Northern California: Interest Coverage= 2.22Debt-service = 1.00The question of with which company one feels more comfortable depends on the business risk Inasmuch as an electric utility has stable cash flows and Northern California is large. THE fact that the debt service coverage ratio is 1.0 means that some of the debt will probably have to be renewed or “ rolled over” at maturity. However, this is typical for an electric utility.The supermarket is likely to have the highest portion of total debt in the form of accounts payable, a short-term liability, because purchases make up a large portion of total costs. Therefore, we would expect it to have the greatest disparity between the two debt ratios. The airline would be expected to have the highest debt ratio, most of which is long-term debt used to finance aircraft. Here the ratio of total debt to total assets is slightly less than the ratio of long- term debt to total capitalization. An apparel maker will have a sizeable amount of accounts payable , but will also have some long-term debt used to finance fixed assets. Finally, the chemical company is determined largely by elimination. Such a company has current liabilities, but relies heavily on long-term debt to finance fixed assets.CHAPTER 171. A) Total value of firm: $ 88,800,000Implied overall capitalization rate: 0.1126126b) Total value of the firm: $88,800,000Implied overall capitalization rate: 0.134352. a) 1) sell your Gottahave stock for $22,500.2) Borrow $20,000 at 12 percent interest. This personal debt is equal to 1 percent of Gottahave debt.3) Buy 1 percent of the stock of the Wannabee Company for $40,000 and still have $22,500 +$20, 00-$40,000= $ 2,500 left over for other investments.Return on investment in Wannabee $6,000Less: interest paid $2,400Net return: $3,600Your net dollar return $3,600, is the same as it was for your investment in Gottahave. However, your personal cash outlay of $20,000($40,000 less personal borrowings of $20,000) is $2,500 less than your previous $22,500 investment in Gottahave.b) When there is no further opportunity for employing fewer funds and achieving the same total dollar return the arbitrage process will cease. At this point, the total value of the two firms must be the same, as must their average costs of capital.3. a) $400,000 in debt. The market price per share of common stock is highest at this amount of financial leverage.b) Omittedc) Yes, The optimal capita structure – the one possessing the lowest overall cost of capital --- involves $400,000 in debt.b) $ 1,200,000c) Value of all-equity financed firm = 3,000,000V alue of recapitalized firm = $4,200,0005. The optimal amount of debt would be $5 million6. a) Without bankruptcy cost, the optimal capital structure is 40% equity when K0 = 0.091b) With bankruptcy cost, the optimal capital structure is 60% equity when K0 = 0.0967. According to the notion of asymmetric information between management and investors, the company should issue the overvalued security, or at least the one that is not undervalued in its mind. This would be debt in the situation described in the problem. Investors would be aware of management’s likely behavior and would view the event as” good news.” The stock price might rise, all other things the same, if this information was not otherwise conveyed.In contrast, if the common stock were believed to be overvalued, management would want to issue common stock. This assumes it wishes to maximize the wealth of existing stockholders. Investors would regard this announcement as “bad news,”and the stock price might decline. Information effects through financing assume that the information is not otherwise known by the market Management usually has a bias in thinking that the common stock of the company is undervalued.CHAPTER 182. a) Dividends =$500,000b) Dividends =0c) Dividends =0 Company should raise an additional $1 million through a new issue of common stock if a capital budgeting analysis ( in which flotation costs are treated as outlays) proves favorable.3. a) Low dividend-payout ratio. Highly taxed owners will probably want to realize their returns through capital gains.b) Low dividend-payout ratio. There will be no residual funds.c) Medium or high dividend-payout ratio. There are likely to be funds left over after funding capital expenditures. Moreover, the liquidity and access to borrowing give the company considerable financial flexibility.d) Medium or high dividend-payout ratio. Unless the company cuts its dividend, which probably is unlikely in the short run, its dividend-payout ratio will rise with the drop in earnings.e) Low dividend-payout ratio. The company will probably wish to retain earnings to build its financial strength in order to offset the high business risk.4. We would expect Jumbo to have the higher dividend-payout ratio. As a percent of expectedJumbo has a lower relative standard deviation of cash flow, lower relative capital expenditures, lower relative long-term debt, and greater relative unused bank lines. Its expected capital expenditures are less than its expected cash flow, which would imply residual funds, whereas the opposite occurs for Giant. Finally, Giant has a higher cost associated with floating common stock in order to replace dividends than dos Jumbo. For all of these reasons, we would expect Jumbo to have a higher dividend payout. The only factor working in the other direction is the fact that Giant has a higher relative as well as absolute level of liquidity.5. a) The market seems to evaluate both of these stocks in terms of dividend payments. The average dividend for both firms is approximately the same. Nevertheless, the average market price of Harpo ( about $ 4.38) has been about 13% higher than the average market price for Oprah ( about $3.88) The market has capitalized the dividends of Oprah at a higher rate than Harpo, hence giving the stock of Oprah a lower price. This might result from the constant dividend-payout ratio policy of Oprah, which has produced a volatile dividend stream.b) Neither of these companies seems to be a growth company. In fact, one would wonder whether the retention of earnings is justified for either company. Since both of these firms appear to be evaluated in terms of dividend yield, increased stock prices might ensue from higher dividend payouts.6. a) $50b) 200 sharesc) $40d) Before: $8,000After: $8,000The stock dividend in itself does not affect the value of the company.e) The stock dividend would likely to be regarded as a positive signal and the total value of your holdings would increase.b) $0.3; $ 0.15c) $ 0.2913 $0.1456d) $4.854c.9. a) 27,778 sharesb) If taxes are ignored, it should make little difference other than perhaps if there is a difference in the information content of cash dividends and the information content of the repurchase of stock.c) Taxes create an incentive for repurchase, for the reasons illustrated in the chapter; however, the Internal Revenue Service will challenge a steady program of repurchase in lieu of dividends.。
公司理财精要版原书第12版习题库答案Ross12e_Chapter15_TB

Fundamentals of Corporate Finance, 12e (Ross)Chapter 15 Raising Capital1) Business Aid is funded by a group of wealthy investors for the sole purpose of providing funding for individuals and small firms that are trying to convert their new ideas into viable products. What is this type of funding called?A) Green shoe fundingB) Tombstone underwritingC) Venture capitalD) Red herring fundingE) Life cycle capital2) It is common for venture capitalists to receive at least ________ percent of a start-up company's equity in exchange for the venture capital.A) 10B) 15C) 20D) 30E) 403) Equity financing of new, non-public companies is broadly referred to as:A) singular-risk financing.B) mezzanine-level stock.C) stylized financing.D) private equity.E) exit funding.4) Which one of the following statements concerning venture capital financing is correct?A) Venture capitalists desire shares of common stock but avoid preferred stock.B) Venture capital is relatively easy to obtain.C) Venture capitalists rarely assume active roles in the management of the financed firm.D) Venture capitalists should have key contacts and financial strength.E) Venture capital is relatively inexpensive in today's competitive markets.5) Which one of the following statements concerning venture capitalists is correct?A) Venture capitalists always assume management responsibility for the companies they finance.B) Exit strategy is a key consideration when selecting a venture capitalist.C) Venture capitalists limit their services to providing money to start-up firms.D) Most venture capitalists are long-term investors in the companies they finance.E) A venture capitalist normally invests in a new idea from conception through the IPO.6) When selecting a venture capitalist, which one of the following characteristics is probably the least important?A) Financial strengthB) Level of involvementC) ContactsD) Exit strategyE) Underwriting experience7) Trevor is the CEO of Harvest Foods, which is a privately held corporation. What is the first step he must take if he wishes to take Harvest Foods public?A) Select an underwriterB) Obtain SEC approvalC) Gain board approvalD) Prepare a registration statementE) Distribute a prospectus8) Which one of these describes an exception to the registration filing requirement of the SEC?A) Loans that mature in one year or lessB) Issues that have an approved prospectusC) Loans of $10 million or lessD) Issues of less than $5 millionE) Issues that have received an approved letter of comment9) The Securities and Exchange Commission:A) verifies the accuracy of the information contained in the prospectus.B) publishes red herrings on prospective new security offerings.C) examines the prospectus during the Green Shoe period.D) reviews registration statements to ensure they comply with current laws and regulations.E) determines the final offer price once they have approved the registration statement.10) What is the form called that is filed with the SEC and discloses the material information on a securities issuer when that issuer offers new securities to the general public?A) ProspectusB) Red herringC) IndentureD) Public disclosure statementE) Registration statement11) M&C Merchants is offering $2.5 million of new securities to the general public. Which SEC regulation governs this offering?A) Regulation AB) Regulation CC) Regulation GD) Regulation QE) Regulation R12) What is a prospectus?A) A letter issued by the SEC authorizing a new issue of securitiesB) A report stating that the SEC recommends a new security to investorsC) A letter issued by the SEC that outlines the changes required for a registration statement to be approvedD) A document that describes the details of a proposed security offering along with relevant information about the issuerE) An advertisement in a financial newspaper that describes a security offering13) Which one of the following is a preliminary prospectus?A) TombstoneB) Green shoeC) Registration statementD) Rights offerE) Red herring14) Advertisements in a financial newspaper announcing a public offering of securities, along with a list of the investment banks handling the offering, are called:A) red herrings.B) tombstones.C) Green Shoes.D) registration statements.E) cash offers.15) The raising of small amounts of capital from a large number of people is known as:A) a rights offering.B) over allocating.C) a diversified offer.D) crowdfunding.E) a standby offer.16) During a 12-month period, a company is permitted to issue new securities through crowdfunding up to a limit of:A) $200 thousand.B) $500 thousand.C) $1 million.D) $5 million.E) $50 million.17) What is an issue of securities that is offered for sale to the general public on a direct cash basis called?A) Best efforts underwritingB) Firm commitment underwritingC) General cash offerD) Rights offerE) Herring offer18) Alberto currently owns 2,500 shares of Southern Tools. He has just been notified that the company is issuing additional shares and he is being given a chance to purchase some of these shares prior to the shares being offered to the general public. What is this type of an offer called?A) Best efforts offerB) Firm commitment offerC) General cash offerD) Rights offerE) Priority offer19) JLK is a partnership that was formed two years ago and has been extremely successful thus far. The owners have decided to incorporate and offer shares of stock to the general public. What is this type of an equity offering called?A) Venture capital offeringB) Shelf offeringC) Private placementD) Seasoned equity offeringE) Initial public offering20) What is a seasoned equity offering?A) An offering of shares by shareholders for repurchase by the issuerB) Shares of stock that have been recommended for purchase by the SECC) Equity securities held by a company's founder that are being offered for sale to the general publicD) Sale of newly issued equity shares by a publicly owned companyE) Outstanding shares that are offered for sale by one of a company's original founders21) Executive Tours has decided to go public and has hired an investment firm to handle the offering. The investment firm is serving as a(n):A) aftermarket specialist.B) venture capitalist.C) underwriter.D) seasoned writer.E) primary investor.22) Underwriters generally:A) pay a spread to the issuing firm.B) provide only best efforts underwriting in the U.S.C) accept the risk of selling the new securities in exchange for the gross spread.D) market and distribute an entire issue of new securities within their own firm.E) pass the risk of unsold shares back to the issuing firm via a firm commitment agreement.23) A syndicate can best be defined as a:A) venture capitalist.B) group of attorneys providing services for an IPO.C) block of investors who control a firm.D) bank that loans funds to finance the start-up of a new company.E) group of underwriters sharing the risk of selling a new issue of securities.24) The difference between the underwriters' cost of buying shares in a firm commitment and the offering price of those securities to the public is called the:A) gross spread.B) under price amount.C) filing fee.D) new issue premium.E) offer price.25) Jones & Co. recently went public and received $23.07 a share on their entire offer of 30,000 shares. Keeser & Co. served as the underwriter and sold 28,500 shares to the public at an offer price of $26.50 a share. What type of underwriting was this?A) Best effortsB) ShelfC) OversubscribedD) Private placementE) Firm commitment26) Blue Stone Builders recently offered to sell 45,000 newly issued shares of stock to the public. The underwriters charged a fee of 8.2 percent and paid Blue Stone Builders the uniform auction price for each of those shares. Which one of the following terms best describes this underwriting?A) Dutch auctionB) Best effortsC) Public rightsD) Private placementE) Market commitment27) The 40-day period following an IPO during which the SEC places restrictions on the public communications of the issuer is known as the ________ period.A) auctionB) quietC) lockupD) Green ShoeE) red28) Mobile Units recently offered 75,000 new shares of stock for sale. The underwriters sold a total of 78,500 shares to the public at a price of $16 a share. The additional 3,500 shares were purchased in accordance with which one of the following?A) Green Shoe provisionB) Red herring provisionC) Quiet provisionD) Lockup agreementE) Post-issue agreement29) With firm commitment underwriting, the issuing firm:A) is unsure of the total amount of funds it will receive until after the offering is completed.B) is unsure of the number of shares it will actually issue until after the offering is completed.C) knows exactly how many shares will be purchased by the general public during the offer period.D) retains the financial risk associated with unsold shares.E) knows upfront the amount of money it will receive from the stock offering.30) Which one of the following is a key goal of the aftermarket period?A) Collecting the largest number of Dutch auction bids as possibleB) Determining a fair offer priceC) Supporting the market price for a new securities issueD) Establishing a broad-based underwriting syndicateE) Distributing red herrings to as many potential investors as possible31) Which one of the following statements is correct?A) The quiet period commences when a registration statement is filed with the SEC and ends on the day the IPO shares commence trading.B) Lockup agreements outline how oversubscribed IPO shares will be allocated.C) Additional IPO shares can be issued in accordance with the lockup agreement.D) Quiet period restrictions only apply to the issuer of new securities.E) A public interview with an issuer's CFO could cause a forced delay in the issuer's IPO.32) With Dutch auction underwriting:A) each winning bidder pays the minimum price offered by any bidder.B) all successful bidders pay the same price per share.C) all bidders receive at least a portion of the quantity for which they bid.D) the selling firm receives the maximum possible price for each security sold.E) the bidder for the largest quantity receives the first allocation of securities.33) Individual investors might avoid requesting 100 shares in an upcoming IPO because they:A) do not want to be bothered with submitting their bid to the SEC for approval.B) do not want to abide by the quiet period requirement.C) are prevented from entering orders for less than 1,000 shares.D) are more apt to receive shares if the IPO is under allocated.E) would have to pay a premium based on their small order size.34) If a firm commitment IPO is overpriced then the:A) investors in the IPO may consider suing the underwriters.B) Green Shoe provision will probably be utilized.C) stock price will generally increase on the first day of trading.D) issuing firm is guaranteed to be successful in the long term.E) issuing firm receives less money than it probably should have.35) All of the following are supporting arguments in favor of IPO underpricing except which one?A) Helps prevent the "winner's curse"B) Rewards institutional investors who share their market value opinionsC) Reduces potential lawsuits against underwritersD) Diminishes underwriting riskE) Provides better returns to issuing firms36) When a firm announces an upcoming seasoned stock offering, the market price of the firm's existing shares tends to:A) increase.B) decrease.C) remain constant.D) respond, but the direction of the response is not predictable as shown by past studies.E) decrease momentarily and then immediately increase substantially within an hour following the announcement.37) The total direct costs of underwriting an equity IPO:A) tend to increase on a percentage basis as the total proceeds of the IPO increase.B) are generally between 7 and 9 percent, regardless of the issue size.C) tend to be less than the direct costs of issuing bonds on a percentage of proceeds basis.D) exclude the gross spread.E) can be as low as 5.5 percent and as high as 25 percent of gross proceeds.38) Which one of the following statements is correct concerning the direct costs of issuing securities?A) Domestic bonds are generally more expensive to issue than equity IPOs.B) The gross spread as a percentage of proceeds is the same for similar-sized IPOs and SEOs.C) A seasoned offering is always more expensive on a percentage basis than an IPO.D) There tends to be substantial economies of scale when issuing any type of security.E) The costs of issuing convertible bonds tend to be less on a percentage basis than the costs of issuing straight debt.39) Shares of PLS United have been selling with rights attached. Tomorrow, the stock will sell independent of these rights. Which one of the following terms applies to tomorrow in relation to this stock?A) Pre-issue dateB) Aftermarket dateC) Declaration dateD) Holder-of-record dateE) Ex-rights date40) The date on which a shareholder is officially listed as the recipient of stock rights is called the:A) issue date.B) offer date.C) declaration date.D) holder-of-record date.E) ex-rights date.41) A rights offering in which an underwriting syndicate agrees to purchase the unsubscribed portion of an issue is called a(n) ________ underwriting.A) standbyB) best effortsC) firm commitmentD) direct feeE) oversubscription42) BK & Co. offered 15,000 shares in a rights offer. T.L. Moore & Co. was the underwriter that by prior agreement purchased the 639 unsold shares. For its participation in this rights offer, T.L. Moore & Co. is most likely entitled to:A) the gross margin.B) the optional spread.C) a standby fee.D) the subscription price.E) an oversubscription fee.43) Franklin Minerals recently had a rights offering of 12,000 shares at an offer price of $17 a share. Isabelle is a shareholder who exercised her rights option by buying all of the rights to which she was entitled based on the number of shares she owns. Currently, there are six shareholders who have opted not to participate in the rights offering. Isabelle would like to purchase these unsubscribed shares. Which one of the following will allow her to do so?A) Standby provisionB) Oversubscription privilegeC) Open offer privilegeD) New issues provisionE) Overallotment provision44) Existing shareholders:A) may or may not have a pre-emptive right to newly issued shares.B) must purchase new shares whenever rights are issued.C) are prohibited from selling their rights.D) are generally well advised to let the rights they receive expire.E) can maintain their proportional ownership positions without exercising their rights.45) To purchase a share in a rights offering, an existing shareholder generally just needs to:A) pay the subscription amount in cash.B) submit the required form along with the required number of rights.C) pay the difference between the market price of the stock and the subscription price.D) submit the required number of rights along with a payment for the underwriting fee.E) submit the required number of rights along with the subscription price.46) The value of a right depends upon the number of rights required for each new share as well as the:A) subscription price and book value per share.B) market and book values per share.C) market price, book value, and subscription price.D) market and subscription prices.E) difference between the market and book values per share.47) Before a seasoned stock offering, you owned 500 shares of a firm that had 20,000 shares outstanding. After the seasoned offering, you still owned 500 shares but the number of shares outstanding rose to 25,000. Which one of the following terms best describes this situation?A) OverallotmentB) Percentage ownership dilutionC) Green Shoe allocationD) Red herring allotmentE) Abnormal event48) Which one of the following statements concerning dilution is correct?A) Dilution of percentage ownership occurs whenever an investor fully participates in a rights offer.B) Market value dilution increases as the net present value of a project increases.C) Market value dilution occurs when the net present value of a project is negative.D) Neither book value dilution nor market value dilution has any direct bearing on individual shareholders.E) Book value dilution is the cause of market value dilution.49) Roy owns 200 shares of RTF Inc. He has opted not to participate in the current rights offering by this company. As a result, Roy will most likely be subject to:A) an oversubscription cost.B) underpricing.C) dilution.D) the Green Shoe provision.E) a locked-in period.50) Direct business loans typically ranging from one to five years are called:A) private placements.B) debt SEOs.C) notes payable.D) debt IPOs.E) term loans.51) The High-End mutual fund recently loaned $13.6 million to Henderson Hardware for 15 years at 6.8 percent interest. This loan is best described as a:A) private placement.B) debt SEO.C) note payable.D) debt IPO.E) term loan.52) Which one of the following statements is correct concerning the issuance of long-term debt?A) A direct private long-term loan has to be registered with the SEC.B) Direct placement debt tends to have more restrictive covenants than publicly issued debt.C) Distribution costs are lower for public debt than for private debt.D) It is easier to renegotiate public debt than private debt.E) Wealthy individuals tend to dominate the private debt market.53) Shelf registration allows a firm to register multiple issues at one time with the SEC and then sell those registered shares anytime during the subsequent:A) 3 months.B) 6 months.C) 180 days.D) 2 years.E) 5 years.54) Pearson Electric recently registered 180,000 shares of stock under SEC Rule 415. The company plans to sell 100,000 shares this year and the remaining 80,000 shares next year. What type of registration was this?A) Standby registrationB) Shelf registrationC) Regulation A registrationD) Regulation Q registrationE) Private placement registration55) The Boat Works decided to go public by offering a total of 135,000 shares of common stockto the public. The company hired an underwriter who arranged a firm commitment underwriting and an initial selling price of $24 a share with a spread of 8.3 percent. As it turned out, the underwriters only sold 122,400 shares to the public. What is the amount paid to the issuer?A) $2,227,280B) $3,074,420C) $2,971,080D) $2,692,820E) $2,477,38056) Nelson Paints recently went public by offering 50,000 shares of common stock to the public. The underwriters provided their services in a best efforts underwriting. The offering price was set at $17.50 a share and the gross spread was $2.30. After completing their sales efforts, the underwriters determined that they sold a total of 47,500 shares. How much cash did the company receive from its IPO?A) $722,000B) $717,000C) $735,000D) $705,000E) $748,00057) LC Delivery has decided to sell 1,800 shares of stock through a Dutch auction. The bids received are as follows: 600 shares at $37 a share, 800 shares at $36, 900 shares at $35, 200 shares at $34, and 100 shares at $32 a share. How much will the company receive in total from selling the 1,800 shares? Ignore all transaction and flotation costs.A) $63,100B) $52,500C) $63,000D) $58,800E) $52,10058) Bakers' Town Bread is selling 1,500 shares of stock through a Dutch auction. The bids received are as follows: 200 shares at $17 a share, 400 shares at $15, 700 shares at $14, 400 shares at $13, and 200 shares at $11 a share. How much cash will the company receive from selling these shares of stock? Ignore all transaction and flotation costs.A) $22,000B) $22,500C) $23,000D) $24,500E) $20,20059) Eastern Electric is offering 2,100 shares of stock in a Dutch auction. The bids include: 1,400 shares at $32 a share, 1,500 shares at $31, 1,400 shares at $30, and 900 shares at $29 a share. How much cash will Eastern Electric receive from selling these shares? Ignore all transaction and flotation costs.A) $62,100B) $64,200C) $60,000D) $63,000E) $63,30060) You have been instructed to place an order for a client to purchase 500 shares of every IPO that comes to market. The next two IPOs are each priced at $26 a share and will begin trading on the same day. The client is allocated 500 shares of IPO A and 240 shares of IPO B. At the end of the first day of trading, IPO A was selling for $23.90 a share and IPO B was selling for $29.40 a share. What is the client's total profit or loss on these two IPOs as of the end of the first day of trading?A) − $286B) − $234C) − $148D) $275E) $32961) Richard placed an order for 1,000 shares in each of three IPOs at $28 a share. He was allocated 1,000 shares of IPO A, 200 shares of IPO B, and 600 shares of IPO C. On the first day of trading, IPO A opened at $28 a share and ended the day at $24.25 a share. IPO B opened at $30 a share and finished the day at $37 a share. IPO C opened at $28 a share and ended the day at $27.65 a share. What is the total profit or loss on these three IPO purchases as of the end of the first day of trading?A) − $2,160B) − $1,850C) − $1,950D) $2,240E) $2,17562) Two IPOs will commence trading next week. Scott places an order to buy 600 shares of IPOA. Steve places an order to purchase 600 shares of IPO A and 600 shares of IPOB. Both IPOs are priced at $21 a share. Scott is allocated 300 shares of IPO A. Steve is allocated 300 shares of IPO A and 600 shares of IPO B. At the end of the first day of trading, IPO A is selling for $23.30 a share and IPO B is selling for $17.75 a share. How much additional profit did Steve have at the end of the first day of trading as compared to Scott?A) $1,950B) $1,260C) $1,870D) −$1,950E) −$1,26063) Davis Bros. and The Storage Shed have both announced IPOs at $32 per share. One of these is undervalued by $9, and the other is overvalued by $4, but you have no way of knowing whichis which. You plan on buying 1,000 shares of each issue. If an issue is underpriced, it will be rationed, and only half your order will be filled. What is the amount of the difference between your expected profit and the amount of profit you could earn if you could get 1,000 shares of both IPO offerings?A) $4,500B) $5,000C) $4,000D) $5,500E) $6,00064) Wear Ever is expanding and needs $6.8 million to help fund this growth. The company estimates it can sell new shares of stock for $43 a share. It also estimates it will cost an additional $352,000 for filing and legal fees related to the stock issue. The underwriters have agreed to a spread of 7.5 percent. How many shares of stock must be sold for the company to fund its expansion?A) 170,376B) 185,127C) 179,811D) 154,209E) 61,80665) Mountain Teas wants to raise $13.6 million to open a new production facility. The company estimates the issue costs for legal and accounting fees will be $386,000. The underwriters have set the stock price at $27.50 a share and the underwriting spread at 8.15 percent. How many shares of stock must be sold to meet this cash need?A) 528,414B) 553,709C) 569,315D) 492,144E) 501,90966) Outdoor Goods needs $3.8 million to modernize its production equipment. The underwriters set the stock price at $29.50 a share with an underwriting spread of 7.35 percent. This would be a firm commitment underwriting. The estimated issue costs are $272,000. How many shares of stock must be sold to finance this project?A) 148,984B) 188,917C) 152,311D) 186,299E) 162,40067) Flagler Inc. needs to raise $11.6 million, including all accounting and legal fees, to finance its expansion so has decided to sell new shares of equity via a general cash offering. The offer price is $22.50 per share and the underwriting spread is 7.85 percent. How many shares need to be sold?A) 559,474B) 604,011C) 566,667D) 571,008E) 538,40968) New Education needs to raise $8.79 million to finance its expansion and has decided to sell new shares of equity via a general cash offering. The offer price is $31.40 per share, the underwriting spread is 7.32 percent, and the associated administrative expenses and fees are $517,600. How many shares need to be sold?A) 348,907B) 361,222C) 311,111D) 329,937E) 319,83269) The Huff Co. has just gone public. Under a firm commitment agreement, the company received $17.64 for each of the 3.2 million shares sold. The initial offering price was $22.50 per share, and the stock rose to $24.15 per share in the first day of trading. The company paid $984,900 in direct legal and other costs and incurred $340,000 in indirect costs. What was the flotation cost as a percentage of the net amount raised?A) 38.56 percentB) 40.32 percentC) 41.68 percentD) 40.20 percentE) 39.09 percent70) Mountain Mining requires $3.3 million to expand its current operations and has decided to raise these funds through a rights offering at a subscription price of $18 a share. The current market price of the company's stock is $24.70 a share. How many shares of stock must be sold to fund the expansion plans?A) 140,015B) 133,603C) 148,909D) 183,333E) 195,60771) Northwest Rail wants to raise $27.8 million through a rights offering to upgrade its rail lines. How many shares of stock need to be sold if the current market price is $30.34 a share and the subscription price is $26.50 a share?A) 916,282B) 937,856C) 985,065D) 1,058,604E) 1,049,05772) S&S wants to raise $11.3 million through a rights offering with a subscription price of $15 a share. The company has 1.24 million shares outstanding and a market price of $17.50 a share. Each shareholder will receive one right for each share of stock owned. How many rights will be needed to purchase one new share of stock in this offering?A) 1.42B) 1.75C) 1.65D) 1.82E) 1.5573) P&T wants to raise $2.8 million through a rights offering with a subscription price of $20 a share. Currently, the company has 750,000 shares of stock outstanding at a market price of $24.50 a share. One right will be granted for each share of stock outstanding. How many rights are required to purchase one new share of stock in this offering?A) 5.36B) 6.02C) 5.55D) 6.56E) 6.6774) Miller Fruit wants to expand and needs $1.6 million to do so. Currently, the firm has 465,000 shares of stock outstanding at a market price per share of $32.50. The firm decided on a rights offering with one right granted for each share of outstanding stock. The subscription price is $28 a share. How many rights are needed to purchase one new share of stock in this offering?A) 8.14B) 7.17C) 8.22D) 8.63E) 9.45。
审计学:一种整合方法阿伦斯英文版第12版课后答案Chapter15SolutionsManual

审计学:⼀种整合⽅法阿伦斯英⽂版第12版课后答案Chapter15SolutionsManualChapter 15Audit Sampling for Tests of Controls andSubstantive Tests of TransactionsReview Questions15-1 A representative sample is one in which the characteristics of interest for the sample are approximately the same as for the population (that is, the sample accurately represents the total population). If the population contains significant misstatements, but the sample is practically free of misstatements, the sample is nonrepresentative, which is likely to result in an improper audit decision. The auditor can never know for sure whether he or she has a representative sample because the entire population is ordinarily not tested, but certain things, such as the use of random selection, can increase the likelihood of a representative sample.15-2Statistical sampling is the use of mathematical measurement techniques to calculate formal statistical results. The auditor therefore quantifies sampling risk when statistical sampling is used. In nonstatistical sampling, the auditor does not quantify sampling risk. Instead, conclusions are reached about populations on a more judgmental basis.For both statistical and nonstatistical methods, the three main parts are:1. Plan the sample2. Select the sample and perform the tests3. Evaluate the results15-3In replacement sampling, an element in the population can be included in the sample more than once if the random number corresponding to that element is selected more than once. In nonreplacement sampling, an element can be included only once. If the random number corresponding to an element is selected more than once, it is simply treated as a discard the second time. Although both selection approaches are consistent with sound statistical theory, auditors rarely use replacement sampling; it seems more intuitively satisfying to auditors to include an item only once.15-4 A simple random sample is one in which every possible combination of elements in the population has an equal chance of selection. Two methods of simple random selection are use of a random number table, and use of the computer to generate random numbers. Auditors most often use the computer to generate random numbers because it saves time, reduces the likelihood of error, and provides automatic documentation of the sample selected.15-5In systematic sampling, the auditor calculates an interval and then methodically selects the items for the sample based on the size of the interval. The interval is set by dividing the population size by the number of sample items desired.To select 35 numbers from a population of 1,750, the auditor divides 35 into 1,750 and gets an interval of 50. He or she then selects a random number between 0 and 49. Assume the auditor chooses 17. The first item is the number 17. The next is 67, then 117, 167, and so on.The advantage of systematic sampling is its ease of use. In most populations a systematic sample can be drawn quickly, the approach automatically puts the numbers in sequential order and documentation is easy.A major problem with the use of systematic sampling is the possibility of bias. Because of the way systematic samples are selected, once the first item in the sample is selected, other items are chosen automatically. This causes no problems if the characteristics of interest, such as control deviations, are distributed randomly throughout the population; however, in many cases they are not. If all items of a certain type are processed at certain times of the month or with the use of certain document numbers, a systematically drawn sample has a higher likelihood of failing to obtain a representative sample. This shortcoming is sufficiently serious that some CPA firms prohibit the use of systematic sampling. 15-6The purpose of using nonstatistical sampling for tests of controls and substantive tests of transactions is to estimate the proportion of items in a population containing a characteristic or attribute of interest. The auditor is ordinarily interested in determining internal control deviations or monetary misstatements for tests of controls and substantive tests of transactions.15-7 A block sample is the selection of several items in sequence. Once the first item in the block is selected, the remainder of the block is chosen automatically. Thus, to select 5 blocks of 20 sales invoices, one would select one invoice and the block would be that invoice plus the next 19 entries. This procedure would be repeated 4 other times.15-8 The terms below are defined as follows:15-8 (continued)15-9The sampling unit is the population item from which the auditor selects sample items. The major consideration in defining the sampling unit is making it consistent with the objectives of the audit tests. Thus, the definition of the population and the planned audit procedures usually dictate the appropriate sampling unit.The sampling unit for verifying the occurrence of recorded sales would be the entries in the sales journal since this is the document the auditor wishes to validate. The sampling unit for testing the possibility of omitted sales is the shipping document from which sales are recorded because the failure to bill a shipment is the exception condition of interest to the auditor.15-10 The tolerable exception rate (TER) represents the exception rate that the auditor will permit in the population and still be willing to use the assessed control risk and/or the amount of monetary misstatements in the transactions established during planning. TER is determined by choice of the auditor on the basis of his or her professional judgment.The computed upper exception rate (CUER) is the highest estimated exception rate in the population, at a given ARACR. For nonstatistical sampling, CUER is determined by adding an estimate of sampling error to the SER (sample exception rate). For statistical sampling, CUER is determined by using a statistical sampling table after the auditor has completed the audit testing and therefore knows the number of exceptions in the sample.15-11 Sampling error is an inherent part of sampling that results from testing less than the entire population. Sampling error simply means that the sample is not perfectly representative of the entire population.Nonsampling error occurs when audit tests do not uncover errors that exist in the sample. Nonsampling error can result from:1. The auditor's failure to recognize exceptions, or2. Inappropriate or ineffective audit procedures.There are two ways to reduce sampling risk:1. Increase sample size.2. Use an appropriate method of selecting sample items from thepopulation.Careful design of audit procedures and proper supervision and review are ways to reduce nonsampling risk.15-12 An attribute is the definition of the characteristic being tested and the exception conditions whenever audit sampling is used. The attributes of interest are determined directly from the audit program.15-13 An attribute is the characteristic being tested for in a population. An exception occurs when the attribute being tested for is absent. The exception for the audit procedure, the duplicate sales invoice has been initialed indicating the performance of internal verification, is the lack of initials on duplicate sales invoices.15-14 Tolerable exception rate is the result of an auditor's judgment. The suitable TER is a question of materiality and is therefore affected by both the definition and the importance of the attribute in the audit plan.The sample size for a TER of 6% would be smaller than that for a TER of 3%, all other factors being equal.15-15 The appropriate ARACR is a decision the auditor must make using professional judgment. The degree to which the auditor wishes to reduce assessed control risk below the maximum is the major factor determining the auditor's ARACR.The auditor will choose a smaller sample size for an ARACR of 10% than would be used if the risk were 5%, all other factors being equal.15-16 The relationship between sample size and the four factors determining sample size are as follows:a. As the ARACR increases, the required sample size decreases.b. As the population size increases, the required sample size isnormally unchanged, or may increase slightly.c. As the TER increases, the sample size decreases.d. As the EPER increases, the required sample size increases.15-17 In this situation, the SER is 3%, the sample size is 100 and the ARACR is 5%. From the 5% ARACR table (Table 15-9) then, the CUER is 7.6%. This means that the auditor can state with a 5% risk of being wrong that the true population exception rate does not exceed 7.6%.15-18 Analysis of exceptions is the investigation of individual exceptions to determine the cause of the breakdown in internal control. Such analysis is important because by discovering the nature and causes of individual exceptions, the auditor can more effectively evaluate the effectiveness of internal control. The analysis attempts to tell the "why" and "how" of the exceptions after the auditor already knows how many and what types of exceptions have occurred.15-19 When the CUER exceeds the TER, the auditor may do one or more of the following:1. Revise the TER or the ARACR. This alternative should be followed onlywhen the auditor has concluded that the original specifications weretoo conservative, and when he or she is willing to accept the riskassociated with the higher specifications.2. Expand the sample size. This alternative should be followed whenthe auditor expects the additional benefits to exceed the additionalcosts, that is, the auditor believes that the sample tested was notrepresentative of the population.3. Revise assessed control risk upward. This is likely to increasesubstantive procedures. Revising assessed control risk may bedone if 1 or 2 is not practical and additional substantive proceduresare possible.4. Write a letter to management. This action should be done inconjunction with each of the three alternatives above. Managementshould always be informed when its internal controls are notoperating effectively. If a deficiency in internal control is consideredto be a significant deficiency in the design or operation of internalcontrol, professional standards require the auditor to communicatethe significant deficiency to the audit committee or its equivalent inwriting. If the client is a publicly traded company, the auditor mustevaluate the deficiency to determine the impact on the auditor’sreport on internal control over financial reporting. If the deficiency isdeemed to be a material weakness, the auditor’s report on internalcontrol would contain an adverse opinion.15-20 Random (probabilistic) selection is a part of statistical sampling, but it is not, by itself, statistical measurement. To have statistical measurement, it is necessary to mathematically generalize from the sample to the population.Probabilistic selection must be used if the sample is to be evaluated statistically, although it is also acceptable to use probabilistic selection with a nonstatistical evaluation. If nonprobabilistic selection is used, nonstatistical evaluation must be used.15-21 The decisions the auditor must make in using attributes sampling are: What are the objectives of the audit test? Does audit sampling apply?What attributes are to be tested and what exception conditions are identified?What is the population?What is the sampling unit?What should the TER be?What should the ARACR be?What is the EPER?What generalizations can be made from the sample to thepopulation?What are the causes of the individual exceptions?Is the population acceptable?15-21 (continued)In making the above decisions, the following should be considered: The individual situation.Time and budget constraints.The availability of additional substantive procedures.The professional judgment of the auditor.Multiple Choice Questions From CPA Examinations15-22 a. (1) b. (3) c. (2) d. (4)15-23 a. (1) b. (3) c. (4) d. (4)15-24 a. (4) b. (3) c. (1) d. (2)Discussion Questions and Problems15-25a.An example random sampling plan prepared in Excel (P1525.xls) is available on the Companion Website and on the Instructor’s Resource CD-ROM, which is available upon request. The command for selecting the random number can be entered directly onto the spreadsheet, or can be selected from the function menu (math & trig) functions. It may be necessary to add the analysis tool pack to access the RANDBETWEEN function. Once the formula is entered, it can be copied down to select additional random numbers. When a pair of random numbers is required, the formula for the first random number can be entered in the first column, and the formula for the second random number can be entered in the second column.a. First five numbers using systematic selection:Using systematic selection, the definition of the sampling unit for determining the selection interval for population 3 is the total number of lines in the population. The length of the interval is rounded down to ensure that all line numbers selected are within the defined population.15-26a. To test whether shipments have been billed, a sample of warehouse removal slips should be selected and examined to see ifthey have the proper sales invoice attached. The sampling unit willtherefore be the warehouse removal slip.b. Attributes sampling method: Assuming the auditor is willing to accept a TER of 3% at a 10% ARACR, expecting no exceptions in the sample, the appropriate sample size would be 76, determined from Table 15-8.Nonstatistical sampling method: There is no one right answer to this question because the sample size is determined using professional judgment. Due to the relatively small TER (3%), the sample size should not be small. It will most likely be similar in size to the sample chosen by the statistical method.c. Systematic sample selection:22839 = Population size of warehouse removal slips(37521-14682).76 = Sample size using statistical sampling (students’answers will vary if nonstatistical sampling wasused in part b.300 = Interval (22839/76) if statistical sampling is used (students’ answers will vary if nonstatisticalsampling was used in part b).14825 = Random starting point.Select warehouse removal slip 14825 and every 300th warehouse removal slip after (15125, 15425, etc.)Computer generation of random numbers using Excel (P1526.xls): =RANDBETWEEN(14682,37521)The command for selecting the random number can be entered directly onto the spreadsheet, or can be selected from the function menu (math & trig) functions. It may be necessary to add the analysis tool pack to access the RANDBETWEEN function. Once the formula is entered, it can be copied down to select additional random numbers.d. Other audit procedures that could be performed are:1. Test extensions on attached sales invoices for clerical accuracy. (Accuracy)2. Test time delay between warehouse removal slip date and billing date for timeliness of billing. (Timing)3. Trace entries into perpetual inventory records to determinethat inventory is properly relieved for shipments. (Postingand summarization)15-26 (continued)e. The test performed in part c cannot be used to test for occurrenceof sales because the auditor already knows that inventory wasshipped for these sales. To test for occurrence of sales, the salesinvoice entry in the sales journal is the sampling unit. Since thesales invoice numbers are not identical to the warehouse removalslips it would be improper to use the same sample.15-27a. It would be appropriate to use attributes sampling for all audit procedures except audit procedure 1. Procedure 1 is an analyticalprocedure for which the auditor is doing a 100% review of the entirecash receipts journal.b. The appropriate sampling unit for audit procedures 2-5 is a line item,or the date the prelisting of cash receipts is prepared. The primaryemphasis in the test is the completeness objective and auditprocedure 2 indicates there is a prelisting of cash receipts. All otherprocedures can be performed efficiently and effectively by using theprelisting.c. The attributes for testing are as follows:d. The sample sizes for each attribute are as follows:15-28a. Because the sample sizes under nonstatistical sampling are determined using auditor judgment, students’ answers to thisquestion will vary. They will most likely be similar to the samplesizes chosen using attributes sampling in part b. The importantpoint to remember is that the sample sizes chosen should reflectthe changes in the four factors (ARACR, TER, EPER, andpopulation size). The sample sizes should have fairly predictablerelationships, given the changes in the four factors. The followingreflects some of the relationships that should exist in student’ssample size decisions:SAMPLE SIZE EXPLANATION1. 90 Given2. > Column 1 Decrease in ARACR3. > Column 2 Decrease in TER4. > Column 1 Decrease in ARACR (column 4 is thesame as column 2, with a smallerpopulation size)5. < Column 1 Increase in TER-EPER6. < Column 5 Decrease in EPER7. > Columns 3 & 4 Decrease in TER-EPERb. Using the attributes sampling table in Table 15-8, the sample sizesfor columns 1-7 are:1. 882. 1273. 1814. 1275. 256. 187. 149c.d. The difference in the sample size for columns 3 and 6 result from the larger ARACR and larger TER in column 6. The extremely large TER is the major factor causing the difference.e. The greatest effect on the sample size is the difference between TER and EPER. For columns 3 and 7, the differences between the TER and EPER were 3% and 2% respectively. Those two also had the highest sample size. Where the difference between TER and EPER was great, such as columns 5 and 6, the required sample size was extremely small.Population size had a relatively small effect on sample size.The difference in population size in columns 2 and 4 was 99,000 items, but the increase in sample size for the larger population was marginal (actually the sample sizes were the same using the attributes sampling table).f. The sample size is referred to as the initial sample size because it is based on an estimate of the SER. The actual sample must be evaluated before it is possible to know whether the sample is sufficiently large to achieve the objectives of the test.15-29 a.* Students’ answers as to whether the allowance for sampling error risk is sufficient will vary, depending on their judgment. However, they should recognize the effect that lower sample sizes have on the allowance for sampling risk in situations 3, 5 and 8.b. Using the attributes sampling table in Table 15-9, the CUERs forcolumns 1-8 are:1. 4.0%2. 4.6%3. 9.2%4. 4.6%5. 6.2%6. 16.4%7. 3.0%8. 11.3%c.d. The factor that appears to have the greatest effect is the number ofexceptions found in the sample compared to sample size. For example, in columns 5 and 6, the increase from 2% to 10% SER dramatically increased the CUER. Population size appears to have the least effect. For example, in columns 2 and 4, the CUER was the same using the attributes sampling table even though the population in column 4 was 10 times larger.e. The CUER represents the results of the actual sample whereas theTER represents what the auditor will allow. They must be compared to determine whether or not the population is acceptable.15-30a. and b. The sample sizes and CUERs are shown in the following table:a. The auditor selected a sample size smaller than that determinedfrom the tables in populations 1 and 3. The effect of selecting asmaller sample size than the initial sample size required from thetable is the increased likelihood of having the CUER exceed theTER. If a larger sample size is selected, the result may be a samplesize larger than needed to satisfy TER. That results in excess auditcost. Ultimately, however, the comparison of CUER to TERdetermines whether the sample size was too large or too small.b. The SER and CUER are shown in columns 4 and 5 in thepreceding table.c. The population results are unacceptable for populations 1, 4, and 6.In each of those cases, the CUER exceeds TER.The auditor's options are to change TER or ARACR, increase the sample size, or perform other substantive tests to determine whether there are actually material misstatements in thepopulation. An increase in sample size may be worthwhile inpopulation 1 because the CUER exceeds TER by only a smallamount. Increasing sample size would not likely result in improvedresults for either population 4 or 6 because the CUER exceedsTER by a large amount.d. Analysis of exceptions is necessary even when the population isacceptable because the auditor wants to determine the nature andcause of all exceptions. If, for example, the auditor determines thata misstatement was intentional, additional action would be requiredeven if the CUER were less than TER.15-30 (Continued)e.15-31 a. The actual allowance for sampling risk is shown in the following table:b. The CUER is higher for attribute 1 than attribute 2 because the sample sizeis smaller for attribute 1, resulting in a larger allowance for sampling risk.c. The CUER is higher for attribute 3 than attribute 1 because the auditorselected a lower ARACR. This resulted in a larger allowance for sampling risk to achieve the lower ARACR.d. If the auditor increases the sample size for attribute 4 by 50 items and findsno additional exceptions, the CUER is 5.1% (sample size of 150 and three exceptions). If the auditor finds one exception in the additional items, the CUER is 6.0% (sample size of 150, four exceptions). With a TER of 6%, the sample results will be acceptable if one or no exceptions are found in the additional 50 items. This would require a lower SER in the additional sample than the SER in the original sample of 3.0 percent. Whether a lower rate of exception is likely in the additional sample depends on the rate of exception the auditor expected in designing the sample, and whether the auditor believe the original sample to be representative.15-32a. The following shows which are exceptions and why:b. It is inappropriate to set a single acceptable tolerable exception rate and estimated population exception rate for the combined exceptions because each attribute has a different significance tothe auditor and should be considered separately in analyzing the results of the test.c. The CUER assuming a 5% ARACR for each attribute and a sample size of 150 is as follows:15-32 (continued)d.*Students’ answers will most likely vary for this attribute.e. For each exception, the auditor should check with the controller todetermine an explanation for the cause. In addition, the appropriateanalysis for each type of exception is as follows:15-33a. Attributes sampling approach: The test of control attribute had a 6% SER and a CUER of 12.9%. The substantive test of transactionsattribute has SER of 0% and a CUER of 4.6%.Nonstatistical sampling approach: As in the attributes samplingapproach, the SERs for the test of control and the substantive testof transactions are 6% and 0%, respectively. Students’ estimates ofthe CUERs for the two tests will vary, but will probably be similar tothe CUERs calculated under the attributes sampling approach.b. Attributes sampling approach: TER is 5%. CUERs are 12.9% and4.6%. Therefore, only the substantive test of transactions resultsare satisfactory.Nonstatistical sampling approach: Because the SER for the test ofcontrol is greater than the TER of 5%, the results are clearly notacceptable. Students’ estimates for CUER for the test of controlshould be greater than the SER of 6%. For the substantive test oftransactions, the SER is 0%. It is unlikely that students will estimateCUER for this test greater than 5%, so the results are acceptablefor the substantive test of transactions.c. If the CUER exceeds the TER, the auditor may:1. Revise the TER if he or she thinks the original specificationswere too conservative.2. Expand the sample size if cost permits.3. Alter the substantive procedures if possible.4. Write a letter to management in conjunction with each of theabove to inform management of a deficiency in their internalcontrols. If the client is a publicly traded company, theauditor must evaluate the deficiency to determine the impacton the auditor’s report on internal control over financialreporting. If the deficiency is deemed to be a materialweakness, the auditor’s report on internal control wouldcontain an adverse opinion.In this case, the auditor has evidence that the test of control procedures are not effective, but no exceptions in the sample resulted because of the breakdown. An expansion of the attributestest does not seem advisable and therefore, the auditor shouldprobably expand confirmation of accounts receivable tests. Inaddition, he or she should write a letter to management to informthem of the control breakdown.d. Although misstatements are more likely when controls are noteffective, control deviations do not necessarily result in actualmisstatements. These control deviations involved a lack ofindication of internal verification of pricing, extensions and footingsof invoices. The deviations will not result in actual errors if pricing,extensions and footings were initially correctly calculated, or if theindividual responsible for internal verification performed theprocedure but did not document that it was performed.e. In this case, we want to find out why some invoices are notinternally verified. Possible reasons are incompetence,carelessness, regular clerk on vacation, etc. It is desirable to isolatethe exceptions to certain clerks, time periods or types of invoices.Case15-34a. Audit sampling could be conveniently used for procedures 3 and 4 since each is to be performed on a sample of the population.b. The most appropriate sampling unit for conducting most of the auditsampling tests is the shipping document because most of the testsare related to procedure 4. Following the instructions of the auditprogram, however, the auditor would use sales journal entries asthe sampling unit for step 3 and shipping document numbers forstep 4. Using shipping document numbers, rather than thedocuments themselves, allows the auditor to test the numericalcontrol over shipping documents, as well as to test for unrecordedsales. The selection of numbers will lead to a sample of actualshipping documents upon which tests will be performed.。
伍德里奇计量经济学第六版答案Chapter-15

伍德⾥奇计量经济学第六版答案Chapter-15CHAPTER 15TEACHING NOTESWhen I wrote the first edition, I took the novel approach of introducing instrumental variables as a way of solving the omitted variable (or unobserved heterogeneity) problem. Traditionally, aneous equations models. Occasionally, IV is first seen as a method to solve the measurement error problem. I have even seen texts where the first appearance of IV methods is to obtain a consistent estimator in anAR(1) model with AR(1) serial correlation.The omitted variable problem is conceptually much easier than simultaneity, and stating the conditions needed for an IV to be valid in an omitted variable context is straightforward. Besides, most modern applications of IV have more of an unobserved heterogeneity motivation.A leading example is estimating the return to education when unobserved ability is in the error term. We are not thinking that education and wages are jointly determined; for the vast majority of people, education is completed before we begin collecting information on wages or salaries. Similarly, in studying the effects of attending a certain type of school on student performance, the choice of school is made and then we observe performance on a test. Again, we are primarily concerned with unobserved factors that affect performance and may be correlated with school choice; it is not an issue of simultaneity.The asymptotics underlying the simple IV estimator are no more difficult than for the OLS estimator in the bivariate regression model. Certainly consistency can be derived in class. It is also easy to demonstrate how, even just in terms of inconsistency, IV can be worse than OLS if the IV is not completely exogenous.At a minimum, it is important to always estimate the reduced form equation and test whether the IV is partially correlated with endogenous explanatory variable. The material on multicollinearity and 2SLS estimation is a direct extension of the OLS case. Using equation (15.43), it is easy to explain why multicollinearity is generally more of a problem with 2SLS estimation.Another conceptually straightforward application of IV is to solve the measurement error problem, although, because it requires two measures, it can be hard to implement in practice.Testing for endogeneity and testing any overidentification restrictions is something that should be covered in second semester courses. The tests are fairly easy to motivate and are very easy to implement.While I provide a treatment for time series applications in Section 15.7, I admit to having trouble finding compelling time series applications. These are likely to be found at a less aggregated level, where exogenous IVs have a chance of existing. (See also Chapter 16 for examples.)187SOLUTIONS TO PROBLEMS15.1 (i) It has been fairly well established that socioeconomic status affects student performance. The error term u contains, among other things, family income, which has a positive effect on GPA and is also very likely to be correlated with PC ownership.(ii) Families with higher incomes can afford to buy computers for their children. Therefore, family income certainly satisfies the second requirement for an instrumental variable: it is correlated with the endogenous explanatory variable [see (15.5) with x = PC and z = faminc]. But as we suggested in part (i), faminc has a positive affect on GPA, so the first requirement for a good IV, (15.4), fails for faminc. If we had faminc we would include it as an explanatory variable in the equation; if it is the only important omitted variable correlated with PC, we could then estimate the expanded equation by OLS.(iii) This is a natural experiment that affects whether or not some students own computers. Some students who buy computers when given the grant would not have without the grant. (Students who did not receive the grants might still own computers.) Define a dummy variable, grant, equal to one if the student received a grant, and zero otherwise. Then, if grant was randomly assigned, it is uncorrelated with u. In particular, it is uncorrelated with family income and other socioeconomic factors in u. Further, grant should be correlated with PC: the probability of owning a PC should be significantly higher for student receiving grants. Incidentally, if the university gave grant priority to low-income students, grant would be negatively correlated with u, and IV would be inconsistent.15.2 (i) It seems reasonable to assume that dist and u are uncorrelated because classrooms are not usually assigned withconvenience for particular students in mind.(ii) The variable dist must be partially correlated with atndrte. More precisely, in the reduced formatndrte = 0 + 1priGPA + 2ACT + 3dist + v,we must have 3 0. Given a sample of data we can test H0: 3 = 0 against H1: 3 0 using a t test.(iii) We now need instrumental variables for atndrte and the interaction term,priGPA atndrte. (Even though priGPA is exogenous, atndrte is not, and so priGPA atndrte is generally correlated with u.) Under the exogeneity assumption that E(u|priGPA,ACT,dist) = 0, any function of priGPA, ACT, and dist is uncorrelated with u. In particular, the interaction priGPA dist is uncorrelated with u. If dist is partially correlated with atndrte then priGPA dist is partially correlated with priGPA atndrte. So, we can estimate the equationstndfnl = 0 + 1atndrte + 2priGPA + 3ACT + 4priGPA atndrte + u188by 2SLS using IVs dist, priGPA, ACT, and priGPA dist. It turns out this is not generally optimal. It may be better to add priGPA2 and priGPA ACT to the instrument list. This would give us overidentifying restrictions to test. See Wooldridge (2002, Chapters 5 and 9) for further discussion.15.3 It is easiest to use (15.10) but where we drop. Remember, this is allowed because= and similarly when we replace x with y. So the numerator in the formula for iswhere n1 = is the number of observations with z i = 1, and we have used the fact that /n1 = , the average of the y i over the i with z i = 1. So far, we have shown that thenumerator in is n1(). Next, write as a weighted average of the averages over the two subgroups:= (n0/n) + (n1/n),where n0 = n n1. Therefore,= [(n n1)/n] (n0/n) = (n0/n) ( - ).Therefore, the numerator of can be written as(n0n1/n)().By simply replacing y with x, the denominator in can be expressed as (n0n1/n)(). When we take the ratio of these, the terms involving n0, n1, and n, cancel, leaving= ()/().15.4 (i) The state may set the level of its minimum wage at least partly based on past or expected current economic activity, and this could certainly be part of u t. Then gMIN t and u t are correlated, which causes OLS to be biased and inconsistent. 189。
Chapter 15-已整理

Chapter 15 The Brain, the Spinal Cord and the NervesOnce a number of the body systems have been surveyed, it should become fairly obvious that not one of these systems is capable of functioning alone. All are interdependent, and all must work together as one unit in order that the normal conditions within the body may prevail. The agency that insures the coordination of the organs and organ systems is the nervous system.Conditions both within and outside the body are constantly changing; one purpose of the nervous system is to respond to these internal and external changes (known as stimuli) and so cause the body to adapt itself to new conditions.The nervous system has been very aptly compared with a telephone exchange in which the brain and the spinal cord act as centers and the nerve trunks serve as cables and wires for carrying messages to and from various parts of these centers.15. 1 The Nervous System as a WholeThe parts of the nervous system may be grouped according to how they are made (structure) or else on the basis of what they do (function).Structural (ANATOMIC) ClassificationThe structure of the nervous system serves as the basis for the more commonly used grouping of the parts of the nervous system, as follows:1.The central nervous system, which includes the brain and the spinal cord.2.The peripheral nervous system, which is made up of cranial and spinal nerves.Cranial nerves are those which carry impulses to and from the brain. Spinal nerves arethose which carry messages to and from the spinal cord.From the standpoint of structure, the central and peripheral nervous systems together include most of the nerve tissue in the body. However, certain peripheral nerves have a special function, and for this reason they are grouped together under the designation autonomic nervous system. The reason for this separate classification is that the autonomic nervous system has to do largely with activities which go on more or less automatically. This system carries impulses from the central nervous system to the glands, the involuntary muscles found in the walls of tubes and hollow organs and the heart. The autonomic nervous system is subdivided into the sympathetic and parasympathetic nervous systems, both of which will be explained later in this chapter.Some of the nerves that carry autonomic nervous system impulses are cranial, and others are spinal.15.2 On Nerves in GeneralThe basic nerve cell is called a neuron. Neurons are composed of a cell body, containing the nucleus, with the addition of threadlike projections of the cytoplasm known as nerve fibers. The nerve fibers are of two kinds: dendrites, which conduct impulses to the cell body; and axons, which conduct impulses away from the cell body. The dendrites of sensory neurons are verydifferent from those of other neuron. They are usually single and they may be very long (as much as 3 feet) or they may be short; but in any case, they do not have the treelike appearance so typical of other dendrites. Each sensory nerve fiber (dendrite) has a special structure called the receptor, or end organ, where the stimulus is received and the sensory impulse begins. Sensations such as pain, touch, hearing and seeing which involve these sensory neurons will be discussed in Chapter 11.Each neuron is a separate unit, and there is no anatomic unity between neurons. It would be logical to ask how it is possible for neurons to be in contact; in other words, how the axon of one neuron can be in functional contact with the dendrite of another neuron. This is accomplished by the synapse, from a Greek word meaning “to clasp.” Synapses, then, are points of junction fro transmission of nerve impulses.Nerve fibers that are connected with receptors (for receiving stimuli) conduct impulses to the brain and cord, and when grouped together form afferent nerves. Those fibers that carry impulses from the centers out to the muscles and glands form efferent nerves. Motor neurons, which carry impulses that lead to the contraction of skeletal muscles, are classified as efferent neurons (Fig. 15.1). Some nerves contain a mixture of afferent and efferent nerve fibers and are often referred to as mixed nerves.Fig. 15.1 Diagram of a motor neuron15.3 The Central Nervous SystemTHE BRAINMain parts of the brainThe largest part of the brain is the cerebrum, which is divided into the two cerebral hemispheres, a right and a left one. The brainstem includes the deeper parts that comprise the interbrain (thalamus, etc.) that cannot be seen unless the brain is sectioned, and a series of smaller parts that extend downward. Starting at the upper part of this series, we may see a small part of the midbrain. Below it and plainly visible from the under view of the brain are the pons and the medulla oblongata, which connects with the spinal cord through a large opening in the base of the skull. The pons connects the midbrain and the medulla. Next in size to the cerebralhemispheres is the cerebellum, a word meaning :little brain.” It is located immediately below the back part of the cerebral hemispheres and is connected with the other parts of the brain only by means of the bridgelike pons.Structure of the cerebral hemispheresThe outer nerve tissue of the cerebral hemispheres is gray matter and is called the cerebral cortex. This gray cortex is arranged in folds forming elevated portions known as convolutions, separated by depressions or grooves called fissures, or sulci (Fig. 15.2). Internally the cerebral hemispheres are made largely of white matter and a few islands of gray matter. Inside the hemispheres are two spaces extending in a somewhat irregular fashion. These are the lateral ventricles, which are filled with a watery fluid common to both the brain and the spinal cord called cerebrospinal fluid, to be discussed later.Although there are many fissures (sulci), a few are especially important landmarks. These include the:1. Longitudinal fissure, which is a deep groove that separates the upper parts of the cerebralhemisphere from each other.2. Central fissure, which extends from the top of the brain near the center downward alongthe side at right angles to the longitudinal fissure.3. Lateral fissure, which curves somewhat along the side of the brain and separates thetemporal lobe from the rest of the cerebral hemisphere.Let us examine the cerebral cortex, the layer of gray matter which forms the surface of each cerebral hemisphere. It is within the cerebral cortex that all impulses are received and analyzed. These form the basis of knowledge; the brain “stores”knowledge, much of which can be produced on demand by means of the phenomenon which we call memory. It is in the cerebral cortex that all thought takes place, all association, judgment and discrimination. It is from the cerebral cortex, too, that the orders originating from conscious deliberation emanate; that is, the voluntary movements are controlled here.Fig. 15.2 External surface of the brain showing the main partsand some of the lobes and fissures of the cerebrum.Division and functions of the cerebral cortexThe cerebral cortex of each hemisphere is divided into four lobes, areas named from the overlying cranial bones. It has been found that each area controls a certain category of functions. The four lobes, with some of their characteristic functions, follow:1. The frontal lobe, which is relatively much larger in the human being than in any otherorganism. This contains the motor cortex which controls the voluntary muscles. The left side of the brain governs the right side of the body and the right side of the brain governs the left side of the body. The upper portion of the center controls the lower parts of the body. The frontal lobe also contains two areas used in speech (the speech centers will be discussed later).2. The parietal lobe, which occupies the upper part of each hemisphere, just behind thecentral fissure. This contains the sensory area, in which the general senses such as pain, touch and temperature are interpreted. Also, such interpretations as the determination of distances, sizes and shapes take place here.3. The temporal lobe, which is lateral (at the side) and folds under the hemispheres on eachside. This contains the auditory center for interpreting impulses from the ear.4. The occipital lobe, which is the most posterior, and extends over the cerebellum. Thiscontains the visual area for interpreting messages from the retina of the eye.Speech centersThe speech centers are among the most interesting groups of areas in the cerebral hemispheres (Fig. 15.3). Their development and use are closely connected with the processes of learning. These areas are called the:1. Auditory speech center, located in the temporal lobe near the auditory center. While theauditory center enables a person to interpret sounds, it does not have anything to do with the understanding of words. Such an understanding of language requires the development of the auditory speech center. Often, this is the first speech center to develop in the child.Babies often seem to understand what is being said long before they do any talking themselves. It is usually several years before children learn to read or write words. In many parts of the world people never learn to read or write their language.2. Visual speech center, which is somewhat above and in front of the visual center. In thisarea the ability to read with understanding is developed. You may see the writing in the Japanese language, for example, but this would involve only the visual center in the occipital lobe unless you could read the words.3. Motor speech center, located just in front of the lowest part of the motor cortex in thefrontal lobe. Since the lower part of the motor cortex controls the muscles of the head and the neck, it seems logical to think of the speech area as an extension forward to make possible the control of the muscles of speech in the tongue, the soft palate and the larynx.4. Written speech center, located above the motor speech center, and in front of the corticalarea that controls the muscles of the arm and the hand. Again this center is an extension forward from the motor cortex. The ability to write words usually is one of the last phases in the development of learning words and their meaning, although occasionally a person may write words more readily than he can vocalize them.Fig. 15.3. Functional areas of cerebrumOther parts of the cerebral hemispheresBeneath the gray matter of the cerebral cortex is the white matter, consisting of nerve fibers which connect the cortical areas with each other and with other parts of the nervous system. Among the most important of these large collections of nerve fibers is the internal capsule, a crowded strip of white matter where any injury is apt to cause extensive damage. At the base of each hemisphere are the nerve cell groups called basal ganglia, which regulate the body movements originating in the cerebral cortex. On the underside of each cerebral hemisphere is the olfactory area, concerned with the sense of smell, which is stimulated by the impulses arising in the nerve receptors of the nose.The interbrainThe interbrain, or diencephalon, can be seen only by cutting into the central section of the brain. It includes the thalamus and the hypothalamus. The two masses of gray matter that form the thalamus are relay centers and act to monitor sensory stimuli, suppressing some and magnifying others. The hypothalamus is located in the midline area below the thalamus and contains cells that control body temperature, water balance, sleep, appetite and some of our emotions, such as fear and pleasure. Both divisions of the autonomic nervous system are under the control of the hypothalamus. Thus it influe nces the heart‟s beating, the contractions of the walls of the bladder and other vital body functions.The midbrainThe midbrain is located just below the center of the cerebrum. It forms one of the forward parts of the brainstem. Four rounded masses of gray matter that are hidden by the cerebralhemispheres form the upper part of the midbrain. These four bodies, the corpora quadiigemina, act as relay centers for certain eye and ear reflexes. The ventral white matter of the midbrain conducts impulses between the higher centers of the cerebrum and the lower centers in the pons, cerebellum, medulla and spinal cord.The cerebellumThe cerebellum is made up of three parts: the middle portion, called the vermis (meaning …'wormlike‟‟), and two lateral hemisphere s at the sides. As in the case of the cerebral hemispheres, the cerebellum has an outer area of gray matter and an inner portion that is largely white matter. The functions of the cerebellum are:1. To aid in the coordination of voluntary muscles so that they will function smoothly and inan orderly fashion. Disease of the cerebellum causes muscular jerkiness and tremors.2. To help maintain balance in standing, walking and sitting, as well as during morestrenuous activities. Messages from the internal ear and from the tendon and muscle sensory end organs aid the cerebellum.3. To aid in maintaining muscle tone so that all muscle fibers are slightly tensed and readyto produce necessary changes in position as quickly as may be necessary.The ponsThe pons is white in color because it is composed largely of myelinated nerve fibers. These fibers in the pons carry messages from one side of the cerebellum to the other, from the cerebellum to the higher centers in the cerebrum and midbrain, and from the cerebellum to the lower centers, including the medulla and the spinal cord. Not only is the pons an important connecting link between the cerebellum and the rest of the nervous system, but it also contains connections with four pairs of cranial nerves. Further it contains nerve fibers that carry impulses to and from the centers located above and below it. Certain reflex (involuntary) actions are controlled in the pons; namely, some occurring in respiration.The medulla oblongataThe medulla of the brain is located between the pons and the spinal cord. It appears white externally because, like the pons, it contains many covered (myelinated) nerve fibers. Internally it contains collections of cell bodies (gray matter), which are called centers or nuclei. Among these are the very important vital centers including:1. The respiratory center, which controls the muscles of respiration in response to chemicaland other stimuli.2. The cardiac center, which tends to slow the heart rate so that it will not beat too rapidly tobe effective.3. The vasomotor center, which affects the muscles in the blood vessel walls and hencehelps to determine blood pressure.The last four pairs of cranial nerves are connected with the medulla. The nerve fibers that carry messages up through the spinal cord to the brain continue through the medulla also, as do similar descending or motor fibers. These groups of nerve fibers form tracts (bundles) and are grouped together according to function. The motor fibers from the motor cortex of the cerebral hemispheres .extend down through the medulla, and most of them cross from one side to the other (decussate) while going through this part of the brain. It is in the medulla that the shifting of nerve fibers occurs which causes the right cerebral hemisphere to control muscles in the left side of the body, and the upper portion of the cortex to control of muscles in the lower portions of the person. The medulla is an important reflex centfer, and it is here that certain neurons end and impulses are relayed to other neurons.Ventricles of the brainWithin the brain are four fluid-filled spaces called the ventricles. These extend into the various parts of the brain in a somewhat irregular fashion. We have already mentioned the largest, the lateral ventricles in the two cerebral hemispheres. Their extensions into the lobes of the cerebrum are called horns. These paired ventricles communicate with a midline space, the third ventricle, by means of the openings called foramina. The third ventricle is bounded on each side by the two parts of the thalamus, while the floor is occupied by the hypothalamus. Continuing down from the third ventricle a small canal, called the cerebral aqueduet, extends through the midbrain into the fourth ventricle. The latter is continuous with the near microscopic neural, or central, canal of the spinal cord. Do not confuse this tiny canal inside the cord with the much larger vertebral, or spinal, canal that is a part of the dorsal cavity enclosing the entire cord, together with its membranes and surrounding fluid. .In the roof of the fourth ventricle are three openings that allow the escape of fluid to the area that surrounds the brain and spinal cord. This will be discussed later.After removal of some of the fluid, air or other substances may be injected, and x-rays called encephalograms or ventriculograms are taken. Tumors or other brain disorders may sometimes be located by this means.Another kind of study of the brain and other soft tissues involves the use of high frequency sound impulses. This is called echoencephalography.BrainwavesThe interactions of the billions of nerve cells in the brain give rise to measurable electric currents. These may be recorded by an instrument called the electroencephalograph, which was Mentioned in Chapter 3. Tfie recorded tracings dr brain waves produce an electroencephalogram, not to be confused with the encephalogram mentioned earlier.Disorders of the brainSince the scientific name for the brain is encephalon, infection of, the brain is known asencephalitis. There are many causes of such disease, but the two chief pathogens are:1. Viruses, which cause some of the epidemic types of, sleeping sickness sometimes foundin the United States and in other parts of the world.2. Certain one-celled animals (protozoa) called trypanosoma, which cause the so-calledAfrican sleeping sickness. These protozoa are carried by a kind of fly (tsetse) and are capable of invading the cerebro-spinal fluid of man.Other infections that may involve the brain and related parts include abscesses and meningitis (explained later). As in the case of encephalitis a variety of organisms may cause these disorders. Viruses, bacteria, protozoa and fungi may travel from the centers of infection in the teeth, the sinuses, the tonsils and in the middle ear.Stroke, or cerebral apoplexy, is by far the most common kind of brain disorder. Rupture of a blood vessel (with a consequent cerebral hemorrhage), thrombosis or embolism may cause destruction of brain tissue. Such disorders are more frequent in the presence of artery wall disease, and hence are more common after the age of 40. The onset may seem to be sudden and often is referred to as a cerebrovascular accident. The effects of a stroke will depend on the extent and location of the artery involvement. A hemorrhage into the white matter of the internal capsule in the lower part of the cerebrum may cause extensive paralysis on the side opposite to the affected area. Such a paralysis is called hemiplegia, and the person so afflicted is known as a hemiplegic.Cerebral palsy is a disorder present at birth. It is characterized by diverse disorders of muscles varying in degree from weakness to complete paralysis, and in extent from a slight disorder of the lower extremity muscles to a multiplicity of paralyses involving all four extremities and the speech muscles as well. With patient and continuous muscle reeducation, speech training and other corrective procedures these victims may be helped considerably.Epilepsy, or so-called falling sickness, is a chronic disorder in which there is abnormality of brain function without apparent changes in tlte nerve tissues. In most cases the cause is not known. The study of brain waves obtained with the electroencephalograph usually shows abnormalities and is helpful both in diagnosis and treatment. Research is constantly improving and increasing the knowledge concerning the various forms of epilepsy. Many of these sufferers can be helped to live a normal active life if they follow a very careful hygienic regimen and use appropriate medication as outlined by a physician.Tumors of the brain may develop at any age, but are somewhat more common in young and middle-aged adults. The majority of brain tumors originate from the neuroglia and are called gliomas. The symptoms produced depend on the location of the growth, its destructiveness and the amount it compresses the brain tissue. Involvement of the frontal portions of the cerebrum often causes mental symptoms, such as changes in personality, disordered conduct and drowsiness. Early surgery offers hope of cure in some cases.Aphasia is a term that refers to the loss of the ability to speak or write, or the loss of the understanding of written or spoken language. There are several different kinds of aphasia,depending on what part of the brain is affected. Usually damage to a speech center causes more disturbance in the well-educated person than it does in the illiterate. It also has been noted that there is a tendency for the last language to be acquired to be the first to be lost; and conversely, the speech concepts that were obtained first (in childhood) remain the longest. The lesion that causes aphasia is likely to be in the left cerebral hemisphere in the right-handed person. Often much can be done for these people by patient retraining and much.understanding. The brain is an organ that has a marvelous capacity for adapting itself to different conditions, and its resources are tremendous. Often some means of communi¬cation can be found even though speech areas are damaged.THE SPINAL CORDLocation of the spinal cordIn the embryo the spinal cord occupies the entire spinal canal and so extends down into the tail portion of the vertebral column. However, the column of bone grows much more rapidly than the nerve tissue of the cord, so that the end of the cord soon fails to extend into the lower part of the spinal canal. This disparity in growth increases so that in the adult the cord ends in the region just below the area to which the last rib attaches (between the first and second lumbar vertebrae).Structure of the spinal cordExamination of the spinal cord reveals that it has a small irregularly shaped internal section made of gray matter (nerve cell bodies), and a larger area surrounding this gray part that is made of white matter (nerve fibers). A cross section of the cord shows that the gray matter is so arranged that a column of cells extends up and down dorsally, one on each side; another column is found in the ventral region; while a third less conspicuous part is situated on each side. These three pairs of columns of gray matter give this cross section an H-shaped appearance. The white matter can be seen to be made of thousands of nerve fibers arranged in three areas external to the gray matter on each side.Functions of the spinal cordThe functions of the cord may be divided into three aspects;1. Reflex activities, which involve the transfer and integration of messages that enter thecord, so that a sensory (afferent) impulse entering the center will become a motor (efferent) message leaving the cord.2. A pathway for conducting sensory impulses from afferent nerves upward throughascending tracts to the brain.3. A pathway for conducting motor impulses from the brain down through descending tractsto the nerves that will supply muscles or glands.The reflex pathway through the spinal cord usually involves three or more nerve cellstogether with their fibers, including:1. The sensory neuron, which has its beginning in a receptor and its nerve fiber in a nervethat leads to the cord.2. One or more central neurons, which are entirely within the cord.3. The motor neuron, which receives the impulse from a central neuron and then carries itvia its long axon through a nerve to a muscle or a gland.The knee jerk is an example of a spinal reflex. The pathway for the impulses that make this reflex possible includes a sensory neuron which has its receptor in the tendon just below die knee, its sensory nerve fiber in the nerves that extend to the spinal cord, central neurons inside the lower part of the cord and motor neurons that send processes through nerves from the cord to the effectors in the thigh‟s kicking muscle.Disorders involving the spinal cordAn acute virus disease affecting both the spinal cord and the brain is poliomyelitis, which is most commonly found in children. The polio virus is spread from the nose and the throat; from here it travels to the central nervous system, possibly by way of the respiratory passages and the blood. The virus may destroy the motor nerve cells in the spinal cord, in which case paralysis of one or more limbs results. The virus also can attack some of the cells of the brain and cause death. Prevention of poliomyelitis by means of the oral Sabin vaccine (which was preceded by the Salk vaccine) is one of the many significant advances in preventive medicine.Injuries to the spinal cord occur in traffic accidents in which bones of the spinal column are broken or dislocated. In wars gunshot or shrapnel wounds may damage the cord in varying degrees. Since the nerve tissue of the brain and the cord cannot repair itself, severing the cord causes paralysis below the injury, together with loss of all sensation from this area. Loss of sensation and of motion in the lower part of the body is called paraplegia.Other disorders of the spinal cord include tumors that grow from within the cord or that compress the cord from outside.Multiple sclerosis (sclerosis means hardening) involves the entire spinal cord as well as the brain. In this disease the myelin, a fatlike substance that forms a sheath around certain nerve fibers, disappears and the nerve axons themselves degenerate. It is an extremely disabling disease; however, it usually progresses very slowly so that the patient may have many years of relatively comfortable life remaining to him.Amyotrophic lateral sclerosis is a motor disorder of the nervous system in which certain cells are destroyed. The progressive destruction causes muscle atrophy and loss of motor control, until finally the victim is unable to swallow, or to talk.Spinal puncture and anesthesiaFluid may be removed from the space below the spinal cord. Since the cord is only about 18 inches long and ends some distance above the level of the hip line, a spinal puncture is usuallydone between the third and fourth lumbar vertebrae, about the level of the top of the hip bone. This cerebro-spinal fluid may be studied in the laboratory for evidence of disease or injury.Anesthetics are sometimes dissolved in. cerebrospinal fluid and then injected into the space below the cord, thus temporarily removing all sensation from the lower part of the body. In the hands of a trained operator this method of giving an anesthetic may have a number of advantages for certain types of surgery in selected patients. Under this type of anesthetic the patient is “awake” during the operation, but of course feels nothing in his lower body.COVERINGS OF THE BRAIN AND THE SPINAL CORDThe meninges are three layers of connective tissue that surround the brain and the spinal cord to form a complete enclosure; The outermost of these membranes is called the dura mater. It is the thickest and toughest of these meninges. Inside the skull, the dura mater splits in certain places to provide channels for the blood coming from the brain tissue. The second layer around the brain and the spinal cord is the arachnoid membrane (so-called because it resembles the webs produced by spiders, which belong to a group of animals called the Arachnida). The arachnoid membrane is loosely attached, to the deepest of the meninges by weblike fibers allowing a space for fluid located between the arachnoid and the innermost membrane. The third layer around the brain, the pia mater, is attached to the .nerve tissue of the brain and spinal cord and dips into all the depressions, unlike the other two meninges. It is made of a delicate Connective tissue in which there are many blood vessels. The blood supply to the brain is carried, to a large extent, by the pia mater (Fig. 15.4).Fig. 15.4 Frontal (coroal) section of top of head, showing meninges andrelated parts.。
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Chapter 15 Managers and Communication1) Formal communication can control behavior, but informal communication cannot. Answer: FALSE2) A sender initiates a message by encoding a thought.Answer: TRUE3) E-mail increases filtering because electronic communication is faster.Answer: FALSE4) Communication that takes place among employees on the same organizational level is called lateral communication.Answer: TRUE5) All electronic information is inadmissible in court.Answer: FALSE6) In which of the following cases has communication occurred?A) Gary updates his blog regularly, even though no one reads it.B) Brian attends all the Algebra lectures, but is unable to understand the subject.C) Jen has sent an urgent e-mail to her Japanese colleague, but a translator is not yet available.D) Ana tells her manager that she needs a new computer, but he says that the company can't afford it.Answer: D7) George prepares a memorandum explaining the objectives of a newly created work team that he is expected to manage, and makes sure it reaches each team member. He is involved in ________.A) deciphering the messageB) organizational communicationC) lateral communicationD) decoding the messageAnswer: B8) Complexity capacity refers to the degree to which the communication method________.A) offers a reasonable assurance of confidentialityB) makes a simple message seem more complexC) effectively processes complicated messagesD) offers quick and accurate feedbackAnswer: C9) Which of the following methods of communication offers high scanability?A) publicationsB) face-to-face communicationC) meetingsD) voice mailAnswer: A10) Which of the following is a way for managers to overcome the barriers to communication?A) feedbackB) decodingC) encodingD) filteringAnswer: A11) ________ communication is communication that flows from a manager to employees.A) LateralB) UpwardC) DownwardD) HorizontalAnswer: C12) In the ________ communication network, communication flows according to the formal organizational hierarchy, both downward and upward.A) chainB) all-channelC) wheelD) horizontalAnswer: A"Flo" of Communication (Scenario)Recently the employees of Chatterbox Enterprises, Inc., received a letter from the vice president of operations explaining that a new production facility would be built in Chatland City, AL. It was also stated that about one-fourth of the employees from the current Chatland City facility would be transferred to the new facility and if employees wanted to volunteer for the transfer, they could do so by meeting the human resource manager and filling out a request form. Sam, a production supervisor, first went to Florence, the purchasing manager, who had already volunteered to transfer, to discuss with her the possibility of becoming her inventory control supervisor at the new facility. Florence told Sam that Ruth, the current inventory control supervisor, would not be transferring and that she would consider his request.13) The letter from the vice president to the employees is an example of which type of organizational communication?A) horizontalB) formalC) lateralD) informalAnswer: B14) When Sam went to the human resource manager and applied for transfer to the new facility, he was participating in which type of organizational communication?A) formalB) downwardC) horizontalD) lateralAnswer: A15) If Sam had talked with his co-supervisors before going to speak to Florence, he would have been involved in which type of organizational communication?A) verticalB) internalC) lateralD) downwardAnswer: C16) When Sam spoke to Florence, he was involved in which type of organizational communication?A) diagonalB) upwardC) horizontalD) lateralAnswer: A17) "The grapevine is detrimental to effective organizational communication and must be eliminated if the organization is to effectively engage its employees." Do you agree with this statement? Explain your answer.Answer: Student answers may vary. However, it is a fact that the grapevine, an informal organizational network is part of every organization. In fact, it is an important source of information for the company. This makes it imperative for companies to try to understand its dynamics. Acting as both a filter and a feedback mechanism, it pinpoints those bewildering issues that employees consider important. More importantly, from a managerial point of view, it is possible to analyze what is happening on the grapevine—what information is being passed, how information seems to flow, and what individuals seem to be key information conduits. By staying aware of the grapevine's flow and patterns, managers can identify issues that concern employees, and, in turn, use the grapevine to disseminate important information. Because the grapevine can't be eliminated, managers should "manage" it as an important information network. However, managers can minimize the negative consequences of rumors. They can do so by communicating openly, fully, and honestly with employees, particularly in situations where employees may not like proposed or actual managerial decisions. Studies show that this is likely to be effective in engaging employees.18) In a short essay, list the seven elements of the communication process and explainthe process of interpersonal communication.Answer: The seven elements of the communication process are: (1) the communication source, (2) the message, (3) encoding, (4) the channel, (5) decoding, (6) the receiver, and (7) feedback. Before communication can take place, a purpose, expressed as a message to be conveyed, must exist. It passes between a source (the sender) and a receiver. The message is converted to a symbolic form (called encoding) and passed by way of some medium (channel) to the receiver, who retranslates the sender's message (called decoding). The result is the transfer of meaning from one person to another. In addition, note that the entire process is susceptible tonoise disturbances that interfere with the transmission, receipt, or feedback of a message. Typical examples of noise include illegible print, phone static, inattention by the receiver, or background sounds of machinery or coworkers. Anything that interferes with understanding can be noise, and noise can create distortion at any point in the communication process.19) In a short essay, list and discuss four of the six barriers to effective communication that managers face. Include a specific example of each barrier to support your answer.Answer: a. Filtering the deliberate manipulation of information to make it appear more favorable to the receiver. For example, when a person tells his or her manager what the manager wants to hear, that individual is filtering information. The extent of filtering tends to be a function of the number of vertical levels in the organization and the organizational culture. The more vertical levels there are in an organization, the more opportunities there are for filtering.b. Emotions how a receiver feels when a message is received influences how he or she interprets it. Extreme emotions are most likely to hinder effective communication. In such instances, people often disregard rational and objective thinking processes and substitute emotional judgments.c. Information overload occurs when the amount of information a person is required to work with exceeds that individual's processing capacity. What happens when individuals have more information than they can sort or use? They tend to select out, ignore, pass over, or forget information. Or, they may put off further processing until the overload situation is over.d. Defensiveness when people feel that they're being threatened, they tend to react in ways that reduce their ability to achieve mutual understanding. That is, they become defensive–engaging in behaviors such as verbally attacking others, making sarcastic remarks, being overly judgmental, and questioning others' motives.e. Language words mean different things to different people. Age, education, and cultural background are three of the more obvious variables that influence the language a person uses and the definitions he or she gives to words. People may speak the same language, but use of that language is far from uniform. Senders tend to assume that the words and phrases they use mean the same to the receiver as they do to them. This is incorrect and creates communication barriers.f. National culture interpersonal communication isn't conducted in the same wayaround the world. In the United States, communication patterns tend to be individual oriented and clearly spelled out. U.S. managers rely heavily on memoranda, announcements, position papers, and other formal forms of communication to state their positions on issues. In collectivist countries, such as Japan, there's more interaction for its own sake and a more informal manner of interpersonal contact.。