BUS 401 Week 1 DQ1 Review Question 1-2 and Problem 2-2

Goals of the Firm and Real Interest Rates. Complete Review Question 1-2 from the end of Chapter 1 and Study Problem 2-2 from the end of Chapter 2 and post your answers to the discussion board.

1-2 Firms often involve themselves in projects that do not result directly in profits. For example, IBM and ExxonMobil frequently support public television broadcasts. Do these projects contradict the goal of maximization of shareholder wealth? Why or why not?

2-2 (Real interest rates: financial analysts method) The CFO of your firm has asked you for an approximate answer to this question: What was the increase in real purchasing power associated with both 3-month Treasury bills and 30-year Treasury bonds? Assume that the current 3-month Treasury bill rate is 4.34 percent, the 30-year Treasury bond rate is 7.33 percent, and the inflation rate is 2.78 percent. Also, the chief financial officer wants a short explanation should the 3-month real rate turn out to be less than the 30-year real rate.