Mini-Case 11-2: the Price Is Right

question 52

Essay

Mini-Case 11-2: The Price is Right?
"It is obvious what people want; I can't imagine why someone never thought of it before. What good is it to be wealthy if I have to stay around the house all day waiting for service representatives or doing paperwork?" Penny Matthews decided she would take those responsibilities off the backs of the people of Tucson, Arizona. "My business will arrange for all the services you need around the home (lawn mowing, plumbing, carpets cleaning, televisions repairs, pools cleaning, everything). My clients will be free to enjoy their lives without worrying about their houses. We will also arrange for parties to be completely catered. In addition, if you wish, we will pay all your bills and reconcile your bank statement. A life without the irritations of domestic hassles; that's our service."
Penny was explaining the idea to her close friend and banker, Wallace Trevillian. "You have definitely thought about this for some time and put months of work into its planning," said Wallace. "What do you plan to charge for these services?"
"That's a good question, Wallace. I haven't thought about it."
-How would Penny Matthews go about determining how to price the services her business plans to offer?

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Definitions:

Maker

The individual or entity that creates or signs a promissory note, committing to pay the specified amount.

Maker

The individual or entity that creates, signs, and issues a promissory note, thereby promising to pay a certain sum to a specified person.

Accommodation Party

An individual or entity that signs a negotiable instrument on behalf of another party, guaranteeing payment without direct benefit.

Demand Instrument

is a financial document that requires the payer to pay the full amount upon demand by the holder, such as a check.