When Using Historical Prices to Set Future Prices,several Questions Should

question 38

Multiple Choice

When using historical prices to set future prices,several questions should be asked about the historical data.Which of the following is not one of the questions as presented by the textbook?

• A) How have conditions changed?
• B) Were prices in the past determined by the laws of supply and demand?
• C) Were there one-time engineering, setup, or tooling charges in the original price?
• D) What should be the effect of inflation or deflation on the price?
• E) Will the new procurement create a situation in which the supplier should enjoy the benefits of learning?

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Definitions:

Semi-Annually Compounded

Interest or finance charges are applied to the principal sum twice a year, causing the investment or loan to grow at a faster rate than simple annual compounding.

RSP

Registered Savings Plan, a financial account in Canada designated for holding savings and investment assets, with special tax benefits for retirement savings.

Monthly Compounded

Pertains to interest or any financial metric that is calculated and added to the principal balance every month.

Nominal Rate

The stated interest rate of a bond or loan, not accounting for compounding or inflation effects.