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Ms. Jetson will be found liable to Mr. McDuff under the cause of action of negligence. In order to prove this, Mr. McDuff must provide a prima facie case. This requires him to prove: 1) that a duty was owed to him by Jetson; 2) that she breached this duty; 3) that the breach actually caused the damage, and; 4) he suffered an actual loss or damage (Gateway p. 251).
To prove a duty was owed to, courts in the state of Gould analyze three factors. The first factor is the relationship between the plaintiff and the defendant. As fellow drivers, Ms. Jetson and Mr. McDuff owe a duty to each other to take caution on the road and avoid reckless behavior. The second factor, and most important in the eyes of the courts, is the defendant’s reasonable foreseeability of harm to the plaintiff. A similar issue was at hand in Fogel v. Get ‘N Go Markets. In that case, the plaintiff crashed through the defendant’s transparent glass store front. The court ruled that it was reasonable for Grab ‘N Go to foresee that these transparent glass panels could cause harm to potential customers. The same ruling should apply when considering Ms. Jetson and Mr. McDuff. Ms. Jetson should have known that driving with flip-flops could be dangerous for her and anyone else sharing the road with her. She could plead ignorance, but it is common knowledge that flip-flops are potentially dangerous to wear while driving. A January 2009 article in Viewspeak Magazine cites a study which supports this assertion. In the study, a thousand drivers were polled, and the results showed that twenty-five percent regularly drive with flip-flops and seventy-five percent find it difficult to drive with them on. This means most drivers are aware of the problem, and some of them choose to disregard it and drive with them anyway. The third factor involves public policy concerns. This is a broad subject, but arguably the most important consideration is the ability to prevent future harm. It is in the people’s best interest to ensure that these types of accidents decrease in the future. Ms. Jetson satisfies all three of these factors, which proves a duty of care existed.
almost non-existent.
One way to look at whether the defendant has breached his or her duty is to determine whether the combination of the probability and magnitude measures is greater than the burden measurement. In this case, the probability of the accident and the magnitude of the injury far outweigh Ms. Jetson’s burden to take adequate precaution.
The last two requirements to establish a prima facie case should be undisputed. Jetson’s failure to provide a safe environment directly led to Mr. McDuff’s injuries. As previously mentioned, these injuries were substantial. Therefore, Mr. McDuff has met the four requirements to fulfill his obligation of establishing a prima facie case, and Ms. Jetson will be held liable for his injuries under the cause of action of negligence.
a) the seller has exercised all possible care in the preparation and sale of his product, and
b) the user or consumer has not bought the product from or entered into any contractual relation with the seller (Gateway p. 254-255).”
its flip-flops.
However, after reviewing Wayans v Landon and Black and Decker, Chief Justice Brinkley offered a dissenting opinion. His assertion was that strict liability is not absolute liability, and the manufacturer is not responsible for all harm that results from using a product. He went on to say that there is no liability for failure to warn when the user of the product is or already should be aware of the dangers. The plaintiff already knew or should have known the dangers of passing a lawn mower over a small foreign object. When the danger is obvious, the failure to warn is not a defect that renders the product unreasonably dangerous.
This applies to the present case as well. Ms. Jetson should have known not to wear flip-flops while driving. While McDuff’s injuries are horrific, he should only be able to seek damages from Ms. Jetson. Sandpiper Footwear should not be held strictly liable.
Damage Compensation Estimation
Based on the McDuff v. Jetson law suit analysis, Ms. Jetson will be found liable to Mr. McDuff under the cause of the action of negligence. Since MR. McDuff suffered a spinal cord injury resulting in his becoming a quadriplegic, as the consequence of negligence, Ms. Jestson will have to pay a reasonable compensation to Mr. McDuff to cover the damage Ms. Jeston caused to Mr. McDuff.
Our compensation estimation begins with the analysis of the Consumer Price Index for the years 1999 to 2008 as follow:
|| Year
Age of Mr. McDuff
(years)
Year End CPI Value
Adjusted CPI
|| 1999
43
148.2
1.48
|| 2000
44
152.4
1.52
|| 2001
45
156.6
1.57
|| 2002
46
162.5
1.63
|| 2003
47
166.2
1.66
|| 2004
48
169.8
1.70
|| 2005
49
176.0
1.76
|| 2006
50
183.1
1.83
|| 2007
51
192.6
1.93
|| 2008
52
199.0
1.99
The Consumer Price Index is measurement of price of a basket of goods and services provided by the United Sates Department of Labor. By analyzing the CPI index for a specific location we can determine the cost of living in this particular area. Because we need to know the annual Cost of Living Adjustment to give Mr. McDuff a reasonable compensation for future lost of salaries, we need to interpret the CPI first. As the index shows the price value is constantly growing every year from 1999 to 2008, we conclude the Cost of Living Adjustment (COLA) is positive, which means that the inflation rates during those 10 years could be positive and there could be other factors lead to this positive COLA value. In order to provide more perceptible and accurate Consumer Price Index analysis, we find the Adjusted CPI, and use Excel to create a regression line, and we then use the number of year as the X-axis, and use the Adjusted CPI as the Y-axis to create the scatter of Adjusted CPI, the data and the regression line are as follow:
|| Year
(X)
Adjusted CPI (Y)
|| 1999
1.48
|| 2000
1.52
|| 2001
1.57
|| 2002
1.63
|| Year
(X)
Adjusted CPI (Y)
|| 2003
1.66
|| 2004
1.70
|| 2005
1.76
|| 2006
1.83
|| Year
(X)
Adjusted CPI (Y)
|| 2007
1.93
|| 2008
1.99
|| || ||
|| || ||
As the CPI regression line shows, the correlation of regression is 0.055 indicating the CPI value grows approximately 5.5% every year, during 1999 to 2005, based on the Adjusted CPI value. One major factor that affects the CPI value is the inflation rate, which is also an essential element to predicate the future income of Mr. McDuff.
Because inflation rate equals to the annual Cost of Living Adjustment (COLA), we need to determine the value of COLA for each of the year, from 1999 to the year 2005, before acquiring the average inflation rate in this particular area. We use the formula of calculating COLA based on the CPI value, COLA year of x= (CPIx - CPI(x-1))/ CPI(x-1) , then we use Excel to create a chart showing the clear value of inflation for every year from 1999 to 2008 as follow:
|| Number
Year
Age of Mr. McDuff
Year End CPI Value
Adjusted CPI
COLA=Inflation Rate
|| 1
1999
43
148.2
1.48
Base Year
|| 2
2000
44
152.4
1.52
2.83%
|| 3
2001
45
156.6
1.57
2.76%
|| 4
2002
46
162.5
1.63
3.77%
|| 5
2003
47
166.2
1.66
2.28%
|| 6
2004
48
169.8
1.70
2.17%
|| 7
2005
49
176.0
1.76
3.65%
|| 8
2006
50
183.1
1.83
4.03%
|| 9
2007
51
192.6
1.93
5.19%
|| 10
2008
52
199.0
1.99
3.32%
|| || || || || Mean
3.33%
We then use the mean of inflation rate, 3.33%, of the year from 1999 to 2005 as a predicted approximate future inflation rate in the next 24 years, until the expectation retire year of Mr. McDuff. In terms of employment contract Mr. McDuff has with the United States Postal Service, the contract projects his wages to rise by 3% per year, we then add the 3% of wages raise rate to the inflation rate to determine the proper rate in which his annual salary shall be increased, which is 6.33%.
After acquiring the real increase rate of Mr. McDuff’s wages, and based on the gross salary $48,000 of 2009, we create a chart of the future salary for Mr. McDuff,
|| Year
Age of Mr. McDuff
Salary
|| 2009
53
$48,000.00
|| 2010
54
$51,038.40
|| 2011
55
$54,269.13
|| 2012
56
$57,704.37
|| 2013
57
$61,357.05
|| 2014
58
$65,240.95
|| 2015
59
$69,370.71
|| 2016
60
$73,761.87
|| 2017
61
$78,431.00
|| 2018
62
$83,395.68
|| 2019
63
$88,674.63
|| 2020
64
$94,287.73
|| 2021
65
$100,256.15
We assume the income tax that Mr. McDuff will have to pay in the future is a flat income tax, 25%, which means no matter how much Mr. McDuff will be earning in the next 24 years he will pay 25% tax of his totally income. We need to take the income tax payment out of the totally compensation, since Ms. Hahn has no obligation to give the certain amount of money of future tax to Mr. McDuff.
|| Year
Age
Salary
After Tax
|| 2009
53
$48,000.00
$36,000.00
|| 2010
54
$51,038.40
$38,278.80
|| 2011
55
$54,269.13
$40,701.85
|| 2012
56
$57,704.37
$43,278.28
|| 2013
57
$61,357.05
$46,017.79
|| 2014
58
$65,240.95
$48,930.72
|| 2015
59
$69,370.71
$52,028.03
|| 2016
60
$73,761.87
$55,321.40
|| 2017
61
$78,431.00
$58,823.25
|| 2018
62
$83,395.68
$62,546.76
|| 2019
63
$88,674.63
$66,505.97
|| 2020
64
$94,287.73
$70,715.80
|| 2021
65
$100,256.15
$75,192.11
But the dollar value in this chart is based on the future dollar value, our consulting team need to provide a sound compensation based on present dollar value to Mr. McDuff, or the compensation based on the future dollar value would lead to a unfair overvalued damage compensation for both parties, and Ms. Hahn would have to overpay Mr. McDuff.
In order to calculate the present value of Mr. McDuff’s future salary, we need to apply the Accounting theory of Time Value of Money (Weygandt, C-7). Since the present value rate 8% is given, we then need apply this value as the discount rate into the formula of Present Value, PV= FV/ (1+i)n. We then use Excel to create the chart of Present Value to give both parties a clear perceptible explanation of the compensation based on the present value.
|| Number
Year
Age
Salary
Ater tax
Present Value
|| 1
2009
53
$48,000.00
$36,000.00
$ 33,332.33
|| 2
2010
54
$51,038.40
$38,278.80
$ 32,816.90
|| 3
2011
55
$54,269.13
$40,701.85
$ 32,309.44
|| 4
2012
56
$57,704.37
$43,278.28
$ 31,809.82
|| 5
2013
57
$61,357.05
$46,017.79
$ 31,317.93
|| 6
2014
58
$65,240.95
$48,930.72
$ 30,833.65
|| 7
2015
59
$69,370.71
$52,028.03
$ 30,356.86
|| 8
2016
60
$73,761.87
$55,321.40
$ 29,887.43
|| 9
2017
61
$78,431.00
$58,823.25
$ 29,425.27
|| 10
2018
62
$83,395.68
$62,546.76
$ 28,970.25
|| 11
2019
63
$88,674.63
$66,505.97
$ 28,522.27
|| 12
2020
64
$94,287.73
$70,715.80
$ 28,081.22
|| 13
2021
65
$100,256.15
$75,192.11
$ 27,646.98
|| || || || || Total
$395,310.37
Because this accent is happened in 2009 summer, Ms. Hahn should pay half of Mr. McDuff’s 2009’s salary, and the rest should be pied by the United States Postal Service, which is $16,666.17.
After all the analysis and calculation our team’s conclusion is that Mr. McDuff should be awarded $378,644.20 as the total compensation, this amount of money represent present value of the total loss of future salary that Mr. McDuff would have earned until the year 2021 which is the expected year of retirement.

McDuff v. Jetson
Ms. Jetson will be found liable to Mr. McDuff under the cause of action of negligence. In order to prove this, Mr. McDuff must provide a prima facie case. This requires him to prove: 1) that a duty was owed to him by Jetson; 2) that she breached this duty; 3) that the breach actually caused the damage, and; 4) he suffered an actual loss or damage (Gateway p. 251).
To prove a duty was owed to, courts in the state of Gould analyze three factors. The first factor is the relationship between the plaintiff and the defendant. As fellow drivers, Ms. Jetson and Mr. McDuff owe a duty to each other to take caution on the road and avoid reckless behavior. The second factor, and most important in the eyes of the courts, is the defendant’s reasonable foreseeability of harm to the plaintiff. A similar issue was at hand in Fogel v. Get ‘N Go Markets. In that case, the plaintiff crashed through the defendant’s transparent glass store front. The court ruled that it was reasonable for Grab ‘N Go to foresee that these transparent glass panels could cause harm to potential customers. The same ruling should apply when considering Ms. Jetson and Mr. McDuff. Ms. Jetson should have known that driving with flip-flops could be dangerous for her and anyone else sharing the road with her. She could plead ignorance, but it is common knowledge that flip-flops are potentially dangerous to wear while driving. A January 2009 article in Viewspeak Magazine cites a study which supports this assertion. In the study, a thousand drivers were polled, and the results showed that twenty-five percent regularly drive with flip-flops and seventy-five percent find it difficult to drive with them on. This means most drivers are aware of the problem, and some of them choose to disregard it and drive with them anyway. The third factor involves public policy concerns. This is a broad subject, but arguably the most important consideration is the ability to prevent future harm. It is in the people’s best interest to ensure that these types of accidents decrease in the future. Ms. Jetson satisfies all three of these factors, which proves a duty of care existed.
After establishing that a duty was owed, Mr. McDuff must then prove that Ms. Jetson breached that duty. Courts approach this question by measuring three things: 1) The probability of the accident occurring; 2) the magnitude of the injury suffered as a result of the accident, and; 3) the burden placed on the defendant to take proper precautions to avoid the accident (Gateway p.252). As stated before, wearing flip-flops while driving is a potentially dangerous activity. The lack of ankle support causes the footwear to slide off a person’s feet substantially more often than regular shoes. While driving, this could cause one of the sandals to fall off and get lodged under one of the pedals. Therefore, the probability of an accident increases when flip-flops are being worn. The second measure is the magnitude of the injury caused by the accident. This may be Mr. McDuff’s strongest argument. The crash made him a quadriplegic, making it impossible for him to live a normal life or ever work again. The extent of his injuries is long-term and far-reaching. The last measure is the defendant’s burden to take adequate precaution to avert the accident. One extremely unfortunate aspect of this accident is how easily it could have been avoided. The two main alternatives for Ms. Jetson would have been to either change into normal shoes or simply take her flip-flops off and place them on the seat next to her. The burden for her to take acceptable precaution was almost non-existent.
One way to look at whether the defendant has breached his or her duty is to determine whether the combination of the probability and magnitude measures is greater than the burden measurement. In this case, the probability of the accident and the magnitude of the injury far outweigh Ms. Jetson’s burden to take adequate precaution.
The last two requirements to establish a prima facie case should be undisputed. Jetson’s failure to provide a safe environment directly led to Mr. McDuff’s injuries. As previously mentioned, these injuries were substantial. Therefore, Mr. McDuff has met the four requirements to fulfill his obligation of establishing a prima facie case, and Ms. Jetson will be held liable for his injuries under the cause of action of negligence.
McDuff v Sandpiper Footwear
After analyzing Sandpiper Footwear’s involvement in the case, the determination is that they will most likely not be held strictly liable for their failure to put a warning on their products. When considering strict liability cases, the courts turn to section 402A of the Restatement (Second) of Torts. This sections states:
“1) One who sells any product in a defective condition unreasonably dangerous to the user or consumer or to his property is subject to liability for physical harm thereby caused to the ultimate consumer, or to his property, if
a) the seller is engaged in the business of selling such a product, and
b) it is expected to and does reach the user or consumer without substantial change in the condition in which it is sold.
2) The rule stated in Subsection (1) applies although
a) the seller has exercised all possible care in the preparation and sale of his product, and
b) the user or consumer has not bought the product from or entered into any contractual relation with the seller (Gateway p. 254-255).”
Everything stated above would indicate that Sandpiper Footwear should be held strictly liable except for the very beginning of the section. The issue here is whether the product was in a defective condition unreasonable dangerous to the consumer. A similar situation occurred in Wayans v Landon and Black and Decker. There, a man was using a Black and Decker lawn mower in his yard, when he ran over a small toy. The toy ejected from under the mower at a high velocity and struck a neighbor in the eye. The court ruled that Black and Decker was strictly liable because they had failed to provide a warning for a potentially dangerous product. This would also be Mr. McDuff’s strongest argument. Sandpiper Footwear should have provided a warning stating the dangers of driving while wearing its flip-flops.
However, after reviewing Wayans v Landon and Black and Decker, Chief Justice Brinkley offered a dissenting opinion. His assertion was that strict liability is not absolute liability, and the manufacturer is not responsible for all harm that results from using a product. He went on to say that there is no liability for failure to warn when the user of the product is or already should be aware of the dangers. The plaintiff already knew or should have known the dangers of passing a lawn mower over a small foreign object. When the danger is obvious, the failure to warn is not a defect that renders the product unreasonably dangerous.
This applies to the present case as well. Ms. Jetson should have known not to wear flip-flops while driving. While McDuff’s injuries are horrific, he should only be able to seek damages from Ms. Jetson. Sandpiper Footwear should not be held strictly liable.

Section 1
Principals
Rebecca Warren v. Mechanics National Bank
Acquiring and removing mortgage loans are essential activities in the business field. They secure and release obligations of loans against properties that loaners have. Due to the great significant value of mortgage loans and the complex procedures of acquiring and removing, mortgage loans can cause some considerable inconveniences to business activities.
In this lawsuit case, Rebecca Warren is seeking to file a lawsuit against Mechanics National Bank. They failed to remove the lien on the property of land that Ms. Warren owned in Lagoon Beach, Green; although she fully paid her debt in November, 2004.
Context
This case if closely based on interpretations of contract law, and financial accounting analysis.
This lawsuit is carefully being analyzed by our team, and the report will be submitted to our company, Legal Eagles, LLP.
This report is assigned and will be analyzed and submitted by team 3.
Open Questions
Did Mr. Warren make an acceptance or a counter-offer or a rejection on the letter by changing the 45-days escrow to a 60-days escrow?
Is failure of removing the lien on the Lagoon Beach property against the law of negligence?
How to use financial accounting principles and statistical analysis to generate a reasonable compensation to Mr. Warren due to the lost possibility of acquiring Hotel California.
IRAC Case #1
Issue: Was Commercial Escrow Company negligent in their treatment of Rockport Rebel’s funds?
Issue: Did the collective actions of the plaintiff and the defendant create a valid contract?
Rule: No contract can exist without mutual consent from both parties. For consent to exist, both parties must agree to the same thing in the same sense. A counteroffer containing a condition different from that in the original offer is considered a new proposal. If this proposal is not accepted by the party that issued the first offer, the negotiations amount to nothing.
of time.
The defendant argued that he made an offer to work with the plaintiff and that the plaintiff’s return letter constituted an acceptance of that offer with a “suggestion for better terms.” However, the plaintiff argued that the added proviso significantly changed the terms of the contract and was simply an invitation to negotiate the matter further. No further evidence was presented that indicated the talks went any further than the series of letters already brought forth.
Conclusion: The proviso added new stipulations to the negotiations and did not result in an acceptance of the offer. No binding contract ever came into existence.

IRAC Case #1
Issue: Was Commercial Escrow Company negligent in their treatment of Rockport Rebel’s funds?
Rule: To prove negligence, the plaintiff must show that the defendant had a duty of care towards the plaintiff and that they breached that duty of care. They must also show a causal connection between the negligence and the resulting injury. They must then show that actual loss or damage resulted from the negligence.
Application: Rockport Rebel claimed that Commercial Escrow met all of the aforementioned requirements that constitute negligence and are liable for the resulting damages. By entering the escrow agreement, Commercial Escrow became part of an agent-principal relationship that comes equipped with fiduciary responsibilities. One of these responsibilities is the duty to use care in matters that pertain to the agency. The agreement that they entered had a specific provision which stated that the $25,000 that Rockport Rebel put forth can only be released with Rockport’s written consent, and that they would be fully refunded should the contract not be completed. By releasing the money to Citywide, Commercial Escrow failed to follow the terms of the agreement, which creates a breach of their duty to care. The release of the money to Citywide meant that Rockport Rebel could no longer recover their funds. This establishes a direct causal connection between the negligence and Rockport’s resulting injuries. Lastly, since there was a tangible loss of $25,000, there is clear evidence that Rockport suffered an actual loss or damage. According to these facts, Rockport met the requirements necessary to recover damages under the cause of action of negligence.
Conclusion: Commercial Escrow was negligent in their treatment of Rockport Rebel’s funds.
IRAC Case #2
Issue: Did the collective actions of the plaintiff and the defendant create a valid contract?
Rule: No contract can exist without mutual consent from both parties. For consent to exist, both parties must agree to the same thing in the same sense. A counteroffer containing a condition different from that in the original offer is considered a new proposal. If this proposal is not accepted by the party that issued the first offer, the negotiations amount to nothing.
Application: In this case, the defendant began contract negotiations with the plaintiff. He offered the plaintiff $100,000 in addition to a percentage of the sales of an invention that the plaintiff created. The plaintiff sent him a return letter stating his interest in doing business with the defendant. It also included a proviso to the defendants offer, stating the invention had to go into production within a definite period of time.
The defendant argued that he made an offer to work with the plaintiff and that the plaintiff’s return letter constituted an acceptance of that offer with a “suggestion for better terms.” However, the plaintiff argued that the added proviso significantly changed the terms of the contract and was simply an invitation to negotiate the matter further. No further evidence was presented that indicated the talks went any further than the series of letters already brought forth.
Conclusion: The proviso added new stipulations to the negotiations and did not result in an acceptance of the offer. No binding contract ever came into existence.

We also took a serious analysis on the p-value, because the p-value tells you whether you should reject the null hypothesis. In this case the null hypothesis is mean equals to zero, which means that there is no correlation between sample data and population data. The mean of percent changes in market indices and in interest rate in the year of 2005 and 2006, which are 30.48 and 97.19. The formulae of T-test (need more)
However, before making the prediction, our team has to determine statistically whether this model is useful for prediction purposes, and whether those two variables have a strong enough relation to let us make the predication. So our team had to make sure the regression coefficient is a significantly different from zero. Because if the slope is zero, meaning that there is no relation between two variables, so our team found the slopes of data is -0.029, which is very close to zero, but there is still a relation between those two variables.
Ethical Considerations
International Investments, Inc. used statistical analyses and macro economic concepts to determine the best method for globally investing. One of the most essential components of a business should be taken into account as well though: ethics. There are multiple theories regarding ethics and ethical decision making. We have looked at each theory extensively and found that one of them would best suit International Investments, Inc. in making its decision.
The Utilitarian theory fits most understandably: the greatest good for the greatest number of people (Coursepack). It would be in every employee’s best interest to globally invest. At International Investments, Inc. there are skeptical employees. Some employees believe that interest and unemployment rates are acceptable indicators for other countries’ performance within its stock market. Other employees are content basing their choices on who to invest with on actual performance of other individual firms(Case, p. 229). Whichever strategies employees have, our findings will prove that globally investing is beneficial to everyone at International Investments, Inc.
The Utilitarian theory should remind your firm that what is most beneficial to a business is what is most beneficial to those within that business. Because there are many ways to find a country’s stock market performance, it is best to implement the procedure that provides results with the most assurance, such as using per capita gross national income. If there is still skepticism or uncertainty, stakeholder impact analysis provides frameworks that may guide International Investments, Inc. in choosing the best method.
Of the three frameworks, Pastin’s Approach was most helpful in solving the issues within International Investments, Inc., which were previously addressed. Pastin’s Approach asks that the following four elements be considered when a business decision is being made: 1) Ground rule ethics 2) End-point ethics 3) Rule ethics, and lastly, 4) Social contract ethics. (coursepack p.100) Ground rule ethics asks that a business considers its own values and ground rules when evaluating a new decision. End-point ethics asks that the net benefit of the decision, if it is approved, be considered. Rule ethics recommends that businesses carefully consider stake holders’ rights. Applying the element of rule ethics assures the business that stakeholders’ rights are not infringed upon. The last element, social contract ethics, makes sure each business evaluates and assures everyone’s rights in the decision making process. Applying Pastin’s Approach has helped with making a decision for International Investments, Inc.
Applying the first element was a positive determinant for globally investing. The values of International Investments, Inc. are not sacrificed for this procedure. International Investments, Inc. would benefit most if it invested in a country that has similar values and ethics. Investing in a country that provides poor working conditions, no wages at all, or has been known to defraud, may not be the best choice. Looking at the second element, we found that there is a substantial net benefit to investing globally. Globally investing provides diversity in a business’ portfolio(textbook). And one might ask, “Is globally investing at the expense of our own country?” Globally investing is beneficial to all: the country being invested in, the firms investing in that country, and the country itself that is doing the investing will not be negatively effected. The stake holders in the company have rights, and applying rule ethics checks to make sure that stake holder rights are
protected. Stake holder rights will not be taken advantage of, nor will they be infringed upon at all if your firm globally invests. Not only will the rights of stake holders be there, the rights of everyone involved in globally investing will be protected. In applying social contract ethics we discovered that everyone, including stake holders in your firm, will benefit. Investing abroad may be a simple decision when looking at analyses and macro economic variables, but ethically making this decision provides greater assurance than numbers.

In today’s flat world, global economy has risen to the point where it has caused a change in the way investment firms manage their portfolios. Since national borders allow transactions in the stock markets of foreign countries, it has created an opportunity for many investment firms to transact, and expand their stock portfolios. By doing so, they are creating a risk on their investment due to the fact that the economic performance fluctuates from one country to another. In addition, by not eliminating the above-mentioned risk factor, this may have a positive effect by not solely relying on a single country’s economic performance. Having the stocks held in multiple countries, this will minimize the risk due to establishing investments in a global aspect. In our previous research, we have concluded that interest rates play a highly significant role in evaluating the country’s stock market performance. We must perform the hypothesis test to conclude if whether or not the use of national interest rates is a good variable to consider.
Q.1 a:
our team wasis given a The sample wasis data of percent changes onin market indices mean, we hadhave to find indices and the percent change in interest 2005 and 2006. We2006, so we used the 2006, which wereare 30.48 and variables, which wereare 14.56 and two numbers indicatedindicate the variability that Japan wasis not in also Mexico wasis the only be some other factors, like
Q1 b:
After extracting all those numbers and data, we decided to run two hypothesis tests to see if the mean percent changes in stock market indices and in interest rates are significantly different from zero, and the significance was given 0.05.
that we neededneed to run because we hadneed to test of T-test wasis the mean and n wasis the number sample, which wasis eighteen. So the significance wasis 0.05 and this data wasis 17 (n-1=18-1=17), this test wasis a two test, we dividedivided the significance sample t wasis 8.88 which wasis much bigger sample t wasis located in that we rejectedneed to reject H₀, and acceptedaccept H₁, which that there wereare some significant rate, which wereis 97.19. And we used µequalsµ equals to 0, The n wasis 18. We sample t wasis 1.64. Since the wasis 2.11, we that we neededneed to accept that there wasare some significant the data wasis not able Mexico might be in some other factors during those two years that affected them and lead them to have abnormal we still neededneed further analysis whether we couldcan use the future investment.
Question 2. A
As following the instructions in the question, we wanted to make sure there is a relationship between the two variables of the percent change in market indices and the percent change in interest rates for the eighteen countries, our team decided to create the scatter plot for those two variables. Since the mean task of this case is to predict the change in market indices by analyzing the change in interest rates, so we used the change in interest rates as the explanatory variable, x, which is also referred as the predictor variable, and then we set up the change in market indices as the response variable, which is the variable can be explained by the value of the explanatory variable. After we created the scatter, we found the negative relation between those two variables, which is the linear correlation coefficient, it equals to -0.52. But we noticed an unusual observation is in this data, the representing spot Japan is far away from other spots, and it does not fit the overall pattern of the data, which means that Japan could be an outlier in this data analysis. So we ran an outlier test which is mean ± 3×standared deviation. By doing so, we found the percent market change of Japan in 2005 and 2006 is bigger than mean + 3×standared deviation, it means that the data of Japan is significantly different from the overall pattern. And as we predicated before that Mexico could be one outlier too, and then we ran the outlier test again, found that Mexico’s data is within one standard deviation of the mean, so we concluded that Mexico is not an outlier.
Because the data value of an outlier might affect the entire predication, so our team decided to make a scatter without Japan, in case of predicating the future investment strategy, and then mislead our clients to make unprofitable investments. And then we found the correlation coefficient of the data without Japan is -0.35.
Because the two correlation coefficients are all negative, we made a reasonable conclusion indicating there is a reasonable negative relation between the change in market indices and the change in interest rates. Our interpretation of this negative relation is the rise in interest rates is usually associated with a decrease in the price of stock value. According to the Gateway text book, “The future expected profits must be discounted by the existing interest. If interest rates rise, the present value of a future expected earning is smaller. A rise in interest rates is therefore often associated with a fall in stock price.” And also, “if the interest rate that a firm must pay to borrow is increased, and nothing else effecting future profits has changed, the higher cost of borrowing may lower expected future returned. Lower expected returns would also lower the stock price today.” (229), so our team suggests those business and individuals who invest in international market by buying and selling stocks, do not buy other countries’ stocks when they have a rise in interest rate, which may led the countries to have a fall in stock prices.
Question 2. b
In order to analysis the two variables of the changes in market indices and interest rates of 2005 and 2006 we used Excel to conduct a regression analysis of those two variables. For our team want to predict the market indices, so we used the data from all eighteen countries, and set the change in stock market rate be the dependent variable, which is also called response variable, y. And then we set the percent change in interest rate be the independent variable, which is also called explanatory variable, x. And we also used the scatter that we created in question 1 to find the least-squares regression line, which is y = -0.029x + 33.39. After running the regression analysis, we found the coefficient of determination of those two variables is 0.268, which means that 26.8% of the variance in distance is explained by the least-squares regression line, and the rest 73.2% variation in distance is explained by other factors, which means that we cannot use interest rate to predict the 73.2% variation change of the stock market price change. Then we found the regression coefficient is -0.029 which is the slope of the least-squares regression line of those two variables. And our team’s interpretation of the coefficient of determination is that there is a negative relation between the change in market price indices and the change in interest rate. This interpretation matches the interpretation that we did in question 2, a, about the correlation coefficients of those two variables which is that they have negative relation. So after this interpretation of regression coefficient we have more confidence on the prediction of the negative relation between those two variables.
We also took a serious analysis on the p-value, because the p-value tells you whether you should reject the null hypothesis. In this case the null hypothesis is mean equals to zero, which means that there is no correlation between sample data and population data. The mean of percent changes in market indices and in interest rate in the year of 2005 and 2006, which are 30.48 and 97.19. The formulae of T-test (need more)
However, before making the prediction, our team has to determine statistically whether this model is useful for prediction purposes, and whether those two variables have a strong enough relation to let us make the predication. So our team had to make sure the regression coefficient is a significantly different from zero. Because if the slope is zero, meaning that there is no relation between two variables, so our team found the slopes of data is -0.029, which is very close to zero, but there is still a relation between those two variables.

In order for us to evaluate the issue regarding which method to be used in our firm when making investment decisions, we have concluded that statistical analysis is required. Our research will also include testing the relationship between economic and stock market performance. With the use of macroeconomic variable data available to us, we will consider using variables such as, unemployment rate, interest rate, inflation, and per capita gross national income(GNI).
Primary Issues to Consider
to consider.
Q.1 a:
The standard deviation and the mean are the most popular methods for numerically describing the distribution of a variable. Mean is generally the average value of a given data, and it is also called arithmetic mean, the arithmetic mean of a variable is the sum of all the values of the variable divide by the number of the sample observation. (Michael 121) In this International Investment case, our team was given a sample of population of interest of all countries in the world. The sample was data of interest rates, market index, and inflation rates, etc. of eighteen countries. So in this case our team used sample arithmetic mean for the percent changes on market indices and the percent changes in interest rate. But before calculating the mean, we had to find the percent change in market indices and in interest rates of the eighteen counties in the year of 2005 and 2006. We used the formula, Percent change = , to find the Percent changes of market index and interest rates in 2005 and 2006 of those eighteen countries. After calculating the percent changes, we applied the formula of mean, which is to find the mean of percent changes in market indices and in interest rate in the year of 2005 and 2006, which were 30.48 and 97.19. Those two numbers indicated that the average change in market indices of those eighteen countries is 30.48, and the average change in interest rate is 97.19. Then we started to find the standard deviation of the percent changes in market indices and in interest rate in the year of 2005 and 2006. We used the formula of sample standard deviation, s = to find the standard deviations of those two variables, which were 14.56 and 251.75. Those two numbers indicated the variability of percent changes in market indices and in interest rate in the year of 2005 and 2006. By analyzing the mean and the standard deviation we concluded that Japan was not in the normal range of percent change, there must be some other factors affected Japan’s market index during those particular years, and also Mexico was the only one country has a negative change in interest rate with positive change in market indices, there could be some factors, like reducing government spending, increasing public saving, or short period of high defilation rate. But we could not give an absolute conclusion, because we needed more information and further analysis.
Q1 b:
After extracting all those numbers and data, we decided to run two hypothesis tests to see if the mean percent changes in stock market indices and in interest rates are significantly different from zero, and the significance was given 0.05.
The reason that we needed to run this hypothesis test against the mean of percent changes in stock market indices and in interest rates are equal to zero, which can be written in the test as H₀, µ=0, because we had to test if the sample size has the significant power to give a reliable statistical predication for the entire population with in this case is all the countries in this world, which also means that we needed to test if this sample had unreasonable errors.
We used the T test to test this sample data, because we did not have the mean of population, and the number of sample is less than 30. We assumed the null hypothesis (H₀) is µ=0, which we wanted to prove is wrong, and then we assumed the alternative hypothesis (H₁) is µ≠0, which means that there are some significant changes in the data of stock market value during the year of 2005 and 2006, which is conclusion that we wanted to have. Then we applied all the data to the formulae of T-test was the mean of the percentage change in stock market of those eighteen countries during 2005 and 2006, µ=0, and S=14.56, and n was the number of the sample, which was eighteen. So we found the sample t equals to 8.88. Because the significance was 0.05 and the degrees of freedom of this data was 17 (n-1=18-1=17), and also because this test was a two tails hypothesis test, we divide the significance by 2 got 0.025 which lead us to conclude the equals to 2.11. Since the sample t was 8.88 which was much bigger than the 2.11 so the sample t was located in the rejecting area. After the hypothesis test, we concluded that we rejected H₀, and accepted H₁, which means that there were some significant changes in the data and the data was reasonably reliable. Then as the question instructs, we used the test for the percentage change in interest rates. We used the same T-test equation , applied mean of the percentage change in interest rate, which were 97.19. And then we used µequals to 0, and the sample standard deviation S equals to 251.75. The n was 18. We found the sample t was 1.64. Since the was 2.11, we concluded that we needed to accept the H₀, which means that there was some significant errors or other factors that affected the data, so the data was not able to provide a powerful prediction of interest rate for the entire population. As we observed in question 1 a, Japan and Mexico might in some unusual conditions and had some other factors that affected them have abnormal data values. But we still needed further analysis to decide whether we could use the sample of interest rate as a reliable sample to make predication for future investment.

& Issues
Case Facts Summary
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Primary Issues to Consider
not eliminating above mentionedthe above-mentioned risk factor, this may also have a due to havingestablishing investments spread out globally.in a global aspect. In our rates play an importanta highly significant role in evaluating the country’s stock conclude if whether or not the use to consider.
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& Issues Case
Case Facts Summary of stocks.
In order for us to evaluate the issue on which method to be used in our firm when making investment decisions, we have concluded that statistical analysis is required. Our research will also include testing the relationship between economic and stock market performance. With the use of macroeconomic variable data available to us, we will consider using variables such as, unemployment rate, interest rate, inflation, and per capita gross national income(GNI).
Primary Issues to Consider
to consider.
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Case Facts & Issues Case Facts Summary
As International Investment, Inc., we offer worldwide financial services to businesses and individuals. We specialize in buying and selling stocks through the New York, London, and Tokyo exchanges. Our firm must narrow down as to which foreign markets to invest in order to minimize any risk of non-performing portfolios. As employees of International Investments, Inc., we are asked to research, and determine the best method to use when investing in global markets. Based on our concrete outcome, we will use our findings as foundations when recommending global investments for are clients. In general, investment firms use macroeconomic variables when making decision of selecting stocks. To predict which country will do better than the other, firms use economic indicator such as, interest, and unemployment rates. Not all of our financial analysts use this method because, they consider the use of macroeconomic variables alone is not enough. To limit the risk factor to its minimal, our financial analysts also oversee the performance of individual firms when making their selection of stocks.
In order for us to evaluate the issue on which method to be used in our firm when making investment decisions, we have concluded that statistical analysis is required. Our research will also include testing the relationship between economic and stock market performance. With the use of macroeconomic variable data available to us, we will consider using variables such as, unemployment rate, interest rate, inflation, and per capita gross national income(GNI).
Primary Issues to Consider
In today’s flat world, global economy has risen to the point where it has caused a change in the way investment firms manage their portfolios. Since national borders allow transactions in the stock markets of foreign countries, it has created an opportunity for many investment firms to transact, and expand their stock portfolios. By doing so, they are creating a risk on their investment due to the fact that the economic performance fluctuates from one country to another. In addition, by not eliminating above mentioned risk factor, this may also have a positive effect by not solely relying on a single country’s economic performance. Having the stocks held in multiple countries, this will minimize the risk due to having investments spread out globally. In our previous research, we have concluded that interest rates play an important role in evaluating country’s stock market performance. We must perform the hypothesis test to conclude if the use of national interest rates is a good variable to consider.
Note: David, since I don’t know what other main issues you will be talking about in the body, I need your help on finishing the remainder of the issues to consider. Don’t make me call up the professor and have him describe you the clothes hanger theory. J