Answer:
Interests received from corporate bonds is taxed as ordinary income = 8.8% x (1 - 37%) = 5.544% after tax yield
Non-qualified dividends are also taxed as ordinary income, therefore, the after tax yield of a non-qualified dividend that yields 8.8% = 5.544%
Qualified dividend pay a lower tax rate, since they are taxed as long term capital gains. If the after tax yield will be the same, then:
5.544% = dividend yield x (1 - 20%)
5.544% / 0.8 = dividend yield
6.93% = dividend yield
a. What price should a 3 year semi-annual 10% coupon bond with $1000 face value be trading at if the prices of similar risk zero coupon of ($100 face value) bonds are given below:
Term (In Years) Price (In $)
0.5 100
1 97
1.5 96
2 93
2.5 92
3 91
4 89
b. How would you arbitrage the opportunity if you found out that the bond in Part A above was trading at par? Specifically, explain which bond/s will you buy and which one/s will be sell today and in how much quantities?
Answer:
A) the current price of the bond is:
($50 x 1) + ($50 x 0.97) + ($50 x 0.96) + ($50 x 0.93) + ($50 x 0.92) + ($1,050 x 0.91) = $1,194.50
B) assuming that the bond is trading at par, you have a great opportunity to make money:
maturity zero coupon return of coupon
bond's price bond
0 $1,000 $0
0.5 $1,000 $50
1 $970 $100
1.5 $960 $150
2 $930 $200
2.5 $920 $250
3 $910 $300
You can buy 10 coupon bonds = -$10,000
Sell short 1 One-year zero coupon bond = $970
Sell short 1 Two-year zero coupon bond = $930
Sell short 11 Three-year zero coupon bond = $10,010
Positive cash flow = $1,910
At the end of year 1, you can pay the One-year zero coupon bond with the coupons received = $1,000 (cash flows = $0)
At the end of year 2, you can pay the Two-year zero coupon bond with the coupons received = $1,000 (cash flows = $0)
At the end of year 3, you can pay the Three-year zero coupon bonds with the coupons + maturity value received = $11,000 (cash flows = $0)
If the coupon bonds are selling at par, you could earn today $1,910 for every 10 bonds that you buy.
Information for firm ABC: Inventory at the beginning of April, 2008: 200 units Expected demand during April, 2008: 220 units Production expected during April, 2008: 100 units What is the expected inventory at the end of April 2008
Answer:
250 units
Explanation:
Calculation for the expected inventory at the end of April 2008
Inventory at the beginning of April, 2008 200 units
Add Production expected during April, 2008 100 units
Total 300 units
Less Expected demand during April, 2008 50 units
Expected inventory at the end of April 2008 250 units
(300 units-50 units)
Therefore the Expected inventory at the end of April 2008 will be 250 units
Refer to the scenario above. If the terms of trade are 1.5 kilos of cloudberries for a kilo of salted cod, the terms of trade are ________
Answer:
B. Advantageous for both Norway and Sweden.
Explanation:
The full question is missing but have been attached as picture below.
Options Includes "A. advantageous for Norway but not for Sweden, B. advantageous for both Norway and Sweden, C. advantageous for Sweden but not for Norway, D. not advantageous for either Norway or Sweden"
Norway's opportunity cost of salted cod is 1 cloud berries and 2 cloud berries for Sweden. Since the international price lies between Norway's and Sweden's opportunity cost, it is beneficial for both of them.
Determine when, to the nearest year, $4,000 invested at 5% per year, compounded daily, will be worth $10,000. yr
Answer:
18 years
Explanation:
The computation of the time period is shown below:
Given that
Present value = $4,000
Rate of interest = 5 years
N = 365 days
Future value = $10,000
Now as we know that
Future value = Present value × (1 + rate of interest)^number of years
Let us assume the number of years be t
$10,000 = $4,000 × (1 + 0.05 ÷ 365)^365 × t
2.5 = (1 + 0.05 ÷ 365)^365 × t
2.5 = 1.000136986^365 × t
Now take log on both the sides
log 2.5 = 365t × log 1.000136986
t = 1 ÷ 365[log 2.5 ÷ log 1.000136986]
= 18 years
Think about the merchandise sold at Office Depot/OfficeMax and Staples, and list three to four types of merchandise that fall into extended problem solving, limited problem solving, and habitual decision making for college students. Explain how the categories of merchandise would change for each type of buying decision if the customer was the owner of a medium-sized business.
Answer:
The laptops and printers are the merchandise that fall into extended problem solving.
The stapler, punch machines and stamps are the limited problem solving.
The office stationary like pens, papers and pins are habitual decision making.
Explanation:
The extended problem solving is when there is purchase of a merchandise that involve greater analysis before making a buy decision as they are expensive. The limited problem solving merchandise require lesser analysis of buy decision and a person can buy the product after inquiring from the shop. The habitual decision making is when a person buys a thing instantly before analyzing its benefits versus cost.
Ten years ago, Lucas Inc. earned $0.50 per share. Its earnings this year were $3.60. What was the growth rate in earnings per share (EPS) over the 10-year period? a. 23.57% b. 21.82% c. 26.19% d. 16.80% e. 18.77%
Answer:
21.82 %
Explanation:
Earnings per share is the monetary value of earnings per outstanding share of common stock for a company
Growth multiple = EPS in current year / EPS of 10th year before
Growth multiple = $3.60/ $0.50
Growth multiple = 7.20
Next, raise the 1/10th power of the growth rate as it is required to compute the growth rate in 10 years
(7.20)1/10 = 1.2182
Now, 1 is to be subtracted from the figure obtained that is 1.2182
1.21 – 1 = 0.2182
In the final step, multiply 0.2182 by 100 to obtain the answer in percentage which is as follows:
0.2182 * 100 = 21.82 %
uppose an investor earned a semiannual yield of 6.4 percent on a bond paying coupons twice a year. What is the effective annual yield (EAY) on this investment
Answer:
Effective annual yield is 0.132
Explanation:
The computation of the effective annual yield (EAY) is shown below:
Effective annual yield is
= (1 + periodic interest rate)^m – 1
= (1 + 0.064)^2 - 1
= 0.132
hence, the effective annual yield (EAY) is 0.132
And, the same is to be considered
We simply applied the above formula so that the correct answer could come
planned change is a purposeful systematic effort to alter or bring about change. What occurs next after alternative solutions to a problem are determined and analyzed
Answer:
The answer is "The plan of action amongst these options is selected".
Explanation:
The planned transition would be the planning of the whole company towards new priorities or new directions or a significant part of them.
Its guidance could include community, internal structures, processes, metrics and rewards, and any other associated issues. This strategy is a framework for changing or amending a trend, situation to improve the well-being, and the situation of a customer.in your opinion, what is the importance of contrast in culture among multicultural organization?
Answer:
Contrast Culture It provides a mirror image of the trainee's reference culture by illuminating its underpinning thoughts, values, attitudes, and behaviors.
Explanation:
Compound Interest (LO1) Suppose that the value of an investment in the stock market has increased at an average compound rate of about 5% since 1914. It is now 2016.
If someone invested $1,000 in 1914, how much would that investment be worth today?
Answer:
The investment is worth $144,980 today
Explanation:
The formula for calculating the future value of an invested amount compounded annually at a certain percentage rate (r) over a period of time (t) is given by:
[tex]FV = PV (1+\frac{r}{n})^{nt}\\ where:\\FV = future\ value\\PV = present\ value = \$1000\\r = interest\ rate = 5\%=0.05\\n = number\ of\ compounding\ period\ per\ year\ = 1\\t = time = 1914\ to\ 2016 = 102\\\therefore FV = PV (1+\frac{r}{n})^{nt}\\= FV = 1000 (1+\frac{0.05}{1})^{(1 \times102)}\\= 1000(1.05)^{102}\\FV= 1000 \times 144.98\\FV= \$144,980[/tex]
the economic integration of Europe happened in the last ten years, i.e., since the great recession of 2008-09. True False
Answer: False
Explanation:
Europe has been integrated since the later 20th century when in 1993, their markets were integrated and there was a total free movement of goods and services across the borders of countries in Europe.
In 1999, the Euro was introduced and this helped economic growth and integration even more as they were able to pursue a single monetary policy. Trade and competition rose and goods saw a drop in prices and bargaining power increased.
The difference between the totals of the debit and credit columns of the Adjusted Trial Balance columns on the end-of-period spreadsheet a.is the difference between revenue and expenses b.is the amount of net income or loss c.is the amount of retained earnings d.indicates there is an error on the end-of-period spreadsheet
Answer:
d.indicates there is an error on the end-of-period spreadsheet
Explanation:
The trial balance is a type of financial statement in which the debit side and the credit side are equal and matched while the adjusted trial balance is the balance which is made after passing the adjusting entries
Now in the case when the debit total and credit total is not matched so there must be an error at the end of the accounting period
Therefore the option d is correct
Assume a nominal interest rate on one-year U.S. Treasury Bills of 1.60% and a real rate of interest of 3.00%. Using the Fisher Effect Equation, what is the approximate expected rate of inflation in the U.S. over the next year
Answer:
inflation rate= -0.014 = -1.4%
Explanation:
Giving the following information:
Nominal interest rate= 1.6 %
Real interest rate= 3%
To calculate the inflation rate, we need to use the following formula:
Real interest rate= nominal interest rate - inflation rate
inflation rate= nominal interest rate - Real interest rate
inflation rate= 0.016 - 0.03
inflation rate= -0.014 = -1.4%
In this period the general cost of products decreased 1.4%
Product W1 Product M0 Sales (total) $ 69,700 $ 65,700 Direct materials (total) $ 31,100 $ 23,900 Direct labor (total) $ 22,400 $ 29,500 What is the product margin for Product W1 under activity-based costing
Answer:
Product margin= $16,200
Explanation:
Giving the following information:
Product W1
Sales (total) $ 69,700
Direct materials (total) $ 31,100
Direct labor (total) $ 22,400
To calculate the product margin, we need to use the following formula:
Product margin= sales - production costs
For W1:
Product margin= 69,700 - 31,100 - 22,400
Product margin= $16,200
A company purchased a building three years ago for $150,000 and is using straight-line depreciation to depreciate it over 20 years. The salvage value of the building is $50,000. Prepare the adjusting entry to record the depreciation expense for the current year.
Answer:
Adjusting Journal Entry for the current year:
Debit Depreciation Expense - Building $5,000
Credit Accumulated Depreciation - Building $5,000
To record depreciation expense on building for the year.
Explanation:
a) Data and Calculations:
Cost of building = $150,000
Method of depreciation = straight-line method
Salvage value of the building = $50,000
Useful life of the building = 20 years
Depreciable amount = $100,000 ($150,000 - $50,000)
Depreciation rate (expense) per year = $100,000/20 = $5,000
b) The straight-line method of depreciation is the easiest. It spreads the cost of an asset over its useful life evenly. The depreciable amount is obtained after deducting the residual value from the cost of the asset. Then the depreciable amount is divided into the number of years that the asset will be in use.
What is the payback period for the following set of cash flows? (Round your answer to 2 decimal places, e.g., 32.16.) Year Cash Flow 0 –$ 5,500 1 1,525 2 1,725 3 2,125 4 1,625
Answer:
3.08 years
Explanation:
The computation of the payback period is shown below:
Year Cash flows Cumulative cash flows
0 -$5,500 -$5,500
1 $1,525 -$3,975
2 $1,725 -$2,250
3 $2,125 -$125
4 $1,625 $1,500
Now the pay back period is
= 3 years + $125 ÷ $1,625
= 3.08 years
Stock R has a beta of 1.7, Stock S has a beta of 0.95, the expected rate of return on an average stock is 10%, and the risk-free rate is 3%. By how much does the required return on the riskier stock exceed that on the less risky stock
Answer:
7.5%
Explanation:
according to CAPM -
Required rate of return = risk free rate + (beta x expected rate of return on the average stock)
Stock R = 3% + (10% X 1.7) = 20%
Stock S = 3% + (10% X 0.95) = 12.5%
20% - 12.5% = 7.5%
Suppose Chris starts saving in 3 years from today. He will save $20,000 each year for 6 years (until the end of year 8). Then he leaves that money in the same account until the end of year 10. How much will he have saved at the end of year 10 if he earns 4.3% interest.
Answer:
FV= $145,406.11
Explanation:
Giving the following information:
Annual deposit= $20,000
Interest rate= 4.3%
First, we need to calculate the value of the investment at the end of year 8. We will use the following formula:
FV= {A*[(1+i)^n-1]}/i
A= annual deposit
FV= {20,000*[(1.043^6) - 1]} / 0.043
FV= $133,663.87
Now, the value at the end of the 10th year:
FV= PV*(1+i)^n
FV= 133,663.87*(1.043^2)
FV= $145,406.11
ssume the following information: Variable cost ratio 80% Total fixed costs $60,000 What is the volume of sales dollars required to break even
Answer:
Break-even point (dollars)= $300,000
Explanation:
Giving the following information:
Variable cost ratio 80%
Total fixed costs $60,000
To calculate the break-even point in dollars, we need to use the following formula:
Break-even point (dollars)= fixed costs/ contribution margin ratio
contribution margin ratio= 1 - 0.8= 0.2
Break-even point (dollars)= 60,000 / 0.2
Break-even point (dollars)= $300,000
Using job order costing in a service companyRoth accounting pays jack smtih 90,000 per yearRequirements1. What is the hourly cost to roth accounting of employing smith? Assume a 30-hour week and a 50-week year.2. What direct labor cost would be assigned to Client 507 if smith works 15 hours to prepare client 507's financial statements?
Answer:
1. What is the hourly cost to Roth accounting of employing smith? Assume a 30-hour week and a 50-week year.
total number of labor hours per year = 30 per week x 50 weeks = 1,500 labor hours
cost per labor hour = $90,000 / 1,500 = $60
2. What direct labor cost would be assigned to Client 507 if smith works 15 hours to prepare client 507's financial statements?
total direct labor costs assigned to client 507 = 15 direct labor hours billed x $60 per direct labor hour = $900
A building is acquired on January 1 at a cost of $860,000 with an estimated useful life of ten years and salvage value of $77,400. Compute depreciation expense for the first three years using the double-declining-balance method. (Round your answers to the nearest dollar.)
Answer:
Depreciation expense per year:
Year 1 = $172000
Year 2 = $137600
Year 3 = $110080
Explanation:
Double declining balance method is an accelerated method of charging depreciation expense. It charges a higher depreciation expense in the initial years of the asset's life and lower depreciation expense in the later years.
The formula to calculate depreciation expense per year is,
Depreciation expense = 2 * [ (Cost - Accumulated Depreciation) / Estimated useful life of the asset ]
The depreciation expense for Year 1 to 3 will be,
Depreciation Expense per year
Year 1 = 2 * [ (860000 - 0) / 10 ] = $172000
Year 2 = 2 * [ (860000 - 172000) / 10 ] = $137600
Year 3 = 2 * [ (860000 - (172000 + 137600)) / 10 ] = $110080
The following accounts were taken from the Adjusted Trial Balance columns of the end-of-period spreadsheet: Accumulated Depreciation $ 2,868 Fees Earned 15,445 Depreciation Expense 961 Insurance Expense 563 Prepaid Insurance 3,369 Supplies 1,521 Supplies Expense 3,973 Net income for the period is
Answer:
$9,948
Explanation:
Calculation of net income is seen below
Fee earned
$15,445
Less expenses;
Depreciation
($961)
Insurance expense
($563)
Supply expense
($3,973)
Net income
$9,948
• Please note that other items like prepaid insurance, supplies are balance sheet items, hence will be reported under current assets. Accumulated depreciation is also a balance sheet item.
A bond has 8 years to maturity, a 7 percent coupon, a $1,000 face value, and pays coupon interest semiannually. What is the bond's current price if the yield to maturity is 6.91 percent?
a. $799.32
b. $848.16
c. $917.92
d. $1,005.46
e. $1,009.73
Answer:
Bond Price = $1005.46079 rounded off to $1005.46
Option d is the correct answer
Explanation:
To calculate the price of the bond today, we will use the formula for the price of the bond. We assume that the interest rate provided is stated in annual terms. As the bond is a semi annual bond, the coupon payment, number of periods and semi annual YTM will be,
Coupon Payment (C) = 1,000 * 0.07 * 6/12 = $35
Total periods (n) = 8 * 2 = 16
r or YTM = 0.0691 * 6/12 = 0.03455 or 3.455%
The formula to calculate the price of the bonds today is attached.
Bond Price = 35 * [( 1 - (1+0.03455)^-16) / 0.03455] + 1000 / (1+0.03455)^16
Bond Price = $1005.46079 rounded off to $1005.46
A corporation sold 14,000 shares of its $10 par value common stock at a cash price of $13 per share. The entry to record this transaction would include:
Answer:
Date Description and Explanation Debit Credit
Cash $182,000
Common stock $140,000
Additional paid-in capital $42,000
(To record the issuance of equity shares)
Explanation:
Additional capital = (Issue price - Par value) * Shares issued
= ($13−$10) * 14,000 shares
= $3 * 14,000 shares
= $42,000
Face value = Shares issued * Par value
= 14,000 shares * $10 per share
= $140,000
In both Gamma and Delta average labor productivity is $40,000 per worker per year. The population of Gamma is 200,000 and the population of Delta is 400,000. Fifty percent of the population in each country is employed. Total output in Gamma is _____ and total output in Delta is _____.
Answer: Gamma = $4,00,000,000
Delta = $8,000,000,000
Explanation:
Average labor productivity for each country = $40,000 per worker per year.
Population of Gamma = 200,000
Population of Delta = 400,000.
Percentage employed = 50%
Number of employees in Gamma = % employed × population
= 50% × 200,000
= 0.5 × 200,000
= 100,000 employees
Number of employees in Delta = %employed × population
= 50% × 400,000
= 0.5 × 400,000
= 200,000 employees
Total output will be calculated as:
= Average labor productivity x Number of employees
Total output in Gamma = $40,000 x 100,000 = $4,00,000,000
Total output in Delta = $40,000 x 200,000 = $8,000,000,000
At the end of the current accounting period, Ringgold Co. recorded depreciation of $15,000 on its equipment. What is the effect of this entry on the company's balance sheet
Answer: decrease owners' equity and decrease assets.
Explanation:
When depreciation is recorded on a fixed asset such as equipment, the net book value of the equipment falls. This will decrease the value of the entire assets of the company as equipment is an asset as already mentioned.
Equity will reduce by the same amount because depreciation is an expense and expenses reduce the Net Income of a company which is an account that is part of Equity.
Consider the following information: Cash: $10,000 Accounts Payable: $3,000 Accounts Receivable: $2,000 Office Supplies: $1,000 Furniture: $15,000 Notes Payable: $10,000 Equity: $5000 From the above set of data, what is the total for assets, liabilities, and equity
Answer:
The total for assets, liabilities, and equity:
Total assets $28,000
Total liabilities $13,000
Total equity $15,000
Explanation:
a) Data and Calculations:
Cash: $10,000
Accounts Receivable: $2,000
Office Supplies: $1,000
Furniture: $15,000
Total assets $28,000
Accounts Payable: $3,000
Notes Payable: $10,000
Total liabilities $13,000
Equity: $5,000
Retained Earnings $10,000
Total equity $15,000
Retained Earnings = Assets - (Liabilities + Equity)
b) The accounting equation states that assets = liabilities + equity. This equation is always true with each transaction that occurs, provided it is correctly posted. It is the basis of the double-entry system of accounting with each transaction affecting at least two accounts.
MM Proposition II with no taxes supports the argument that a firm's:
a. unlevered equity is risk-free.
b. cost of equity is inversely related to the firm's debt-equity level.
c. cost of equity is unaffected by the firm's unlevered cost of capital.
d. Incorrect WACC will exceed the unlevered firm's cost of equity.
e. WACC remains constant even if the firm changes its capital structure.
Answer:
e. WACC remains constant even if the firm changes its capital structure.
Explanation:
According to the MM approach having no taxes so the capital structure of the firm remains constant for the weighted average cost of capital
Also, the equity leverage would be changed for the debt to equity proportion
Therefore the option e is correct
And, the same is to be considered
All other options are incorrect
Harrison Co. issued 16-year bonds one year ago at a coupon rate of 6.2 percent. The bonds make semiannual payments. If the YTM on these bonds is 5.4 percent, what is the current dollar price assuming a $1,000 par value
Answer:
$1,743.65
Explanation:
The current dollar price on this bond is its Present Value (PV) and is calculated as follows :
N = 16 × 2 = 32
P/yr = 2
Pmt = ($1,000 × 6.2%) ÷ 2 = $62
i = 5.4 %
FV = $1,000
PV = ?
Using a financial calculator to input the values as above, the current dollar price on this bond is $1,743.65
The income an individual receives from all sources less the Social Security taxes that the individual must pay is known as ____ income.
Answer:
Personal.
Explanation:
The income an individual receives from all sources less the Social Security taxes that the individual must pay is known as personal income.
