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Hoochie [10]
2 years ago
11

Josh bought a bond with a par value of 1,500 from company ABC. The bond pays twenty annual coupons of 90 and matures at the end

of twenty years. It is bought and redeemed at par. Immediately after his purchase, company ABC issues another bond with the same coupon structures and redemption value as the par bond, but with a lower annual effective yield rate of 4%. Josh calculates the price of the new bond using the first-order modified approximation and the first-order Macaulay approximation. Let X be the the new price using the first-order Macaulay approximation and let Y be the new price using the first-order modified approximation. Calculate X-Y.
Business
1 answer:
ElenaW [278]2 years ago
3 0

Answer: c

Explanation:

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On January 2013, Pennington Bancorp acquired $100,000 of marketable securities and classified them as Available for Sale. On Mar
saveliy_v [14]

Answer:

b. Net Income

e. Cash from Investing Activities

Explanation:

Calculation to determine Which of the following items would be increased by the sale of the marketable securities

Using this formula

Gain from investment = Selling price of the security - Value of the security

Let plug in the formula

Gain from investment= $93,000 - $85,000

Gain from investment= $8,000

Based on the above calculation The sell of marketable security will INCREASE CASH which means that CASH FROM INVESTING ACTIVITIES will increase and NET INCOME will increase.

Therefore the items that would be increased by the sale of the marketable securities are :

b. Net Income

e. Cash from Investing Activities

4 0
2 years ago
Kristian Thalen has just joined the corporate treasury group at Electrolux of Sweden, a multinational Swedish appliance maker. E
WITCHER [35]

Answer:

See explaination

Explanation:

cost of debt, after-tax = (4.3% + 1.2%)*(1 - 26%) = 4.07%

cost of equity = 4.3% + 1.3*4% = 9.5%

market capitalization = 286130000 * 182 = 52075660000

total value of equity outstanding = market capitalization = 52075660000

Debt portion = 11532000000 / (11532000000 + 52075660000) = 0.18

Equity portion = 1 - 0.18 = 0.82

weighted average cost of capital = 0.18*4.07% + 0.82*9.5% = 8.52%

7 0
2 years ago
Midwest Fastener Supply stock is expected to return 16 percent in a booming economy, 12 percent in a normal economy, and −3 perc
Anit [1.1K]

Answer:

11.28%

Explanation:

Midwest fastener stock is expected to have a 16% booming economy

12% normal economy

-3% recession economy

The probability of an economic boom is 12%

The probability of a normal state is 80%

The probability of a recession is 8%

Therefore, the expected rate of return can be calculated as follows

= (return in booming economy×probability of boom economy)+(return in normal economy × probability of normal economy)+(return in recession economy×probability of recession economy)

= (16%+12%)+(12%+80%)+(-3%+8%)

= 192%+960%+(-24%)

= 192%+960%-24%

= 1,128%/100

= 11.28%

Hence the expected rate of return on the stock is 11.28%

5 0
2 years ago
Kit Company borrows $5 million at 12% on January 1, 2016, specifically for the purpose of financing the construction of a buildi
kakasveta [241]

Answer:

1. The amount of interest expense Kit would capitalize related to the construction of the building is <u>$300,000</u>.

2. The amount of interest revenue Kit would recognize is <u>$275,000</u>.

3. The amount of interest revenue Kit would capitalized as per IFRS  (IAS 23) is <u>$25,000</u>.

Explanation:

1. Compute the amount of interest expense Kit would capitalize related to the construction of the building.$

Note: See part 1 of the attached excel file for the calculation of average expenses incurred for the building

Average expenses incurred for the building = $2,500,000

Interest rate = 12%

Interest expense to capitalize = $2,500,000 * 12% = $300,000

Therefore, the amount of interest expense Kit would capitalize related to the construction of the building is <u>$300,000</u>.

2. Compute the amount of interest revenue Kit would recognize.$

Note: See part 2 of the attached excel file for the calculation of the total interest revenue.

Amount of interest revenue = $275,000

Therefore, the amount of interest revenue Kit would recognize is <u>$275,000</u>.

3. Assume that Kit uses IFRS. What amount of interest would be capitalized related to the construction of the building?$

The IAS 23 Clause 12 states that to the extent that an entity borrows funds specifically for the purpose of obtaining a qualifying asset, the entity shall determine the amount of borrowing costs eligible for capitalization as the actual borrowing costs incurred on that borrowing during the period less any investment income on the temporary investment of those borrowings.

Based on the above, the amount of interest that would be capitalized related to the construction of the building can be calculated as follows:

Amount of interest revenue to capitalized as per IFRS = Interest expense to capitalize - Total interest income = $3000,000 - $275,000 = $25,000

Therefore, the amount of interest revenue Kit would capitalized as per IFRS  (IAS 23) is <u>$25,000</u>.

Download xlsx
4 0
2 years ago
Each of 16 students measured the circumference of a tennis ball by four different methods, which were:
antoniya [11.8K]

Question Continuation

a. Compute the mean measurement for each method.

b. Compute the median measurement for. each method.

c. Compute the 20% trimmed mean measurement for each method.

Answer:

a. Mean

Mean A = 22.675

Mean B = 20.71875

Mean C = 21.0125

Mean D = 20.86875

b. Median

Median A = 23.45

Median B = 20.45

Median C = 21.0

Median D = 20.7

c. 20% Trimmed Mean

Trimmed Mean A = 23.14

Trimmed Mean B = 20.73

Trimmed Mean C = 21.04

Trimmed Mean D = 20.75

Explanation:

a.

Mean = Σx/n

Where Σx= Summation of entries in each method

n = 16

Mean of Method A = (18.0 + 18.0 +18.0 + 19.0 + 22.0 + 22.0 + 22.5 + 22.9 + 24.0 + 24.0 + 25.0 +25.0 + 25.0 + 25.0 + 26.0 +26.4)/16

Mean A = 362.8/16

Mean A = 22.675

Mean of Method B = (18.8 + 18.9 + 18.9 + 19.8 + 20.1 + 20.4 + 20.4 + 20.4 + 20.6 + 20.5 + 21.2 + 21.9 + 22.0 + 22.0 + 22.0 + 23.6)16

Mean B = 331.5/16

Mean B = 20.71875

Mean of Method C = (20.2 + 20.5 + 20.5 + 20.7 + 20.8 + 20.9 + 21.0 + 21.0 + 21.0 + 21.0 + 21.0 + 21.5 + 21.5 + 21.5 + 21.5 + 21.6)/16

Mean C = 336.2/16

Mean C = 21.0125

Mean of Method D = (20.0 + 20.0 + 20.0 + 20.2 + 20.2 + 20.5 + 20.5 + 20.7 + 20.7 + 20.7 + 21.0 + 21.5 + 21.5 + 21.6 + 22.1 + 22.3)/16

Mean D = 333.9/16

Mean D = 20.86875

b.

Median is the number(s) at the middle

Since the total number of points for each method is 16 and this is an even number we need to calculate the median as the average between the 8th and the 9th position of the data ordered from the smallest to the largest. If we do this we have that:

Method A

Arranged Data: 18.0, 18.0, 18.0, 19.0, 22.0, 22.0, 22.5, 22.9, 24.0, 24.0, 25.0, 25.0, 25.0, 25.0, 26.0, 26.4

The 8th and 9th data are: 22.9 and 24.0

Median = (22.9 + 24.0/2

Median = 46.9/2

Median A = 23.45

Method B

Arranged Data: 18.8, 18.9, 18.9, 19.8, 20.1, 20.4, 20.4, 20.4, 20.5, 20.6, 21.2, 21.9, 22.0, 22.0, 22.0, 23.6

The 8th and 9th data are: 20.4 and 20.5

Median = (20.4+20.5)/2

Median = 40.9/2

Median B = 20.45

Method C

Arranged Data: 20.2, 20.5, 20.5, 20.7, 20.8, 20.9, 21.0, 21.0, 21.0, 21.0, 21.0, 21.5, 21.5, 21.5, 21.5, 21.6

The 8th and 9th data are: 21.0 and 21.0

Median = (21.0 + 21.0)/2

Median = 42.0/2

Median C = 21.0

Method D

Arranged Data: 20.0, 20.0, 20.0, 20.2, 20.2, 20.5, 20.5, 20.7, 20.7, 20.7, 21.0, 21.5, 21.5, 21.6, 22.1, 22.3

The 8th and 9th data are: 20.7 and 20.7

Median = (20.7+20.7)/2

Median = 41.4/2

Median D = 20.7

c.

The trimmed mean by 20% means that we'll calculate mean by removing the 20% from each of the tails.

20% of 16 = 3.2 (Approximated to 3)

So we need to remove 3 observations from both ends of the data.

Method A becomes

19.0, 22.0, 22.0, 22.5, 22.9, 24.0, 24.0, 25.0, 25.0, 25.0

Trimmed Mean A = (19.0+22.0+22.0+22.5+ 22.9+24.0+24.0+25.0+ 25.0+ 25.0)/10

Trimmed Mean A = 231.4/10

Trimmed Mean A = 23.14

Method B becomes

19.8, 20.1, 20.4, 20.4, 20.4, 20.6, 20.5, 21.2, 21.9, 22.0

Trimmed Mean B = (19.8+20.1+20.4+ 20.4+ 20.4+20.6+20.5+21.2+21.9+22.0)/10

Trimmed Mean B = 207.3/10

Trimmed Mean B = 20.73

Method C becomes

20.7, 20.8, 20.9, 21.0, 21.0, 21.0, 21.0, 21.0, 21.5, 21.5

Trimmed Mean C = (20.7+ 20.8+ 20.9+ 21.0+ 21.0+ 21.0+21.0+, 21.0+, 21.5+21.5)/10

Trimmed Mean C = 210.4/10

Trimmed Mean C = 21.04

Method D becomes

20.2, 20.2, 20.5, 20.5, 20.7, 20.7, 20.7, 21.0, 21.5, 21.5

Trimmed Mean D = (20.2+, 20.2+20.5+, 20.5+ 20.7+ 20.7+ 20.7 +, 21.0 +21.5 + 21.5)/10

Trimmed Mean D = 207.5/10

Trimmed Mean D = 20.75

7 0
2 years ago
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