Ajax, Inc., issued callable bonds with a par value of $1,000,000 that require the payment of a call premium of $10,000. The bond
1 answer:
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Answer: $1.89
Explanation: As, we know that :-
where,
net income for common shareholders = net income - preferred dividend
= $20 - $3 = $17
= 9 shares
so putting the values into equation we get :-
= $1.89
Answer:
Task A:
<u>What is the effecting annual rate changed on this loan?</u>
Answer is 3.03%
<u>Task B: </u>
<u>What would be the quarterly payment on this loan?</u>
Answer is $5,403.06
<u>Task C:</u>
<u>Dr. Zoidberg also discovers that instead of the special promotional rate he can make an additional down payment of $20,000 that would lower his loan amount accordingly (i.e. by $20,000). At what APR would Dr. Zoidberg have the same quarterly payment with this option as with the initial promotional rate of 3%?</u>
Answer is 12.21%
<u>Task D</u>
<u>Dr. Zoidberg finds that he can get 1.5% APR if he elects option (c). What will his quarterly payment be under this option?</u>
The answer is $4,159.37
<u>Task E:</u>
<u>Now assume that that payment frequency changes to annual, preserving the same EAR. What is his payment now?</u>
The answer is $21,835.46
Explanation:
<h2>Task A: </h2><h3>What is the effecting annual rate changed on this loan?</h3>Solution:
Effective annual rate = (1 + (APR/n))ⁿ - 1
where
n = number of compounding periods per year = 4 (compounding quarterly)
APR = 3%
Effective annual rate = (1 + (3%/4))⁴ - 1
Effective annual rate = 3.03% (answer).
<h2>Task B: </h2><h3>What would be the quarterly payment on this loan?</h3>Solution:
Quarterly loan payment is calculated using PMT function in Excel :
Rate = 3% / 4 (converting annual rate into Quarterly rate)
nper = 5*4 (5 year loan with 12 Quarterly payments each year)
pv = 100000 (loan amount)
PMT Formula = PMT(3%/4,5*4,100000)
PMT is calculated to be $5,403.06 (answer)
Note: PMT calculation has been attached.
<h2>Task C:</h2><h3>Dr. Zoidberg also discovers that instead of the special promotional rate he can make an additional down payment of $20,000 that would lower his loan amount accordingly (i.e. by $20,000). At what APR would Dr. Zoidberg have the same quarterly payment with this option as with the initial promotional rate of 3%?</h3>Solution
The quarterly rate to have the same quarterly payment is calculated using RATE function in Excel :
nper = 5*4 (5 year loan with 12 Quarterly payments each year)
pmt = -5403.06 (Quarterly payment. This is entered with a negative sign because it is a payment)
pv = 80000 (loan amount)
RATE is calculated to be 3.05%. This is the quarterly rate. To get APR, we multiply by 4.
Formula for APR = RATE(5*4,C1,80000)*4
APR = 12.21% (answer)
<h2>Task D</h2><h3>Dr. Zoidberg finds that he can get 1.5% APR if he elects option (c). What will his quarterly payment be under this option?</h3>Solution:
Quarterly loan payment is calculated using PMT function in Excel :
rate = 1.5% / 4 (converting annual rate into Quarterly rate)
nper = 5*4 (5 year loan with 12 Quarterly payments each year)
pv = 80000 (loan amount)
PMT formula: PMT(1.5%/4,5*4,80000)
PMT is calculated to be $4,159.37
<h2>Task E</h2><h3>Now assume that that payment frequency changes to annual, preserving the same EAR. What is his payment now?</h3>Solution:
PMT = PMT(3%,5,100000)
PMT = $21,835.46
Answer:
Kindly check the attached images below for the well arranged account entries
Explanation:
1
Date General Journal Debit Credit
Jul 01,2022 Equipment 25550 =15800+6800+2950
Prepaid Insurance 2750
Cash 28300
2
Date General Journal Debit Credit
Dec 31,2022 Depreciation expense 1915 =(25550-6400)/5*6/12
Accumulated Depreciation-Equipment 1915
3
Year Depreciation expense Accumulated
Depreciation Book value
2022 1915 1915 23635
2023 3830 5745 19805
2024 3830 9575 15975
2025 3830 13405 12145
2026 3830 17235 8315
2027 1915 19150 6400
Total 19150
4
Date General Journal Debit Credit
Dec 31,2022 Insurance expense 1375 =2750*6/12
Prepaid insurance 1375
