Answers
Final answer:
A bond is an 'I owe you' note where the lender (the investor) lends capital to the borrower (the issuing entity) in return for a bond and gets paid back the face value plus interest at a predetermined rate. Legacy in this case has issued $570,000 worth of bonds with an 8.5% interest rate for four years, selling them at a rate of $508,050 when the current market rate is 12%. The price of a bond is influenced by current market rates.
Explanation:
The subject of the question pertains to bonds, which are part of the financial market. A bond is an 'I owe you' note that an investor buys in exchange for lending capital to an entity, like a corporation or government. In this scenario, Legacy is issuing bonds of $570,000 with an 8.5% interest rate for four years, that pay on a semiannual basis. These bonds are sold at $508,050 when the market rate is 12%.
When buying a bond, an investor becomes the lender and the issuing entity becomes a borrower who agrees to pay back the face value of the bond at maturity, plus an agreed-upon interest rate. As mentioned above, the bond has a coupon rate, usually semi-annual, and a maturity date when the borrower will pay back its face value and last interest payment. By these parameters of face value, interest rate, and maturity date, a buyer can calculate a bond's present value. This value may not be the same as the bond's face value.
If you consider a market rate now at 12%, you know that you could invest $964 in an alternative investment and receive $1,080 a year from now; or $964(1 + 0.12) = $1080. This means you would not pay more than $964 for the original $1,000 bond. Therefore, the price of a bond is influenced by the current market rate.
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Final answer:
A bond is an "I owe you" note that an investor receives in exchange for money. Legacy issued bonds at a price lower than the face value due to higher market interest rates.
Explanation:
In financial terms, a bond is an "I owe you" note that an investor receives in exchange for money. The bond has a face value, a coupon rate, and a maturity date. Combining these elements and market interest rates, a buyer can compute a bond's present value. Legacy issued $570,000 of 8.5%, four-year bonds at $508,050 when the market rate is 12%. This means that the present value of the bonds is less than the face value because the market rate is higher than the coupon rate.
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Related Questions
An All-Pro defensive lineman is in contract negotiations. The team has offered the following salary structure: Time Salary 0 $ 5,700,000 1 4,300,000 2 4,800,000 3 5,300,000 4 6,700,000 5 7,400,000 6 8,200,000 All salaries are to be paid in a lump sum. The player has asked you as his agent to renegotiate the terms. He wants a $9.2 million signing bonus payable today and a contract value increase of $1,200,000. He also wants an equal salary paid every three months, with the first paycheck three months from now. If the discount rate is 4.7 percent compounded daily, what is the amount of his quarterly check? Assume 365 days in a year. (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89.)
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Hill Company uses job-order costing. At the end of the month, the following data was gathered: Job # Total Cost Complete? Sold? 803 $611 yes yes 804 423 yes no 805 805 no no 806 682 yes yes 807 525 yes no 808 250 no no 809 440 yes yes 810 773 yes no 811 267 no no 812 341 no no Hill's selling price is cost plus 50% for each of its products. What is the total in Finished Goods? a.$1,860 b.$1,721 c.$1,700 d.$2,163 e.$2,230
Logistics Solutions provides order fulfillment services for dot merchants. The company maintains warehouses that stock items carried by its dot clients. When a client receives an order from a customer, the order is forwarded to Logistics Solutions, which pulls the item from storage, packs it, and ships it to the customer. The company uses a predetermined variable overhead rate based on direct labor-hours. In the most recent month, 120,000 items were shipped to customers using 2,300 direct labor-hours. The company incurred a total of $7,360 in variable overhead costs. According to the company's standards, 0.02 direct labor-hours are required to fulfill an order for one item and the variable overhead rate is $3.25 per direct labor-hour. Required: 1. What variable overhead cost should have been incurred to fill the orders for the 120,000 items? How much does this differ from the actual variable overhead cost? 2. Break down the difference computed (1) above into a variable overhead rate variance and a variable overhead efficiency variance.
Answers
Answer:
Total= 36,800 pounds
Explanation:
Giving the following information:
Sales (units ) - Production (units):
May: 20,000 - 19,000
June: 18,000 - 16,000
Two pounds of material is required for each finished unit. The inventory of materials at the end of each month should equal 20% of the following month's production needs.
Purchases for May= production for the month + desired ending inventory - beginning inventory
Production= 19,000*2 pounds= 38,000 pounds
Desired ending inventory= (16,000*2)*0.2= 6,400 pounds
Beginning inventory= (38,000*0.2)= (7,600)
Total= 36,800 pounds
Answers
Answer: Dwayne's investment will be worth $89,961.02 after the last annuity payment is made.
Since Dwayne contributes $4700 at the beginning of each year, we need to calculate the future value of an annuity due.
We use this formula for our calculations:
Substituting the values we get,
Assets Liabilities
Complete the following table to show the effect of a new deposit on excess and required reserves when the required reserve ratio is 25%.
Amount Deposited (Dollars) Change in Excess Reserves (Dollars) Change in Required Reserves (Dollars)
1,800,000
Answers
Answer:
a) First Main Street Bank's T-account (before the bank makes any new loans) will look as follows:
Assets | Liabilities
Reserves $1,800,000 | Deposits $1,800,000
b) The effect of a new deposit on excess and required reserves when the required reserve ratio is 25% are as follows:
Amount Deposited (Dollars) = $1,800,000
Change in Excess Reserves (Dollars) = $1,350,000
Change in Required Reserves (Dollars) = $450,000
Explanation:
a) Complete the following table to reflect any changes in First Main Street Bank's T-account (before the bank makes any new loans)
A deposit of $1,800,000 by Yakov into his checking account at First Main Street Bank will lead to the creation of both an asset and a liability for First Main Street Bank.
The reserves on the asset side of the T-account of First Main Street Bank will therefore increase by $1,800,000. This gives the bank the opportunity to able to give loan to its other customers from the additional reserves.
On the other hand, the deposit of $1,800,000 by Yakov will be recorded as a demand deposit on the liability side of the T-account of First Main Street Bank. This is because it is possible for Yakov to withdraw his deposit at any time.
This transaction will therefore be reflected as follows:
Assets | Liabilities
Reserves $1,800,000 | Deposits $1,800,000
b) Complete the following table to show the effect of a new deposit on excess and required reserves when the required reserve ratio is 25%.
Note: See the attached excel file to see how the table will actually look.
The required reserve ratio of 25% implies that First Main Street Bank is required by law to hold 25% of the new reserves which in this case is the initial deposits from Yakov.
By calculating this, 25% of $1,800,00 is $450,000 and it indicates an increase of $450,000 in the required reserve of First Main Street Bank.
After deducting 25% from 100%, we have 75% left. And 75% of $1,800,000 is $1,350,000. This $1,350,000 is the excess reserves that First Main Street Bank can use to give loans to other customers.
The breakdown is therefore as follows:
Amount Deposited (Dollars) = $1,800,000
Change in Excess Reserves (Dollars) = 75% * $1,800,000 = $1,350,000
Change in Required Reserves (Dollars) = 25% * $1,800,000 = $450,000
The reserve ratio is part of the reservable liabilities that commercial banks should hold on to, rather than lending or investing.
What is a reserve ratio?
This is a requirement determined by the country's largest bank, the United States Federal Reserve. It is also known as the cash reserve ratio.
As per the information, the calculation of the reserve ratio from the government bond:
Now, this 1,800,000 will be part of demand deposits on the Assets side, and on the liability side, it will form part of the reserves.
Assets I Liabilities
Reserves $1,800,000 | Deposits $1,800,000
Secondly, the required reserve to be maintained from the reserves is $450,000 and the excess reserve is $1,350,000 that can be utilised for lending loans to the Public.
Hence, the amount of reserve ratio that First Main street Bank will maintain is $450,000.
To learn more about reserve ratio, refer:
Answers
Answer:
a. Gross pay for the week = $2,240
b. net pay for the week = $683
Explanation:
a) gross pay for the week = total amount earned, before the deduction of taxes and other charges, it is calculated as follows:
amount earned per hour = $32
amount earned in excess of 40 hours = 1.5 × 32 = $48 per hour
Total hour worked = 60 hours
This means that in the first 40 hours, the employee earned 32$ per hour and $48 per hour for the next 20 hours
∴ amount earned in the first 40 hours = 32 × 40 = $1,280
amount earned in the next 20 hours = 48 × 20 = $960
∴ Gross pay for the week = 1,280 + 960 = $2,240
b) net pay for the week = Gross pay - (Total deductions)
Deductions are as follows:
social security tax rate = 6.0% of gross pay = 0.06 × 2,240 = $134.4
Medicare tax rate = 1.5% of gross pay = 0.015 × 2,240 = $33.6
Federal income tax = $515
Total deductions = 134.4 + 33.6 + 515 = $683
∴ Net pay for the week = 2,240 - 683 = $1,557
Answers
Answer:
* Profit from buying the call with strike price of $50 after six months if:
- The stock price is $40: -$9
- The stock price is $50: -$9
- The stock price is $60: $1
* Profit from buying the put with strike price of $50 after six months if:
- The stock price is $40: $9
- The stock price is $50: -$1
- The stock price is $60: -$1
Explanation:
It is useful to recall that the call's buyer has the right but not the obligation to buy an underlying asset at strike price at expiration date; while the put's buyer has the right but not the obligation to sell an underlying asset at strike price at expiration date.
Explanation for each circumstances:
*Profit from buying the call with strike price of $50 after six months if:
- The stock price is $40: Do not exercise the call option as investor can buy from the market at $40 instead at the strike price of $50. Thus, investor will recognize a loss of $9 from buying the option.
- The stock price is $50: Market price is equal to strike price, investor will recognize a loss of $9 from buying the option.
- The stock price is $60: $1. Investor buy at strike price $50, sell in the market for $60 to get profit of $10, minus option price of $9, net gain is $1.
* Profit from buying the put with strike price of $50 after six months if:
- The stock price is $40: Investor buy from market at $40, sell through put option at $50, recognized the profit of $10. Net gain will be determined by further deducting of option price $1, to come at $9.
- The stock price is $50: Market price is equal to strike price, investor will recognize a loss of $1 from buying the option.
- The stock price is $60: Investor ignore the option as it can sell at market price of $60 instead of strike price $50. Net loss is option price $1.
Answers
Answer:
The cash payments for September are $646000
Explanation:
The cash payments for merchandise are divided into to parts. The previous month's 70% payments and this month's 30% payments. Thus, the cash payments for the month of september will be 70% for AAugust purchases and 30% for september's purchases.
Thus the cash payments for merchandise will be,
Cash Payments = 0.7 * 610000 + 0.3 * 730000 = $646000
Answer:
=646000
Explanation:
30% pay in the month of purchase .
Note that th purchase made in September is $730,000 and 30% is due that month.
= 30% × 730,000
= 219,000
70% in the following month
For his category, payment be made in September should relate to purchases made in August, and $610,000 was purchased in August
=70%× $610,000
=427,000
Cash payment f r te September
= 219,000 + 427,000
=$646,000