Common stockholders bear the greatest risk of loss of value if a firm should fail.
There are two sorts of shareholders in a company: common shareholders and preferred shareholders. They are the owners of common stocks, as their name implies, in a corporation. These individuals enjoy voting rights over matters concerning the company.
A person who has acquired at least one common share of a corporation is referred to as a common shareholder. Common shareholders have entitled to declared common dividends as well as a vote on corporate matters. In the event of bankruptcy, common shareholders are compensated last, following preferred shareholders and debtholders.
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Answer:
The price of the bonds at Janary 1 2018 is $70,824,063
Explanation:
Data:
Face Amount = F = $80,000,000
Time = n = 10 years * 2 (semiannually) = 20 semesters
Yield = r = 12% / 2 (semiannually) = 6% = 0.06
Payment = C = $80,000,000 * 10% / 2 = $4,000,000
Computation:
Bond Price = (C * (1 - (1 + r)^-n) / r) + (F / (1 + r)^n)
Bond Price = ($4,000,000 * (1 - (1 + 0.06)^-20) / 0.06) + ($80,000,000 / (1 + 0.06)^20)
Bond Price = ($4,000,000 * 11.46992) + $24,944,378.15089
Bond Price = $45,879,684.87426 + $24,944,378.15089
Bond Price = $70,824,063
Hope this helps!
Answer:
Answer is yes
Explanation:
Answer:
Possible outcome of stock price at end of 6 months (0.5 years)
Outcome 1:
Stock price = 35
Strike price = 45
Payoff call = max{ST - K,0} = max{35-45,0} = 0
Present value =
PV = 0/(1+5%)^0.5 = 0
Outcome 2:
Stock price = 49
Strike price = 45
Payoff call = max{ST - K,0} = max{49-45,0} = 4
Present value =
PV = 4/(1+5%)^0.5 = 3.903
Probability of both outcomes = 0.5
Value of call option = 0.5*0 + 0.5*3.903 = 1.95
Short sale arbitrage opportunity:
Short the stock and buy a call option. Invest the proceeds at 5% for 6 months:
Short stock = +41.6
long call = -1.95
Proceeds = 41.6 - 1.95 = 39.65
Amount after 6 months = 39.65*(1+5%)^0.5 = 40.629
Case 1:
Stock price = 35
Payoff from long call = 0
Buy the stock at market price and close the short stock position = -35
Total payoff = 40.629 - 35 = 5.629
Case 2:
Stock price = 49
Payoff from long call = 49 - 45 = 4
Buy the stock from market price and close the short stock position = -49
Total payoff = 40.629 + 4 - 49 = -4.3708
Present value of payoff from both cases = (0.5*5.629 + 0.5*(-4.3708))/(1+5%)^0.5
= 1.2581/1.0246 = 1.2277
Arbitrage payoff = 1.2277
Answer:
The short sale proceeds in an arbitrage strategy is 1.2277
Explanation:
From the question given,
The Possible outcome of stock price at end of 6 months (0.5 years)
The Outcome is:
The Stock price = 35
The Strike price = 45
The Payoff call = max(ST - K,0) = max(35-45,0) = 0
The Present value = PV = 0/(1+5%)^0.5 = 0
The possible Outcome 2:
The Stock price = 49
The Strike price = 45
The Payoff call = max{ST - K,0} = max{49-45,0} = 4
The Present value =
PV = 4/(1+5%)^0.5 = 3.903
Then,
The Probability of both outcomes = 0.5
Value of call option = 0.5*0 + 0.5 x 3.903 = 1.95
Therefore, the Short sale arbitrage opportunity is:
The Short the stock and buy a call option.
Invest the proceeds at 5% for 6 months:
Short stock = +41.6
long call = -1.95
Proceeds = 41.6 - 1.95 = 39.65
Amount after 6 months = 39.65*(1+5%)^0.5 = 40.629
The Case 1:
Stock price = 35
Payoff from long call = 0
Buy the stock at market price and close the short stock position = -35
The Total payoff = 40.629 - 35 = 5.629
For Case 2:
Stock price = 49
Payoff from long call = 49 - 45 = 4
Buy the stock from market price and close the short stock position = -49
Total payoff = 40.629 + 4 - 49 = -4.3708
The Present value of payoff from both cases = (0.5*5.629 + 0.5*(-4.3708))/(1+5%)^0.5
= 1.2581/1.0246 = 1.2277
Then the Arbitrage payoff = 1.2277
Answer:
$8000
= $10,636.63
Explanation:
Simple interest = P x R x T
P = amount
R = interest rate
T = time
= $12,500 × 0.08 x 8 = $8000
For compound interest:
FV = P (1 + r)^n
FV = Future value
P = Present value
R = interest rate
N = number of years
$12500(1.08)^8 = $23,136.63
Interest = $23,136.63 - $12,500 = $10,636.63
I hope my answer helps you
Answer:
C. Variances falling outside of an acceptable range of outcomes do not require investigation.
Explanation:
The purpose of any business is to generate profit which is the difference between the revenues and all cost related to business.
In order to define suitable selling price and acceptable cost, all figures are to be set in standard range; any variance outside the standard, even lower or higher, must be investigated then the company can make proper adjustments.
In the end, the right standard is not only achievable but also maximize for the profit set.
So while other statements are true about standard and variance, the statement (C) is totally wrong because it said “Variances falling outside of an acceptable range of outcomes do not require investigation”
Answer:
c) $767,464.54
Explanation:
The computation of the future value of an annuity is shown below:
As we know that
Future value of annuity F = Payment made × ((1 + rate of interest)^t - 1) ÷ rate of interest
= $3,400 × (1.092^35 - 1) ÷ 0.092
= $3,400 × 225.7249
= $767,464.54
Hence, the future value of an annuity is $767,464.54
Therefore the correct option is c.
Noma will have $767,464.54 in 35 years.
To calculate the future value of Noma's savings, we can use the formula for compound interest: FV = P(1 + r)^t, where FV is the future value, P is the principal amount, r is the interest rate, and t is the number of years. In this case, Noma plans to save $3,400 per year for 35 years with an annual interest rate of 9.2 percent. Plugging these values into the formula:
FV = 3400 * (1 + 0.092)^35
Calculating this expression, Noma will have a future value of $767,464.54 in 35 years.
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