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kogti [31]
3 years ago
14

Suppose you borrow​ $2,000 for one year and at the end of the year you repay the​ $2,000 plus​ $110 of interest. If the expected

inflation rate was​ 2.2% at the time you took out the​ loan, what was the real interest rate you​ paid?
a. 2.2%
b. 3.3%
c. 5.5%
d. 8.8%
Business
1 answer:
UkoKoshka [18]3 years ago
6 0

Answer:

b. 3.3%

Explanation:

The nominal interest rate is 5.5%, (110/2000*100), and the inflation was 2.2%

The shortest way to calculate real interest rate is to subtract the inflation from the nominal interest rate, in this case

5.5% - 2.%2 = 3.3%

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The following appeared in the October 15, 2021, issue of the Financial Smarts Journal:
larisa [96]

Answer:

1. The market rate of interest is higher than 7.75% when the Craft Foods bonds were issued.

2. Debit Cash for $746,700,000; Dbit Discount on bond payable for $3,225,000; Debit Bond issue cost for $75,000; and Credit Bond payable for $750,000,000.

Explanation:

1. Based on the information provided in the announcement, indicate whether the market rate of interest is higher or lower than 7.75% when the Craft Foods bonds were issued.

From the information provided, it can be observed that the face value of this bond is 100% but it is issued at 99.57% price. Since the issue price of 99.57% is less than the face value, this implies that the bond is issued at a discount.

When a bond is issued at a discount, it indicates the stated interest rate is lower than the market interest rate.

Therefore, the market rate of interest is higher than 7.75% when the Craft Foods bonds were issued.

2. If debt issue costs were $75,000 and the bonds were issued on an interest payment date, what entry did Craft use to record the sale?

Before the journal entry is prepared, the following are first calculated:

Proceeds from bond issue = Bond price * Total face value = $750,000,000 * 99.57% = $746,775,000

Discount on bond = Total face value - Proceeds from bond issue = 750,000,000 - $746,775,000 = $3,225,000

Cash = Proceeds from bond issue - Debt issue costs = $746,775,000 - $75,000 = $746,700,000

The journal entry will now look as follows:

<u>Description                                 Debit ($)                Credit ($)      </u>

Cash                                        746,700,000

Discount on bond payable        3,225,000

Bond issue cost                               75,000

  Bond payable                                                      750,000,000

<u><em>(To record bond issue at a discount.)                                               </em></u>

3 0
3 years ago
Sairs Info Solutions is a firm that develops software applications for other companies. After the company moves into a new offic
sertanlavr [38]

Answer:

B) Ergonomics reduces the physical strain on employees performing a job.

Explanation:

Ergonomics is referred to the study of human behavior and their efficiency in the workplace.

As employees are not able to perform properly in new office, and they are complaining about the seating arrangement, the company's initiative to do ergonomics study will help in understanding the situation, and problems and will help them to reduce any problems faced, as the study helps to encounter the mentality of workers, and problem is in majority it will be easy to understand the reason is not in employees but the problem is in workplace.

4 0
4 years ago
Which of the following statements about group insurance is true?
Kruka [31]

Answer:

it b i promise it is the right answer i know

4 0
3 years ago
Could someone help with the answer please
marshall27 [118]

Answer:

Explanation idea generation

4 0
3 years ago
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What does an exchange rate tell you?
MrRa [10]
When you ask me about exchage rate I remember about Arabic coming to Africa for trading goods. So this tells me that the the value of one currence from deferent nations was converted to another. I hope you got it.
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3 years ago
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