Answer:
Follows are the solution to this question:
Explanation:
Follows are the two ways of describing its high return:
Firstly, the mutual fund is invested in pretty unstable debt and is reciprocating with greater yields for taking a risk.
Secondly, during every decrease in bond yields, the finance kept bonds so the income on stocks exceeded this same rate of interest significantly. Remember that bond costs skyrocket as interest rates drop as well as give the purchaser an investment income. Because once interest rates are now close to zero, it's also likely that they could increase as well as the owners would then lose their money. Its high return could be due to a drop in interest rates, and not only will it not be replicated, but the low or even low return will almost definitely be followed by either a rise in interest rates.
Answer:
1. Price ceiling, Binding
2. Price ceiling, Binding
3. Price floor, binding
Explanation:
Price ceiling is a government or group control limit on how high a product, commodity or service can be charged.
Price floor is a government or group limit on how low a product, commodity or service can be charged.
Binding simply means you are legally bound to something while non-binding means you are not legally bound to it.
Answer:
The price of the stock today=$560
Explanation:
We can use the expression for calculating the required rate of return to calculate the price of the stock today:
RRR=(EDP/SP)+DGR
where;
RRR=required rate of return
EDP=expected dividend payment
SP=share price
DGR=dividend growth rate
In our case:
RRR=13%=13/100=0.13
EDP=$2.80 per share
SP=unknown
DGR=20% and 8%, the average DGR=(20+5)/2=12.5%=0.125
replacing in the original expression;
0.13=(2.8/SP)+0.125
2.8/SP=0.13-0.125
2.8/SP=0.005
SP=2.8/0.005
SP=$560
The price of the stock today=$560
Answer: Please see the required journals below:
December 31:
Debit Bad debt expense $6,034
Credit Allowance for doubtful accounts $6,034
February 1:
Debit Allowance for doubtful accounts $431
Credit Accounts receivables $431
June 5:
Debit Cash $431
Credit Bad debt recovery (income statement) $431
Explanation: The company estimates its bad debt expense as percentage of sales. In this case 0.7% of its annual sales of $862,000 was deemed as uncollectible, that is, 0.7% x $862,000 = $6,034. The required journals to recognize this bad debt expense is provided above. However, since there was an existing provision, which resides in the allowance account, a write-off would definitely hit that account in order to extinguish the accounts receivable portion. Upon recovery of the write-off, we cannot reinstate the receivable since it was already extinguished but we need to recognize the recovery as a gain.
