Answer:
E. have a sinking fund provision
Explanation:
Callable bonds are the one wherein the issuer/borrower has an option to redeem the bonds anytime after an initial stipulated period. In case of such bonds, if the issuer decides to redeem the bonds, the holders have to accept the redemption value.
Usually, when market rate of interest on such bonds falls below the coupon rate of such bonds, the issuer redeems such bonds. Thus, such bonds are beneficial to the issuer.
Call protection refers to the period within which such bonds cannot be called or redeemed.
Sinking fund provision refers to transferring a portion of money during the duration of such callable bonds to a separate reserve known as sinking fund, which is created for the purpose of redemption of funds. So when such bonds are to be called, the total money transferred to sinking fund reserve would be raised and used for payment to bondholders.
Creation of such a reserve helps the issuer avoid the pressure of lump sum payment as periodically funds are set aside for the purpose of redemption.
Answer:
Hi there!
C. Debit Miscellaneous Expense $270; credit Cash $270.
Explanation:
At the time of the reimbursement from the petty cash, the vouchers for the money used are presented and these must be charged to the different expenses incurred.
In October 1, the journal entry for the petty cash increase of $54 will be:
Debit Petty Cash $54; credit cash $54.
Answer:
Following are the factors in the economy that affects the cost of money:
- Inflation
- Required return of the investors on the additional risk
- Systematic risk in the economy
- Duration of lending
- Credit Spread
Explanation:
If the inflation rate increases then the required return would be compensation for inflation and required return.
The higher is the risk associated with the investment the higher would be the investor's required return.
According to the Capital Asset Pricing Model, the company compensates the investor for the systematic risk, not for the unsystematic risk that he faces because CAPM assumes that the investor has diversified portfolio of investment.
If the amount lend is for greater duration, then there is a risk that the borrower will default payments. There is another explanation which is that there is higher chances of loss of opportunity due to lending amount for greater duration.
Credit Spread is the measure of the risk that the company will be unable to pay interest on loan or principal amount or both. So as we know higher the risk associated with the investment, the higher is the Required return demanded by the investors.
Indemnity, Insurable Interest, Utmost Good Faith, Proximate Cause, Subrogation and Contribution.
Answer:
Rate of return=0.222=22.2%
Explanation:
Price at which shares are sold=$45 per share
Number of shares=100 shares
Initial margin=50%=0.5
Price of share on repurchase=$40 per share
Required:
Rate of return if shares are repurchased=?
Solution:
Rate of return=
Profit earned=($45-$40)*100
Profit earned=$500
Initial Investment=(100*45)0.5
Initial Investment=$2,250
Rate of return=
Rate of return=0.222=22.2%
