Answer:
c. The required rate of return would increase because the bond would then be more risky to a bondholder.
Explanation:
Options to the question are <em>"a. There is no reason to expect a change in the required rate of return. b. The required rate of return would decline because the bond would then be less risky to a bondholder. c. The required rate of return would increase because the bond would then be more risky to a bondholder. d. It is impossible to say without more information. e. Because of the call premium, the required rate of return would decline."</em>
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Bonds will be usually called back when the new interest rates are lower, this will lower the interest income of the investors. However, call premium cannot always compensate all the income loss by investors.
Answer:
1,350 units
Explanation:
The computation of the break-even point in composite units is shown below;
Composition contribution margin per unit is
= ($75 - $35) × 5 + ($95 - $40) × 2
= 310
Now break-even point in composite units is
= Fixed cost ÷ Composition contribution margin per unit
= $418,500 ÷ 310
= 1,350 units
fixed expenses ........... it makes sense
