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kobusy [5.1K]
3 years ago
11

On January 1, 2005, Systil Corporation issues $50M 10 year bonds with a coupon rate of 10%. Interest is payable annually at the

end of the year. If the required return on bonds of similar risk at January 1, 2006 is 8%, what will be the price of the bonds be at this date?
Business
1 answer:
Serga [27]3 years ago
4 0

Answer:

By January 1, 2006 the price of the bonds=$50.675 M

Explanation:

The price of a bond at any given time can be expressed as;

Current price=(Annual coupon×((1-(1/(1+r)^i)/r)+ (face value/(1+r)^i)

where;

i-maturity period, from 2005-2006=1 year

r-nominal yield to maturity rate=8%

coupon rate=10%

face value=$50 M

Annual coupon=(10/100)×50 M=5 M

replacing;

Current price=Annual coupon×((1-(1/(1+r)^i)/r  + face value/(1+r)^i

(5 M×((1-(1/(1+0.08)^1)/0.08)+50/(1+0.08)^1

(5 M×(1-0.93)/0.08)+46.3

(5×0.875)+46.3=4.375+46.3=50.675 M

By January 1, 2006 the price of the bonds=$50.675 M

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Travis Company purchased merchandise on account from a supplier for $7,500, terms 2/10, net 30 on December 26. Travis Company pa
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Answer:

December 26

Dr. Inventory             $7,500

Cr. Account Payable $7,500

December 31

Dr. Account Payable     $7,500

Dr. Discount Received  $150

Cr. Cash                          $7,350

Explanation:

Credit terms of 2/10, n/30 means there is a discount of 2% is available on payment of due amount within discount period of 10 days after sale with net credit period of 30 days.

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7 0
3 years ago
Stanley's Bicycles store buys bicycles on average for $600 and sells them on average for $750. He pays a sales commission of 15%
Rudik [331]

Answer:

Stanley's Bicycles contribution margin is $7,500

Explanation:

<u>Stanley's Bicycles Contribution Margin Income Statement for the month of June</u>

Sales ($750 x 200)                                                       $150,000

Less Variable Costs :

Costs of Sales ($600 x 200)                  $120,000

Commissions ( $150,000 x 15 %)            $22,500    ($142,500)

Contribution                                                                     $7,500

Less Fixed Costs

Rent                                                             $1,400

Salaries                                                       $3,000       ($4,400)

Net Income                                                                       $3,100

Conclusion

Contribution Margin is Sales less Variable Costs. Therefore, Stanley's Bicycles contribution margin is $7,500

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