Answer: Option (C) is correct.
Explanation:
There is a adjustment entry for depreciation of $3,545 but the amount that is debited as depreciation expense is different from the amount that is credited as accumulated depreciation.
Depreciation Expense A/C Dr. $3,454
To Accumulated Depreciation $3,545
This will lead to an unequal adjusted trial balance.
Option 'A' and 'B' has no effect on the adjusted trail balance to be unequal because whole transaction is omitted.
Option 'D' also has no effect on adjusted trail balance because the debit and credit amount will still match.
Answer:
The amount of maximum net loss is $100
Explanation:
The butterfly spread comprise of buying 100 options with the strike price of $60 and $70 and the selling 200 options with the strike price of $65.
The maximum loss is when the strike price is less than $60 or be greater than $70. The aggregate payoffs from the options will amount to $0.
The cost of setting up the butterfly spread is:
= 11 × 100 + 18 × 100 - 14 × 200
= $100
Therefore,the net loss will be $100
Answer:
a. will be higher than the present value of stock B
Explanation:
Use the formula for dividend discount model (DDM) to calculate the price of each stock;
<u>For Stock A</u>
Price = Div1 /(r-g)
where Div 1 = next year's expected dividend
r = required rate of return
g = dividend growth rate
Price = 4 / (0.10- 0.06)
Price = $100
<u>For Stock B</u>
Price = Div1 /(r-g)
Price = 4 / (0.10 - 0.05)
Price = $80
Therefore, the intrinsic value of stock A will be higher than the present value of stock B
