Answer and Explanation:
a. The computation of price (expressed as a percentage of the face value) is shown below:-
Price = Face value ÷ (1 + Yield to maturity)^Number of the compounding period
= $1,000 ÷ (1 + 0.0323)^1
= $1,000 ÷ 1.0323
= $968.71
Price expected as a percentage to a face value = Price ÷ Face value × 100
= $968.71 ÷ $1,000 × 100
= 96.87%
b. The computation of credit spread of AAA-rated corporate bonds is shown below:-
Credit spread = Yield of AAA-rated corporate bond - Yield of treasury bond
= 3.23% - 3.15%
= 0.08%
c. The computation of credit spread on B-rated corporate bonds is shown below:-
Credit spread = Yield of B-rated corporate bond - Yeld of treasury bond
= 4.94% - 3.15%
= 1.79%
d. The credit rating for a bond changes with its respective credit risk change. That implies the bond 's rating would be lower the lower risk, and likewise.
The investor is demanding higher returns on risky bonds for additional risk-taking. Hence the credit spread is widening as the rating of bonds falls with an increase in the risk.
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A contract with a customer must meet all of the following criteria:
Has approval and commitment of the parties.
Rights of the parties are identified.
Payment terms are identified.
The contract has commercial substance.
Collectability of consideration is probable.
Answer:
OB. the owner owns only some of the units
Explanation:
A franchise is a business model where a franchisee acquires a license from the franchisor to operate a similar business to the franchisor. The franchisor owns the popular business and authorities the franchisee to establish an independent but outlet. The franchisee acquires rights to the business name, products, services, logo, brand name, and systems from the franchisor.
A franchisee business operates as a branch of the franchisor business. The only difference is that a franchisee is owned and managed by an independent investor. In the chain store, all the branches are owned by the same entity or investor. The franchisor does not own all the outlets that operate with his brand name.
