Answer:
1) Debit Bank $11787069 Debit bond discount $912931 ; Credit Bond $12700000
2) Debit Interest expense $751293 ; Credit Bank $660,000 Credit Discount on Bond payable $91293
3 )Debit interest expense $ 751293 ; Credit bank 660000, Credit discount on bond payable $91293
b)Interest expense = $1502586
c)It is because a financial crisis might have happened prior to issuing the bond and the company still went ahead with issuing even though the rate has changed.
Explanation:
interest expense = 12000000 * 0.11 * 6/12=$660000
discount on bond payable = $912931 /5 = 182586 /2= 91293
Interest expense = $751293 * 2 = $1502586
Answer:
Interest rates and investment
If interest rates are increased then it will tend to discourage investment because investment has a higher opportunity cost. With higher rates, it is more expensive to borrow money from a bank. Saving money in a bank gives a higher rate of return.
Answer:
d. The $1,500,000 is not taxable because Detroit settled the case
Explanation:
The $1,500,000 is not taxable because Detroit settled the case, Compensation received of damaging Goodwill is not taxable.
Answer: Step 1) Find share of market in the Portfolio
(11.5-3.5)x+3.5=6.5
8x=3
x=3/8
x=0.375
=37.5%
SD of market portfolio= 0.375x+0=9.5
x=9.5/0.375
=25.33%
correl = cov / (std 1 * std2)
0.4=COV/0.2533*0.545
COV= 0.2533*0.545*0.4=0.05
cov of 2 assets = b1 * b2 * variance of market
0.05=B1*1*0.2533^2
B of security=0.0032
Capm Model
3.5+0.0032(11.5-3.5)=3.5256% expected return
Explanation:
Step 1) Find the share of market in the portfolio in order to find market SD
Step 2) Find Covariance betweens security and market by using both SDS and correlation
Step 3) Find Beta of Security using Co variance
Step 4) Use the Beta in CAPM model in order to find expected return
