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fgiga [73]
3 years ago
11

"Which statements are TRUE about IO tranches? I When interest rates rise, the price of the tranche falls II When interest rates

rise, the price of the tranche rises III When interest rates fall, the price of the tranche falls IV When interest rates fall, the price of the tranche rises"
Business
1 answer:
horrorfan [7]3 years ago
5 0

The available options are:

A. I and III

B. I and IV

C. II and III

D. II and IV

Answer:

C. II and III

Explanation:

IO tranche which is an acronym for Interest Only tranche is defined as a form of tranche which earns interest only from a secured loan which is derived from Principal Only tranche.

However, Interest Only tranche is quite different from a typical bond, simply because when market interest rate increases the rate of prepayment decreases, which in turn makes the rate of maturity to be longer. Thereby when interest rates increase, prices increase, and vice versa.

Hence the true statements are:

II When interest rates rise, the price of the tranche rises

III When interest rates fall, the price of the tranche falls

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Even though most corporate bonds in the United States make coupon payments semiannually, bonds issued elsewhere often have annua
max2010maxim [7]

Answer:

Market Price $985.01

Explanation:

We have to convert the US semiannually rate to annually.

(1 + 0.078/2)^{2} -1 = 0.079521

Now this is the annual rate spected for a similar US Bonds

So we are going to calculate the present value using this rate.

Present value of an annuity of 78 for 20 years at 7.9521%

C * \frac{1-(1+r)^{-time} }{rate} = PV\\

78 * \frac{1-(1+0.079521)^{-20} }{0.079521} = PV\\

PV = 768.55

And we need to add the present value ofthe 1,000 euros at this rate

\frac{Principal}{(1 + rate)^{time} = Present Value}

\frac{1,000}{(1 + 0.079521)^{20} = Present Value }

Present Value = 216.4602211

Adding those two values together

$985.01

The reasoning behind this is that an american investor will prefer at equal price an US bonds because it compounds interest twice a year over the German Bonds.

6 0
3 years ago
On October 14, the Patrick Company sold merchandise with an invoice price of $1,200 ($770 cost), with terms of 2/10, n/30, to th
Anna11 [10]

Answer:

Patrick Company

Journal Entries:

Oct. 14: Debit Accounts receivable (Baxter Company) $1,200

Credit Sales revenue $1,200

To record the sale of goods on account, terms of 2/10, n/30.

Oct. 14: Debit Cost of goods sold $770

Credit Inventory $770

To record the cost of goods sold.

Oct. 18: Debit Sales returns $220

Credit Accounts receivable (Baxter Company) $220

To record the return of goods (wrong size) by Baxter.

Oct. 18: Debit Inventory $170

Credit Cost of goods sold $170

To record the cost of goods returned.

Oct. 24: Debit Cash $960

Debit Cash discounts $20

Credit Accounts receivable (Baxter Company) $980

To record the receipt of check on full settlement, including discounts.

Explanation:

a) Data and Calculations:

Oct. 14: Accounts receivable (Baxter Company) $1,200 Sales revenue $1,200, terms of 2/10, n/30.

Oct. 14: Cost of goods sold $770 Inventory $770

Oct. 18: Sales returns $220 Accounts receivable (Baxter Company) $220

Oct. 18: Inventory $170 Cost of goods sold $170

Oct. 24: Cash $960 Cash discounts $20 Accounts receivable (Baxter Company) $980

7 0
3 years ago
the two principal policy tools that the federal government uses to manage economic conditions are monetary policy and fiscal pol
steposvetlana [31]

Monetary policy is used to control the size of the money supply to stimulate or moderate business activity levels in the economy. in contrast, fiscal policy uses government spending and taxation to do the same.

<h3>What is monetary and fiscal policy?</h3>

Fiscal policy are the steps taken by the government to change the business levels in the economy. The tools of fiscal policy are taxes and government spending. Fiscal policy can be expansionary or contractionary.

Expansionary fiscal policy is when the government increases the money supply in the economy either by increasing spending or cutting taxes. Contractionary fiscal policies is when the government reduces the money supply in the economy either by reducing spending or increasing taxes

Monetary policy are policies taken by the central bank of a country to shift aggregate demand. The tools of monetary policy are open market operations, reserve requirement and discount rate.

Expansionary monetary policy are polices taken in order to increase money supply. Contractionary monetary policy are policies taken to reduce money supply.

To learn more about monetary policy, please check: brainly.com/question/3817564

#SPJ1

7 0
2 years ago
The role of ______ control is to challenge the organization's beliefs and goals and to continuously monitor, test, and review st
RUDIKE [14]

Answer:

Informational

Explanation:

The role of "informational" control is to challenge the organization's beliefs and goals and to continuously monitor, test, and review strategies. Informational control is when a business gathers information and analyzes that information from different perspectives to come up with better strategy's in order to better the business itself.

Hope this helps.

4 0
3 years ago
If each unit of output can be sold at a price of $5 and incurs variable costs which are constant at $3 per unit, and if the fixe
Vesnalui [34]

Answer:

Break-even point= 15,000/ (5 - 3)= 7,500 units

Explanation:

Giving the following information:

Each unit of output can be sold for $5, variable costs are constant at $3 per unit, and if the fixed costs are $15,000.

We need to use the following formula:

Break-even point= fixed costs/ contribution margin

Break-even point= 15,000/ (5 - 3)= 7,500 units

7 0
3 years ago
Read 2 more answers
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