Answer:
$5.97
Explanation:
In order to determine the capital gain of the bond in a year's time,it is first first of all important to calculate the yield to maturity on the bond which is arrived at by applying the rate formula in excel as follows:
=rate(nper,pmt,-pv,fv)
nper is the number of coupon interest the bond would pay over its entire life of 15 years which is 15
pmt is the annual interest,7.9%*$1000=$79
pv is the current market price of the bond which is $790
fv is the value of $1000
=rate(15,79,-790,1000)=10.79%
Afterwards,the price of the bond in one year' time can then be calculated:
=-pv(rate,nper,pmt,fv)
The variables in the formula are as above except for nper which would reduce by 1 in a year's time
=-pv(10.79%,14,79,1000)
pv=$ 795.97
Hence the capital gain=price now-price one year ago/price one year ago
price now is $795.97
price one year ago was $790
Capital gain=$795.97-$790=$5.97
Capital gain %= ($795.97-$790)/$790=0.76%
Answer:
Compound interest is better than simple interest
Explanation:
Compound interest is better than simple interest especially when it comes to investing. Funds grow at a faster rate in compound interest than simple interest.
Simple interest is the interest on only the principal while compound interest is the interest on principal and on the previous accumulated interest (that is, interest on interest).
The formula for simple interest is:
P x r x t
Where P is the principal
r is the interest rate
t in the time.
For compound interest:
A=P(1+r/n)^nt.
A is the amount after compounding.
P is the principal.
r is the interest rate
n is the number of times interest compounds(adds up) per year
t is the number of years.
Answer:
a. Overstates Inflation.
In the case of Mary and Bob, the CPI would have already increased but in this case the price of the minivan increased as well. This will overstate inflation because it will not measure the general rise in price alone (inflation), it will also measure the rise in price as a result of the new minivan having better features.
b. Understated Inflation
Donna's case represents an understated inflation because the quantity shrank yet the price stayed the same. This means that the price is now buying less quantity than it used to which is inflation because more dollars are now required to buy the previous amount. This was not however recorded as there was no change in price.
c. Overstates Inflation
In the case of Zach, the inflation will be overstated because Zach is no longer buying bagels and is now buying muffins so continuing to use bagels as a representative good in the basket of goods used to calculate CPI would be overstating it.
d. Accurate representation of Inflation
In Chris's case, the increase in the price of the same shoe over the years has been because of a general rise in prices and not because it is a different model. It is the same shoe and its price is rising generally so this is an accurate depiction of inflation.
To record the write-off of receivables:
Allowance for doubtful accounts ----------------------------$24,000
Accounts Receivable -----------------------------------------------$24,000
To record the accounts receivable collected from the written-off receivable, first restore the accounts receivable with the following entry:
Accounts Receivable ------------------------------------------$1,900
Allowance for doubtful accounts ------------------------------$1,900
To record the collection of accounts receivable:
Cash -----------------------------------------------------------------$1,900
Accounts Receivable ----------------------------------------------$1,900
Or, the direct journal entry to record the collection of previously written-off accounts receivable is:
Cash ---------------------------------------------------------------$1,900
Allowance for doubtful accounts ------------------------------$1,900
