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motikmotik
3 years ago
14

The consumer price index was 120 in 2013 and 126 in 2014. The nominal interest rate during this period was 8 percent. What was t

he real interest rate during this period?
Business
1 answer:
Kisachek [45]3 years ago
7 0

Answer:

3 percent

Explanation:

A real interest rate is an interest rate which doesn't have impact of inflation and depicts the real cost of funds to the borrower and the real yield to the lender or an investor.

Inflation = (126-120)/120 = 5%

Real Interest Rate = Nominal Interest Rate - Inflation

                               = 8% - 5%= 3%

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The journal entry to record each semiannual interest payment is:

Debit Bond Interest Expense $22,000; credit Cash $22,000.

<h3>What journal entries?</h3>
  • A journal entry is an act of keeping or producing records of any economic or non-economic transaction.
  • An accounting journal, which shows a company's debit and credit balances, records transactions.
  • The journal entry can be made up of multiple records, each of which is either a debit or a credit.
  • Otherwise, the journal entry is termed unbalanced if the sum of the debits does not equal the total of the credits.
  • For example, a corporation may issue 8%, 15-year bonds with a par value of $550,000 that pay semi-annual interest. The market rate is currently 8%.
  • The journal entry for each semiannual interest payment is as follows: Debit Bond Interest Expense $22,000; credit Cash $22,000.

Therefore, the journal entry to record each semiannual interest payment is:

Debit Bond Interest Expense $22,000; credit Cash $22,000.

Know more about journal entries here:

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Sensation feeling

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A change in tastes or fashions can impact..
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Each of the following factors affects the weighted average cost of capital (WACC) equation. Which of the following factors are o
Volgvan

Answer: The correct answers are "The general level of stock prices" and "The effect of the tax rate on the cost of debt in the weighted average cost of capital equation".

Explanation: The general level of stock prices and the effect of the tax rate on the cost of debt in the weighted average cost of capital equation are outside from firm's control because although companies have knowledge of the market, the general level of stock prices is not controlled by them, but by the market. And the effect of the tax rate is not controlled by companies because the tax rate is set by the state.

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