Answer: (a) 6%
(b) 10.61%
(c) Yes
Explanation:
a) After tax cost of debt = Yield (1- tax)
= 8 ( 1 - 0.25)
= 8 × 0.75
= 6%
b) 


= 0.1061 or 10.61%
Note: Cost of preferred stock is not tax deductible
c),Yes the treasurer is correct ,The cost of debt is 5% less than cost of preferred stock [10.61 - 6 = 4.61%]
Answer:
Dr Cash 1020
Cr Service revenue 1000
Cr Service fee 20
Explanation:
Service fee is expense of individual who is purchasing not store's expense.
- Total cash received by store is $ 1020 because 2% is service charges by master card,its is income of master card not store so store will treat as liability.
The only revenue of store is $1000.
Assume company x deposits $100,000 in cash in a commercial bank. If no excess reserves exist at the time this deposit is made and the reserve ratio is 20 percent, the bank can increase loans by a maximum of $500,000.
Reserve ratio = 20% = 20/100 = 0.25
Initial Money supply = (1/Reserve ratio)*New Deposit = (100,000/0.25) = $ 400,000
Reserve ratio = Rerserve / Deposit
=> Reserves = 0.25*100,000 = 25,000
Max Increase in Money Supply = Initial Money Supply + Reserves/ Reserve Ratio
= $ 400,000 + 100,000
= $ 500,000.
The term commercial bank refers to financial institutions that accept deposits, provide checking account services, issue various loans, and provide basic financial products such as certificates of deposit (CDs) and savings accounts to individuals and small businesses. refers to
Learn more about the commercial banks at
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