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klasskru [66]
3 years ago
9

Assume that interest rates on 20-year Treasury and corporate bonds with different ratings, all of which are noncallable, are as

follows: T-bond = 7.72% A = 9.64% AAA = 8.72% BBB = 10.18% The differences in rates among these issues were most probably caused primarily by:
Business
1 answer:
Elina [12.6K]3 years ago
3 0

Answer:

The question is missing the options which are below:

A Real risk-free rate differences.  

B Tax effects.  

C Default risk differences.  

D Maturity risk differences.  

E Inflation differences.  

The correct answer is option C,default risk differences.

Explanation:

Default risk is the increase in return given to an investor to compensate the investor for the likely losses that may arise due to the inability of the borrower to make funds available to the investor on the maturity date or even in required amount.

Different debt instruments have different default risk depending on their credit rating as rated by international rating agencies.Such rating is a function of many factors,which includes:

Balance sheet position

Profitability

Liquidity strength of the company

Macro-economic factors and some others.

Liquidity refers to the ability of the company to settle obligations such as repayment of bonds and interest  when due.

Invariably,liquidity has a higher impact in determining credit rating as well as default risk of an instrument.

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The bonds issued by Stainless Tubs bear an 8 percent coupon, payable semiannually. The bonds mature in 11 years and have a $1,00
GenaCL600 [577]

Answer:

8.69%

Explanation:

Face value (FV)=$ 1,000.00

Coupon rate=8.00%

Interest per period (PMT) =$30.00

Bond price (PV)=$ 952.00

Number of years to maturity 11

Number of compounding periods till maturity (N)                                                  22

Bond Yield to maturity RATE(NPER,PMT,PV,FV)*2 = 8.69 %

4 0
2 years ago
A Michigan State University student spends his summer months in his hometown, where he works for a local micro-brewery during th
murzikaleks [220]

Answer: Expectancy theory

Explanation:

The theory that suggests that the student will only work as hard as necessary to earn a "C" grade is the expectancy theory.

Expectancy theory states that an individual will act in a particular way due to the fact of what they believe will be the result of the behavior that they selected and thereby will select a particular behavior above orhers.

Here, the student simply selects his work above the school grade because he believes that a C is enough for him. Therefore, the answer will be expectancy theory.

6 0
2 years ago
Merger Co. has 10 employees, each of whom earns $1,700 per month and has been employed since January 1. FICA Social Security tax
andriy [413]

Answer:

Date            Description                                         Debit                    Credit

March, 31     Payroll Tax expense                       $‭2,320.5‬0

                    FICA Social Security taxes                                             $1,054

                    FICA Medicare taxes                                                      $ 246.50

                    FUTA taxes                                                                      $ 102

                    SUTA taxes                                                                      $ 918

<u>Working </u>

FICA Social Security taxes = 1,700 * 10 * 6.2% = $‭1,054‬

FICA Medicare taxes = 1,700 * 10 * 1.45% = $‭246.5‬0

FUTA Taxes = 1,700 * 10 * 0.6% = $‭102‬

SUTA Taxes = 1,700 * 10 * 5.4% = $‭918‬

Payroll Tax expense = 1,054 + 246.50 + 102 + 918 = $‭2,320.5‬0

7 0
3 years ago
Pogisa is a director at trendz corp. after studying and consulting with experts, pogisa votes to have trendz sell a tract of lan
Alenkasestr [34]

She may be entitled to protection under the <u>Business Judgement Rule</u>, which is a doctrine that courts generally defer to the business decisions of company executives when the decisions were in good faith.  

4 0
3 years ago
The Cook Corporation has two divisions--East and West. The divisions have the following revenues and expenses: East West Sales $
VLD [36.1K]

Answer:

$76,100 net operating loss

Explanation:

The computation of the overall company net operating income (loss) is shown below:

= East sales - east Variable costs - east Traceable fixed costs  - east Allocated common corporate costs - west Allocated common corporate costs

= $550,000 - $198,000 - $169,500 - $117,500 - $141,100

= -$76,100 loss

Since the west division is eliminated so all the items would be ignored except Allocated common corporate costs

4 0
3 years ago
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