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klasskru [66]
2 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]2 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 receiving department has three activities: unloading, counting goods, and inspecting. Unloading uses a forklift that is leas
stepladder [879]

Answer:

Calculating the cost of each activity,

Unloading = $ 80,100

Counting = $ 37,500

Inspecting = $54,450

Explanation:

Given:

Unloading lease = $15,000 per year

Fuel for the forklift = $3,600 per year

Maintenance for the forklift = $1,500 per year

Inspection uses some special testing equipment that has depreciation of $1,200 per year

Operating cost = $750.

Receiving employees average salary = $50,000 per year

Salaries; 3 × 50,000 = 150,000

Unloading salary = 40%  × 150,000 = 60,000

Counting salary = 25%  × 150,000 = 37,500

Inspecting salary = 35% × 150,000 = 52,500

                              Unloading                 Counting                    Inspection

Equipment               15,000                                                             1,200

Fuel                           3,600

Operation cost          1,500                                                                750

Labor                       60,000                   37,500                          52,500

Total cost                 80,100                   37,500                          54,450

6 0
2 years ago
A customer purchases 8M of City of Los Angeles 4% G.O.'s, maturing in 2038 at 95. The interest payment dates are Jan 1st and Jul
Temka [501]

Answer:

The amount customers are expected to pay $7600 per bond

Explanation:

8M implies that the municipal bond has  $8000 as its par value.

The amount a customer would is 95% of the par value

Hence, customers are expected to pay $7600 (95%*$8000)

For instance a 5M at 105 means that the par value of the bond is $5000 but issued at 105%, which translates into $5250 without considering commissions as well as the accrued interest on the bond which might also be factored into the price.

6 0
2 years ago
Read 2 more answers
Slick Sam has a special relationship with his banker. The nature of the relationship is as follows: The bank owes Sam $100 per y
kodGreya [7K]

Answer:

X=97.24

Explanation:

PV = Present Value = X+2000 by the 16th years

PMT = Payments = $100

FV = Future Value = 2000 at the end of 16 years

n= number of years

Applying the equation of future value for annuity

FV = pmt* ​((1+r)ⁿ - 1   )/r

Inputting the values;

2000=100*((1+r)¹⁶-1)/r

Solving for r, gives r = 2.9%

Therefore using the formula for PV for annuity;

PV=PMT*(1-(1/1+r)/r)

X=100*(1-(1/1.029)/0.029

X=100*((1-0.9718)/0.029)

X=100*(0.0282/0.029)

X=97.24

4 0
3 years ago
During the first month of operations ended August 31, Kodiak Fridgeration Company manufactured 80,000 mini refrigerators, of whi
tiny-mole [99]

Answer:

1.                     Absorption Costing Income Statement

                         For the month ended May 31, 2016

Sales                                                                     $10,800,000

<u>Cost of goods sold</u>

Beginning inventory                   -

Cost of goods manufactured    $9,600,000

Ending Inventory                         <u>$960,000</u>

Cost of goods sold                                                <u>$8,640,000</u>

Gross margin                                                          $2,160,000

<u>Selling and administrative expenses</u>

$1,080,000 + $180,000                                         <u>$1,260,000</u>

Income from operation                                           <u>$900,000</u>

<u />

2.             Variable Costing Income Statement

               For the month ended May 31, 2016

Sales                                                                            $10,800,000

<u>Variable cost of goods sold</u>

Beginning Inventory                     -

Variable cost of goods manufactured $9,280,000

Ending Inventory                                    $928,000

Variable cost of goods sold                                        <u>$8,352,000</u>

Manufacturing margin                                                  $2,448,000

Variable selling and administrative                             <u>$1,080,000</u>

expenses

Contribution margin                                                     $1,368,000

<u>Fixed Cost:</u>

Fixed manufacturing cost                        $320,000

Fixed selling and administrative              <u>$180,000</u>

expenses

Total fixed cost                                                                <u>$500,000</u>

Income from operation                                                  <u>$868,000</u>

<u />

3. The reason for difference of amount for income from operation is $32,000 ($900,000 - $868,000). It is due to fixed manufacturing cost which is included for ending inventory under absorption costing (320,000 / 80,000 * 8,000). Hence, income under absorption costing is higher by $32,000 as compared to income under variable costing.

8 0
3 years ago
J Crane, Ltd. is a local coat retailer. The store’s accountant prepared the following income statement for the month ended Janua
kari74 [83]

Answer:

                                                J Crane, Ltd

                           Contribution Margin Income Statement

                           For the Month ended January 31 YY

                                                                      $                       $

Sales revenue                                                                 750,000

Less Variable cost :

Cost of goods sold                                  300,000

Selling expenses                                     19,500

Admin Expense                                      <u> 37,500</u>

                                                                                       <u>  357,000 </u>                

Contribution Margin                                                        393,000

Less Fixed cost :

Selling expense                                       4,060

Administrative expense                         <u> 12,000</u>

                                                                                       <u>  16,060 </u>

Net income                                                                     <u> </u><u>376,940</u>

<u />

<u>Working:</u>

Number of Coat sold = 750,000/250 = 3000 coats

Variable costs:

Selling expenses = 6.5 x 3000 = 19500

Admin Expense = 750,000 x 5% = 37,500

Fixed cost:

Selling expenses = 23560 - 19500 = 4060

Admin Expense = 49,500 - 37,500 = 12,000

4 0
3 years ago
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