Answer:
The value of the call option today is $10.19
Explanation:
The value of the call option under the two state stock price model is calculated by calculating the present value of the expected return on the stock based on the price increase and price decrease and the probability of such change in prices. It assumes the price to be such that the price is arbitrage free price.
The return on stock is 131 - 109 = 22 if the prices rise to $131. The option will be exercised in this case.
The return on stock will be 0 in case prices go down to $87 as the option will not be exercised and it will expire worthless.
The expected return is = 22 * 0.5 + 0 * 0.5 = $11
The present value of the return is 11 / (1+0.08) =$10.185 rounded off to $10.19
Thus, the price of the call option today is $10.19
Answer:
Master Budget Variance = -$25,986 Unfavorable
Explanation:
Master Budget Variance = Standard or Budgeted Sales Value - Actual Sales Value
Budgeted Sales Value = 14 pools for $20,517 per pool = $287,238
Actual Sales Value = 12 pools for $21,771 per pool = $261,252
Master Budget Variance = $287,238 - $261,252 = $25,986
Since actual sales value is less than budgeted sales, the variance is unfavorable.
Master Budget Variance = -$25,986 Unfavorable
<span>The supplier may feel that revealing cost information to buyers may put them at a disadvantage because it would hurt their pricing strategy, they would be better of withholding the info to sell at a higher price or more convenient manner. The supplier may also not fully understand the cost information, so he or she may not want to give the buyer false information.</span>
Answer and Explanation:
The journal entries are shown below:
On Jan 1
Cash $400,000
To Bonds payable $400,000
(Being the bond is issued for cash)
For recording this we debited the cash as it increased the assets and at the same time it increased the liabilities so the bond payable is credited
On July 1
Interest expense $14,000
To Cash $14,000
(Being the payment of interest is recorded)
The computation is shown below:
= $400,000 × 7% × 6 months ÷ 12 months
= $14,000
For recording this we debited the expenses as it increased the expenses and at the same time it decreased the assets so the cash is credited
On Dec 31
Interest expense $14,000
To Interest payable $14,000
(Being the accrual of interest is recorded)
For recording this we debited the expenses as it increased the expenses and at the same time it increased the liabilities so the interest payable is credited
