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Igoryamba
3 years ago
11

A corporate bond currently yields 8.5%. Municipal bonds with the same risk, maturity, and liquidity currently yield 5.5%. At wha

t tax rate would investors be indifferent between the two bonds?
Business
1 answer:
max2010maxim [7]3 years ago
6 0

Answer: 35.29%

Explanation:

Municipal Bonds are attractive in that they give the tax benefit of being tax exempt whereas a corporate bond is liable for taxation. The tax rate that will therefore make an investor indifferent between the two bonds is the one that will equate the Corporate bond's yield net of tax to the yield on the Municipal bond.

5.5% = 8.5% * ( 1 - x)

5.5% = 8.5% - 0.085x

0.085x = 8.5% - 5.5%

0.085x = 3%

x = 35.29%

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It is July 16. A company has a portfolio of stocks worth $100 million. The beta of the portfolio is 1.2. The company would like
Anuta_ua [19.1K]

Answer:

A. The company should take Short position and

140 contract

B. The company should take Long position and 60 contract

B.

Explanation:

Calculation for what position that the company should take

Using this formula

Company position=(Beta of the portfolio*Change in beta of the portfolio) *Portfolio of stocks /Index futures price* Each Contract index times

Let plug in the formula

Company position =(1.2-0.5)*$100 million/2,000*250

Company position=0.7*$100 million/500,000

Company position=$70,000,000/500,000

Company position=140 contract

Therefore the position that the company should take will be SHORT position with 140 contract

B. Calculation for the increase in beta of the portfolio from 1.2 to 1.5 and what position tthr company should take in the futures contract and how many contracts

Using this formula

Company position=Increase in beta of the portfolio *Portfolio of stocks /Index futures price* Each Contract index times

Let plug in the formula

Company position =(1.5-1.2)*$100 million/2,000*250

Company position=0.3*$100 million/500,000

Company position=$30,000,000/500,000

Company position=60 contract

Therefore the company should take Long position and 60 contract

4 0
3 years ago
Crane Corporation's computation of cost of goods sold is:
slava [35]

Answer:

16.64 days

Explanation:

Given the above information, we will calculate the average days to sell inventories with the formula below;

Average days to sell inventories = [Ending inventory / Cost of goods sold] × 100

Ending inventory = $72,000

Cost of goods sold = $432,800

Then, Average days to sell inventories

= [$72,000 / $432,800] × 100

= 16.64 days

Therefore, the average days to sell inventory for Fry are 16.64 days

5 0
3 years ago
Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $120 per unit. Variable expenses are $60.00 pe
umka21 [38]

Answer:

50%

Explanation:

Given: Selling price= $120 per unit.

          Variable cost= $60 per unit.

First computing contribution margin.

Contribution margin= Selling\ price\ per\ unit - variable\ cost\ per\ unit

⇒ Contribution margin= \$120 - \$ 60

∴ Contribution margin=  \$ 60

Now, calculating the contribution margin ratio.

Contribution margin ratio= \frac{Contribution\ margin}{selling\ price\ per\ unit}

⇒ Contribution margin ratio= \frac{\$ 60}{\$ 120} \times 100

∴ Contribution margin ratio= 50\%

Hence, the product´s contribution ratio is 50%.

7 0
3 years ago
(Inspired by the events in the Montreal cement market in 1966.) You are the CEO of Independent Cement (IC), and are considering
pychu [463]

Answer:

1) C.C. is currently selling at $ 12. So, if I.C.'s price is equal to C.C.'s it can sell to all the 400 customers. Hence, IC should keep the price at $12. The CC's price after price determination by IC will be $ 11 as doing so, CC will be able to sell to all 400 customers. Expected profits of IC will be as follows:

Sales =12 *400

Less : Marginal cost = 3*400

Expected profits = $ 3600

(2) If IC builds a small plant, then it can sell upto its capacity i.e. 100 units to 100 customers, if its price is no greater than IC. So IC can keep its price at $ 12. Expected profits of IC = 100 *12 less marginal cost i.e. 3*100 = $ 900.

As a result of above, CC will keep its price either 11 or 12.

Case 1( If CC's price is 11)

Expected profits = sales- marginal cost = 400* 11 - Marginal cost i.e. 4 * 400= 2800

Case 2 ( If CC's price is 12)

Expected profits = sales- marginal cost = 300* 12- Marginal cost i.e. 4* 300 =2400

So, CC's price would be $ 11 as it leads to maximisation of his profits

(3) The choice of size of plant will be dependent upon the profits and is driven by profit maximisation factor.

Case 1 ( If small plant is chosen)

Sales = 100 * 12

Less : Marginal cost = 100 * 3

Profits = $ 900

Case 2 ( If large plant is chosen, we should keep our price at 11 as CC would always keep the price at 11 , not 12 as it maximises its profit at 11)

Sales = 400 * 11

Less marginal cost : 3 * 400

Profits = 3200

Hence, large plant should be chosen

4 0
3 years ago
Who is responsible for training food workers on safe food handling procedures?
notsponge [240]

Answer:

supervisor, owner or manager

Explanation:

It is always the supervisor, owner or manager's duty to train an employee working in the food industry about the handling procedures and compliance with health policies.

Taking into consideration the specifics of each food industry (various countries and standards), the person in charge should handle proper training or provide adequate courses which teach the employees how to handle food and ensure that the health or food hygiene factors are respected.

6 0
3 years ago
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