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alekssr [168]
3 years ago
11

You want to decide whether to invest in zero-coupon bonds or not. Currently, the yield to maturity of these zero-coupon bonds fo

r the one-year is 8% and for the two-year is 9%. Given this information what is the forward rate of interest for the second year?
a. 10.01%
b. 8%
c. 9.2%
d. 3.25%
Business
1 answer:
kirza4 [7]3 years ago
5 0

Answer:

The forward rate of interest for the second year is;

a. 10.01%

Explanation:

<em>Step 1: Determine the 1 year final value of the investment</em>

The formula for calculating the final value for the 1 year investment is;

F.V=P.V(1+r)

where;

F.V=final value

P.V=present value

r=yield to maturity

In our case;

F.V=unknown

P.V=x

r=8%=8/100=0.08

replacing;

F.V=x(1+0.08)=1.08 x

<em>Step 2: Determine the 2 year final value of the investment</em>

Using the formula;

F.V=P.V(1+r)²

where;

F.V=unknown

P.V=x

r=9%=9/100=0.09

replacing;

F.V=x(1+0.09)²=1.1881 x

<em>Step 3: Determine the forward rate of interest for the second year</em>

The forward rate of interest can be expressed as;

forward rate of interest=(2-year future value/1-year future value)-1

replacing;

forward rate of interest=(1.1881 x/1.08 x)-1=0.10009×100=10.01%

forward rate of interest=10.01%

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Montana Mining Co. pays $3,721,000 for an ore deposit containing 1,525,000 tons. The company installs machinery in the mine cost
Paraphin [41]

Answer:

Ore deposit depletion and Mining machinery depreciation Journal entries

Dr Depletion charge (Ore deposits) 405,528

Cr Accumulated depreciation 405,528

Dr Depletion charge (Ore deposits) 23,268

Cr Accumulated depreciation 23,268

Explanation:

Preparation of the year-end entries to record both the ore deposit depletion and the mining machinery depreciation of Montana Mining Co

Depletion of natural resources can be defined as the way in which the cost of natural resources is apportioned upto the period when it will be utilized which is why they are shown at cost in balance sheet.

The entry is to record depreciation charged on ore deposit depletion. Therefore To record this entry we have to debit depletion charges, and credit accumulated depreciation

Dr Depletion charge (Ore deposits) 405,528

Cr Accumulated depreciation 405,528

Computation of depletion cost per unit:

The depletion cost per unit can be calculated by dividing the net cost of the ore with the total units of capacity :

Depletion/units = Cost - Salvage/ Total unit of capacity

$3,721,000/1,525,000 tons

=$2.44

Hence, depletion per unit is $2.44.

Computation depletion amount on ore deposit:

The depletion amount on ore deposit can be calculated by multiplying the cost per depletion unit with the number of units utilized:

Depletion =Cost/Unit ×Units Utilized

$2.44×166,200 tones

=$405,528

Hence, depletion expenses on ore deposit amounts to $405,528.

The pass entry to record depreciation charged on mining machine :

Dr Depletion charge (Ore deposits) 23,268

Cr Accumulated depreciation 23,268

Computation of depreciation cost per unit:

The depletion cost per unit can be calculated by dividing the net cost of the ore with the total units of capacity :

Depletion/units = Cost - Salvage/ Total unit of capacity

$213,500/1,525,000 tons

=$0.14

Hence, depreciation per unit is $0.14.

Computation of depreciation amount on ore deposit:

The depletion amount on ore deposit can be calculated by multiplying the cost per depletion unit with the number of units utilized:

Depletion =Cost/Unit ×Units Utilized

$0.14×166,200 tones

=$23,268

Therefore the depreciation expenses on ore deposit amounts to $23,268

4 0
3 years ago
What is the difference between a positive economic statement and a normative statement?
yaroslaw [1]

Answer:

e. A positive economic statement can be proved; a normative statement cannot.

Explanation:

A positive economic statement are objective statement that can be tested, amended or rejected by referring to available evidence.

this means in essence that a positive economic statement is prone to improvement when proven. it is not rigid

a normative statement is subjective that cannot be changed. it is rigid.

7 0
3 years ago
If your income varies, you should
MAXImum [283]

Answer:

b. list the average amount.

Explanation:

If your income varies, you should "list the average amount".

When a particular set of values vary, an average value is used. Average value is actually the estimated value which is found in two or more varying values. It gives an idea of what an expected value will be.

So, when income varies, the average amount is expected to be listed. This is done in order compensate even the lowest amount. So if two income varies, the average amount can be determined by adding the highest amount to the lowest amount, and dividing the outcome by 2.

7 0
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Felipe works for an insurance agency with about 50 employees. The HR director recently sent an email requesting information on w
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Answer:

C.  Most people used the reply all button

Explanation:

This is a problem that can occur in companies due to misuse of e-mail functionalities. What happened in this case was that the employees who responded to the HR director's request email, used the reply button to all contacts forwarded in the director's original email, which ends up creating an email chain unnecessary and can hinder and delay the work of other employees, who need to see emails related to their role.

Therefore, the essential thing is that each employee makes use of the e-mail tool effectively, responding only to the recipient of the e-mail and avoiding sending unnecessary and private messages to contacts not interested in the professional subject addressed in the e-mail.

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If workers and firms have rational expectations, they understand that ________ monetary policy will raise the inflation rate, so
Deffense [45]

Answer:

<u>expansionary; will be equal to</u>

Explanation:

<em>Remember</em>, monetary policies are basically divided into:

  1. expansionary monetary policy, and
  2. contractionary monetary policy.

Indeed, as the name implies, the expansionary monetary policy is meant to in a sense boost up economic growth in terms of reducing interest rates thereby theoretically increasing spending and also leading to an increase in the money supply. When there is an increase in the money supply, this thus leads to an increased inflation rate, which would be expected if workers and firms have rational expectations.

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