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3 years ago

The price quotations of Treasury bonds in the Wall Street Journal show an ask price of 104.25 and a bid price of 104.125.

Business

1 answer:

Andreas93 [3]3 years ago

5 0

As a seller we would receive $1,041.25

<u>Solution:</u>

You may receive the bid price of the dealer, $104.125\%$ of $1,000, or $1,041.25

Prices of treasury bonds are expressed as par value amounts.

The quote price of 104:25 means that the bond is priced at $(104 + \frac{25}{100})\%= 104.25\%$ of the par value.

Therefore, if the debt is $1,000, the dollar values to be charged by the borrower should be $1,000\times104.25\% = \$1,041.25$

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Costs of Acquiring Fixed Assets

Zepler [3.9K]

Answer:

The answer is given below:

Explanation:

1.Yes

2.Yes

3.Yes

4.Yes

5.Yes

6. Yes

7.No

8.Yes

9.Yes

10.No

11.No

12.No

As a rule of thumb,those costs which increase the value or useful life of asset should be capitalized where as those costs that are incurred to maintain the usage of asset are revenue expenditure and should be charged to income statement not the asset.

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3 years ago

Read 2 more answers

Select the true statement about default risk. It is the risk that the bond's price will fall below its par value. Bondholders ha

Novosadov [1.4K]

Answer:

Bondholders have a degree of legal protection against default risk, but it is not comprehensive.

Explanation:

A bond can be defined as a debt or fixed investment security, in which a bondholder (investor or creditor) loans an amount of money to the bond issuer (government or corporations) for a specific period of time. The bond issuer are expected to return the principal (face value) at maturity with an agreed upon interest (coupon), which are paid at fixed intervals.

The par value of a bond is its face value and it comprises of its total dollar amount as well as its maturity value. Also, the par value of a bond gives the basis on which periodic interest is paid. Thus, a bond is issued at par value when the market rate of interest is the same as the contract rate of interest. This simply means that, a bond would be issued at par (face) value when the bond's stated rated is significantly equal to the effective or market interest rate on the specific date it was issued.

In Economics, bonds could either be issued at discount or premium. A bond that is being issued at a discount has its stated rate lower than the market interest rate, on the specific date of issuance while a bond that is issued at a premium, has its stated rate higher than the market interest rate on the specific date of issuance.

Default risk in bonds refer to the risk that a bond issuer (borrower) is unable to pay the principal or interest agreed upon in the contract with the bondholder (lender) in a timely manner.

Hence, the true statement about default risk is that bondholders have a degree of legal protection against default risk, but it is not comprehensive.

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3 years ago

You can buy property today for $2.2 million and sell it in 5 years for $3.2 million. (You earn no rental income on the property.

Stolb23 [73]

Answer:

PV of the sales price $1,986,948.23

Explanation:

We will calcualte the present value of the sale price using the present value of a lump sum formula:

$\frac{Maturity}{(1 + rate)^{time} } = PV$

Maturity 3,200,000

time 5 years

rate 10% = 10/100 = 0.1

$\frac{3200000}{(1 + 0.1)^{5} } = PV$

PV $1,986,948.2338

This indicates the 3,200,000 in five years are equivalent to 1,986,948.23 dollars Thus, this investment is not profitable as the property will be purchased at 2,200,000

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3 years ago

A new shop wants to sell Muffins, the sell price is 2.5 dollars per unit. The cost for production is 1 dollar per unit. At the f

FromTheMoon [43]

Answer:

The price went from 2.50 dollar per unit to 1.25

And quantity sold of first hand muffin increase from 500 to 1,600

Explanation:

First day:

We build the equation and solve considering:

a= first hand muffin sold at 2.5 dollar

b = left-over sold at 0.5 dollar

considering the shop made 2,000 muffin and the cost is 1 dollar per muffin:

quantities equation: a + b = 2,000

price equation: 2.5a + 0.5b = 2,000

2.5(2,000 - b) + 0.5b = 2,000

5,000 - 2.5b + 0.5b = 2,000

3,000/2 = b = 1,500

a = 2,000 - b = 2,000 - 1,500 = 500

It sale 500 dollar of muffin at 2.5 and 1,500 at 0.5 getting a total of 2,000 revenue to cover the cost.

Second day:

There is a decrease in price to 1.25 per muffin

This generates a profit of 400 dollar thus:

(sales price less cost) x quantity = profit

(1.25 - 1) x a = 400

a = 400/0.25 = 1,600

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3 years ago

When Lofonift Inc. introduced its flagship product, an MP3 player, it captured the MP3 player market by offering its product at

mestny [16]

Answer:

Predatory pricing.

Explanation:

When Lofonift Inc. introduced its flagship product, an MP3 player, it captured the MP3 player market by offering its product at the lowest price in the market. This gradually forced many of its competitors out of business. Once its competitors were out of business, Lofonift Inc. raised its prices. In this scenario, Lofonift Inc. most likely indulged in predatory pricing.

Predatory pricing is a strategy used by some business owners to reduce the cost of a particular commodity or item to the lowest possible amount such that the available competitors will be driven out of business.

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3 years ago