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kumpel [21]
3 years ago
5

Optimizing economic agents use the real interest rate when thinking about the economic costs and returns of a loan. Suppose the

average rate paid by banks on savings accounts is 0.65% at a time when inflation is around 1.45%.
For the average saver, the real rate of interest on his or her savings is -0 80 %. If banks expect that the rate of inflation in the coming year will be 445% and they want a real return of 6% on a certain category of loans, then the nominal rate they should charge borrowers on those loans is ______ %

Business
1 answer:
Elan Coil [88]3 years ago
4 0

Answer:

10.45 %

Explanation:

Please see attachment

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Rachel's Designs has 1,100 shares of 7%, $50 par value cumulative preferred stock issued at the beginning of 2019. All remaining
gladu [14]

Answer:

The dividend payable to the cumulative preferred stock holers in 2021 is $11,550 while the amount payable to common stock holders is $1,450.

Explanation:

Cumulative preferred stock dividends accrue and becomes payable when the reporting entity has favourable cash flows. Rachael Designs plans to make payment of $13,000 dividends in 2021. As the annual cumulative preferred dividend is $3,850 (1,100 shares x $50 x 7%), the amount due over three years will be $3,850 x 3 whcih is $11,550. Thus, out of the proposed cash outflow of $13,000, the amount of $11,550 will be paid to cumulative preferred stock holders while only $1,450 will be paid to the common stock holders.

5 0
4 years ago
Clabber Company has bonds outstanding with a par value of $123,000 and a carrying value of $111,100. If the company calls these
White raven [17]

Answer:

The gain on retirement = $4,600

Explanation:

The gain or loss on retirement = Carrying Value of the Bonds -  Call price of the Bonds

The gain or loss on retirement = $111,100 -  $106,500

The gain on retirement = $4,600

Note: Par value will not be taken for the calculation of the above

4 0
3 years ago
Teller's checks and personal checks are classified as
Veseljchak [2.6K]
The awnser to the question is A Drafts
6 0
2 years ago
Read 2 more answers
A new corporate bond is being offered for $930. The bond has a face value of $1,000 and matures in 10 years. The coupon rate is
PilotLPTM [1.2K]

Answer:

The answer is 7.65%

Explanation:

The cost of capital is equal to the cost of debt in this example as it involves a debt instrument. The formula for the cost of debt is as follows:

(Interest Expense x (1 – Tax Rate) ÷  (Amount of Debt – Debt Acquisition Fees + Premium on Debt – Discount on Debt)

In the example, the given values are the following:

Interest Expense = 7% x $1,000 = $70 (no tax rate was provided)

Amount of debt = $1,000 (face value of the bond)

Debt acquisition fee = $15

Discount on debt = $70 ($1,000 face value vs. the $930 proceeds of the bond, the bond was issued at a discount)

Solution:

$70 ÷ ($1,000 - $15 - $70) = 7.65% cost of capital (cost of debt)

8 0
3 years ago
A major lottery advertises that it pays the winner $10 million. However, this prize money is paid at the rate of $ 500,000 each
My name is Ann [436]

Answer:

We have to discount these payments to find the present value

500,000

500,000/1.1

500,000/1.1^2

500,000/1.1^3

We keep on doing this until we reach 500,000/1.1^19

After that we add all the payments and get the value. A less time consuming way of doing it is using a financial calculator

Pv=?

N=19

FV=0

PMT=500,000

=4,182,460.05 we add 500,000 to this because the first payment was not discounted=4,682,460.05= Present Value.

Explanation:

8 0
3 years ago
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