Answer:
<em><u>Classifying Cash Flows:</u></em>
Retirement of bonds payable ⇒ <em><u>Financing activity</u></em>
Purchase of inventory for cash ⇒ <u><em>Operating activity</em></u>
Cash sales ⇒ <u><em>Operating activity</em></u>
Repurchase of common stock ⇒ <em><u>Financing activity</u></em>
Payment of accounts payable ⇒ <u><em>Operating activity</em></u>
Disposal of equipment ⇒ <em><u>Investing activity</u></em>
Answer:
(c) Circle graph
Explanation:
The circle graph or pie chart is commonly used when we want to give a visual demonstration of the proportional division of a data. Each item is expressed as a sector of the circle where the angle is relative to the value of the item.
Answer:
a) 16%
b) 2.25
c) Increase in expected market risk premium
Explanation:
Expected standard deviation of market return = 20%
measure of risk aversion ( A ) = 4
a) Determine a reasonable expected market risk premium
= A * ( std ) ^2
= 4 * ( 20%)^2
= 16%
b) determine Value of A
market risk premium = A * ( std )^2
∴ A = 9% / ( 20% ) ^2
= 0.09 / 0.04
= 2.25
c) If investors become more risk tolerant the expected market risk premium will increase
The potential risk that the investors may face when this is made use is that the issuer may not be able to make profit when the bonds are considered to offer as a guaranteed return because they are honored by law and with that, this will cause the value of the bond to be lowered when exposed in the market in which the return will also be lower when return to the investors.
