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Crank
3 years ago
14

5. Suppose Hillard Manufacturing sold an issue of bonds with a 12-year maturity, a $1,000 par value, a 10% coupon rate, and semi

annual interest payments. Two years after the bonds were issued, the going rate of interest on bonds such as these fell to 5%. At what price would the bonds sell
Business
1 answer:
balandron [24]3 years ago
4 0

Answer:

Price of bonds = $1,389.73  

Explanation:

<em>The value of the bond is the present value(PV) of the future cash receipts expected from the bond. The value is equal to present values of interest payment plus the redemption value (RV). </em>

Value of Bond = PV of interest + PV of RV

The value of bond for Hillard  can be worked out as follows:

Step 1  

<em>Calculate the PV of interest payments </em>

Semi annual interest payment

= 10% × 1,000 × 1/2 =50

PV of interest payment

A ×(1- (1+r)^(-n))/r

r- semi-annual yield = 5%/2 = 2.5%

n- 10× 2 = 20.

Note that the bonds now have 10 years to maturity because it was issued 2 years ago

PV on interest = 50 × (1-(1.025^(-20)/0.0425 = 779.45

Step 2

<em>PV of redemption Value </em>

PV = $1,000 × (1.025)^(-20) =   610.27

Step 3

<em>Price of bond </em>

=  779.45+  610.27 =  $1,389.73

Price of bonds = $1,389.73  

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$31.44

Explanation:

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Hence, the amount of accretion expense Gunk will record in 2020 related to the asset retirement obligation

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4 0
2 years ago
Toby’s current marginal utility from consuming peanuts is 100 utils per ounce and his marginal utility from consuming cashews is
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Answer:

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Explanation:

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Toby will maximize his utility when we have:

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Where;

MUp/Pp = Marginal utility of peanut divided by price of peanut = 100/10 = 10

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From the above, Toby is not maximizing his utility. I am able to know this because MUp/Pp > MUc/Pc (i.e. 10 > 8). An Toby will only maximize his utility when MUp/Pp = MUc/Pc.

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Since MUp/Pp > MUc/Pc (i.e. 10 > 8), Toby should reduce his spending on cashew in order to increase MUc and increase his spending on peanuts reduce MUp until MUp/Pp = MUc/Pc.

3 0
3 years ago
Explain what unearned revenues are by selecting the statements below which are correct. (Check all that apply.) Multiple select
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Answer:

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They are also called deferred revenues.

Explanation:

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<u>Ending work in process 8,300(100%)      8,300</u>

<u>Equivalent unit(material)                         17,700</u>

<u></u>

B. Computation for equivalent unit(conversion costs)

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Units transferred                                         9,400

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<u>Equivalent unit(conversion costs)          13,301</u>

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maximum amount that a consumer is willing to pay for the slice.

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