What is involved in the process of reconciliation?

A bond has a modified duration of 8 and a price of 112,955 calculated using an annual effective interest rate of 6.4%. EMAC is t

quester [9]

Answer:

Option E (143) is the appropriate solution.

Explanation:

According to the question,

The modified duration will be:

= $\frac{Macaulay \ duration}{(1+yield)}$

= $8\times 1.064$

= $8.512$

The percentage change in price will be:

= $-0.6\times 8 \ percent$

= $-4.8$ (%)

Now,

The EMOD will be:

= $112955\times (1-4.8 \ percent)$

= $107533.2$ ($)

Or,

The EMAC will be:

= $112955\times (\frac{1.064}{1.07} )^{8.512}$

= $107675.7$ ($)

Hence,

⇒ $EMOD-EMAC=107533.2-107675.7$

$=-142.5$

⇒ $EMAC-EMOD=143$

5 0

2 years ago

Sanford Co. sells $500,000 of 10% bonds on March 1, 2020. The bonds pay interest on September 1 and March 1. The due date of the

Triss [41]

Answer:

ATTACHED file with the bonds schedule

Explanation:

First, we solve for the proceed from the issuance:

PV of the coupon:

$C \times \frac{1-(1+r)^{-time} }{rate} = PV\\$

C 25,000.000 (500,000 x 10%/2)

time 7 (3 and a half year x 2 payment per year)

rate 0.06 (12% annual / 2)

$25000 \times \frac{1-(1+0.06)^{-7} }{0.06} = PV\\$

PV $139,559.5360

PV of maturity:

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

Maturity 500,000.00

time 7.00

rate 0.06

$\frac{500000}{(1 + 0.06)^{7} } = PV$

PV 332,528.56

PV c $139,559.5360

PV m $332,528.5568

Total $472,088.0928

Then we construct the bonds schedule as follows:

procceds 472,088

face value 500,000

discount on bonds payable -27,912

bond rate 0.05

market rate 0.06

ionterest expense: carrying value times market rate:

472,088 x 0.06 = 28,325.29

cash outlay 25,000

amortization 3,325.29

carrying value after first payment:

472,088 + 3,325.29 = 475,413.29

and the process repeat for all periods.

3 0

2 years ago

Hurricane katrina damaged a large portion of refining and pipeline capacity when it swept through the gulf coast states in augus

Phoenix [80]

<span>A result of the intensity and magnitude of the hurricane it damaged the pipeline. Gasoline distributors affected the prices because of the loss of supply and the unstable transportation or delivery. Stability of prices or equilibrium was achieved after reconstruction and changes that had transpired. Expected prices hikes on products would also be seen afterward.

</span>

7 0

3 years ago

Which of the following statements are true concerning the predetermined overhead rate when the direct labor-hour requirement for

In-s [12.5K]

Answer: The predetermined overhead rate increased because the total direct labor-hours dropped

Explanation:

The predetermined overhead rate refers to an allocation rate which is used in applying the estimated manufacturing overhead cost to the cost objects for a particular reporting period.

When there's reduction in the direct labor-hour requirement from 5 hours to 2 hours, the predetermined overhead rate increased because the total direct labor-hours dropped

The predetermined overhead rate is calculated as the total overhead cost divided by the machine hour. Therefore, if there's reduction in the direct labor hour rate, then there will be a rise in the predetermined overhead rate.

6 0

2 years ago

Beedles Inc. needed to raise $14 million in an IPO and chose Security Brokers Inc. to underwrite the offering. The agreement sta

Elis [28]

Answer:

a. Profit = $780,000

b. Profit = $3,780,000

c. Loss = $2,220,000

Explanation:

Note: This question is not complete. The complete question is therefore provided before answering the question as follows:

Beedles Inc. needed to raise $14 million in an IPO and chose Security Brokers Inc. to underwrite the offering. The agreement stated that Security Brokers would sell 3 million shares to the public and provide $14 million in net proceeds to Beedles. The out-of-pocket expenses incurred by Security Brokers in the design and distribution of the issue were $220,000. What profit or loss would Security Brokers incur if the issue were sold to the public at the following average price

a. $5 per share

b. $6 per share

c. $4 per share

The explanation of the answer is now given as follows:

The profit or loss can be calculated using the following formula:

Profit or loss = Sales proceed - Net proceeds to Beedles - Out-of-pocket expenses incurred by Security Brokers ........... (1)

Where;

Sales proceed = Average price * Number of shares = Average price per share * 3,000,000

Net proceeds to Beedles = 14,000,000

Out-of-pocket expenses incurred by Security Brokers = $220,000

We can proceed as follows:

a. profit or loss at average price $5 per share

Substituting all the values into equation (1), we have:

Profit or loss = ($5 * 3,000,000) - $14,000,000 - $220,000 = $780,000 profit

b. profit or loss at average price $6 per share

Substituting all the values into equation (1), we have:

Profit or loss = ($6 * 3,000,000) - $14,000,000 - $220,000 = $3,780,000 profit

c. profit or loss at average price $4 per share

Substituting all the values into equation (1), we have:

Profit or loss = ($4 * 3,000,000) - $14,000,000 - $220,000 = -$2,220,000 loss

3 0

3 years ago