Answer:
a. Increase the direct costs of the state's debt.
Explanation:
When a bond's rating is downgraded is a signal to the investors that investing in the bond now is riskier than it was prior to the rating downgrade, hence, a perceived higher risk using the risk/return relationship means that the bond issue would have to offer a higher return to entice the investors to invest in the bonds.
As a result, the higher required rate of return translates into a higher direct cost of the state's debt since their interest rate offered has increased
Answer:
Effective annual interest rate=0.52%
Explanation:
Step 1: Express the formula for calculating interest
The formula for calculating interest can be expressed as;
I=PRT
where;
P=principal amount borrowed
R=annual interest rate as a percentage
T=number of years
Step 2: Determine the value of the variables P, R and T
In our case;
I=$10
P=(125-10)=$115
R=unknown=r
T=2 months=2/12=1/6 years
replacing in the expression;
10=115×r×(2/12)
10=(230/12)r
r=10×12/230=0.5217
0.5217 rounded off to the nearest 2 decimal places is:
r=0.52%
Effective annual interest rate=0.52%
Answer:
$1,240,000
Explanation:
Given that,
Net income = $1,000,000
Pretax foreign currency translation adjustment = $400,000
Unrealized pretax loss on debt securities = $80,000
Effective tax rate = 25%
Total other comprehensive income:
= Foreign currency translation adjustment - Loss on debt securities
= [$400,000 × (1 - 25%)] - [$80,000 × (1 - 25%)]
= ($400,000 × 0.75) - ($80,000 × 0.75)
= $300,000 - $60,000
= $240,000
Comprehensive income:
= Net income + Total other comprehensive income
= $1,000,000 + $240,000
= $1,240,000