Answer:
Given:
12% bonds have a face value of $35,000,000
Bonds sold for $37,702,483 based on the market interest rate of 10%.
∴
The interest expense on July 1 can be computed as
Interest expense = Bonds sold × Effective market interest rate (
= 5%)
= $37,702,483 × .05 (1/2 of the effective interest rate)
= $1,885,124
⇒ The interest expense on July 1 is $1,885,124
Answer:
-3
Explanation:
PED= change in quantity demanded /change in price
Answer:
To find the present value of the interest payments, multiply <u>$3,000</u> by the present value factor <u>8.1109</u>.
Explanation:
the market price of the bonds:
- present value of face value = $100,000 / (1 + 4%)¹⁰ = $67,556.47
- present value of coupon payments = $3,000 x 8.1109 (PV annuity factor, 4%, 10 periods) = $24,332.70
market price = $91,889.17
Since the market rate is higher than the coupon rate, the bonds will be sold at a discount.
Answer:
D. Fall; Surplus
Explanation:
Loanable Funds
This is simply the sum total of all the money individuals in an economy or nation have decided to save and lend to borrowers as an investment rather than use for individual consumption. The market describes how money is borrowed. It illustrates the interactions between savers and borrowers in a country.
Interest rate here is determined by the demand and Supply of loanable funds. When the Savers and More than the borrowers, that is, supply is larger than demand, interest Rate generally FALLS (drops). This is as a result of the SURPLUS loanable funds available.
A good example is in the question, where the borrowers want 100million and the Savers are saving 125 million.
The Savers amount are more than the borrowers amount by 25 million, hence a fall in interest rate due to that Surplus.
Answer:
1a. 3,000 units
1b. $1,050,000
2. See attachment.
3. contribution margin income statement
Sales ($350 × 7,000 units) $2,450,000
Less Variable Cost ($245 × 7,000 units)) ($1,715,000)
Contribution $735,000
Less Fixed Costs ( $315,000)
Operating Profit $420,000
Explanation:
Break-even point (sales units ) = Fixed Cost ÷ Contribution per unit
= $315,000 ÷ ($350 - $245)
= 3,000
Break-even point (sales dollars) = Fixed Cost ÷ Contribution Margin Ratio
= $315,000 ÷ ($105/$350)
= $1,050,000
