Answer: If the FOMC directs the Federal Reserve trading desk to loosen credit, the trading desk will engage in repo's with banks, injecting reserves into the banking system. This should lower the Fed Funds Rate between banks since there are more reserves available.
Explanation: During prolonged periods of economic recession, interest rates can be expected to. Decrease.
Assume you are risk-averse and have the following three choices. Expected Value Standard Deviation A $ 1,870 $ 1,520 B 2,000 840 C 1,590 710 a. Compute the coefficient of variation for each. (Round your answers to 3 decimal places.) b. Which project will you select
Answer:
a. The Coefficient of variation is expressed as;
= Standard Deviation/Expected return
Choice A
= 1,520/1,870
= 0.813
Choice B
= 840/2,000
= 0.42
Choice C
= 710/1,590
= 0.447
b. The coefficient of variation measures the volatility of the return of the investment. The more volatile it is, the more risky it is. A risk Averse investor would go for the one with the least Coefficient which is Choice B in this case.
You need a 25-year, fixed-rate mortgage to buy a new home for $210,000. Your mortgage bank will lend you the money at a 7.1 percent APR for this 300-month loan. However, you can afford monthly payments of only $950, so you offer to pay off any remaining loan balance at the end of the loan in the form of a single balloon payment. How large will this balloon payment have to be for you to keep your monthly payments at $950?
Answer:
$450,732, the loan's principal balance increases because the monthly payment doesn't even cover interest expense
Explanation:
In order for you to pay the debt completely in 25 years, you would need to pay $1,497.66 per month. But since you can only afford to pay $950 per month, the remaining balance will be $450,732.
I prepared an amortization schedule in an excel spreadsheet
Problem 14-12 Book Value versus Market Value [LO3] Dinklage Corp. has 4 million shares of common stock outstanding. The current share price is $76, and the book value per share is $7. The company also has two bond issues outstanding. The first bond issue has a face value of $105 million, a coupon rate of 5 percent, and sells for 95 percent of par. The second issue has a face value of $90 million, a coupon rate of 4 percent, and sells for 107 percent of par. The first issue matures in 25 years, the second in 8 years. Both bonds make semiannual coupon payments. a. What are the company's capital structure weights on a book value basis? (Do not round intermediate calculations and round your answers to 4 decimal places, e.g., .1616.) b. What are the company’s capital structure weights on a market value basis? (Do not round intermediate calculations and round your answers to 4 decimal places, e.g., .1616.) c. Which are more relevant, the book or market value weights? Market value
Answer:
a. What are the company's capital structure weights on a book value basis?
common stocks' book value = 4,000,000 x $7 = $28,000,000
first bond = $105,000,000
second bond = $90,000,000
total book value = $223,000,000
capital structure:
common stocks = $28 / $223 = 0.1256
debt = $195 / $223 = 0.8744
b. What are the company’s capital structure weights on a market value basis?
common stocks' market value = 4,000,000 x $76 = $304,000,000
first bond = $99,750,000
second bond = $96,300,000
total book value = $500,050,000
capital structure:
common stocks = $304 / $500.05 = 0.6079
debt = $196.05 / $500.05 = 0.3921
c. Which are more relevant, the book or market value weights?
The market value is always more relevant and it is used to calculate the company's WACC.
In some parts of the country, the buyer and the seller never meet at closing; the paperwork is handled by an escrow agent in a process called
Answer:
Closing escrow
Explanation:
Closing escrow refers to completing the sale and transfering the ownership from the seller to the buyer in a process in which a third party that would be the escrow agent maintains the papers and the money until the operation is closed. According to this, the answer is that in some parts of the country, the buyer and the seller never meet at closing; the paperwork is handled by an escrow agent in a process called closing escrow because the escrow agent keeps the funds and the paperwork until the transaction is complete and because of that the buyer and the seller don't need to meet at closing.
Some of the following future cash flows have been expressed in then-current (future) dollars and others in CV dollars. Use an interest rate of 10% per year and an inflation rate of 6%. Find the present worth with all cash flows expressed in future dollars.
Year Cash flow, $ Expressed as
0 17,100 CV
3 46,500 Then-current
4 12,300 Then-current
7 26,900 CV
The present worth with all cash flows expressed in future dollars is $_______.
Answer:
$62,267.91
Explanation:
first we must calculate the interest rate = 10% + 6% + (10% x 6%) = 16.6%
now we can use the present value formula:
present value = future value / (1 + rate)ⁿ
present values for:
cash flow year 0 = $17,100cash flow year 3 = $46,500/1.166³ = $29,333.06cash flow year 4 = $12,300/1.166⁴ = $6,654.43cash flow year 7 = $26,900/1.166⁷ = $9,180.42total present value = $62,267.91
Answer:
The present worth with all cash flows expressed in future dollars is $62267.91An investor who expects declining interest rates would maximize their capital gain by purchasing a bond that has a ___ coupon and a ___ term to maturity.
Answer: zero; long
Explanation:
An investor who expects declining interest rates would maximize their capital gain by purchasing a bond that has a zero coupon and a long term to maturity.
In this case, a zero-coupon bond will b chosen since the face value will have to be repaid when the bond matures.
When the government passes a new law that explicitly changes overall tax or spending levels, it is enacting:
Answer:
A discretionary fiscal policy.
Explanation:
A discretionary fiscal policy is a policy guideline out in place by Government with the aim of either shrinking or expanding the economy. This kind of policy is usually associated with either an increase or decrease in the tax rates or levels which will increase government revenue or decrease in government revenue or be focused on increasing or decreasing government spendings on the economy either through increasing or decreasing investment in infrastructures etc
"If a portfolio manager believes that the market will be stable over the next 6 months, to generate extra income, the manager could:"
Answer and Explanation:
For earning an extra income, the options contracts could be sold at the premium i.e. collected or in short word sell naked index calls.
Now if the index calls writer exercised, so the delivering of the stock could not be held as it delivers only cash
And, also the writing of index call oppose to the securities portfolio should be termed as a naked writing strategy
While on the other hand in case of the income writing, if the call writer owns the physical instrument than the writer expected to the market for staying neutral
What would be the best answer
Answer:
The correct answer is :- Measurable gain
Which of the following is a good example of a manufacturing-related key success factor?
a. Global distribution capabilities
b. High labor productivity
c. Accurate filling of buyer orders
d. Short delivery time capability
Answer:
b. High labor productivity
Explanation:
High labor productivity is a good example of a manufacturing related key success factor because it reduces wages expenses. The reduction of wages and overall efficiency in production result into increase in the profitability of the firm. It also gives the firm a good competitive advantage over others in the market.
Cynthia Knott's oyster bar buys fresh Louisiana oysters for $3 per pound and sells them for $8 per pound. Any oysters not sold that day are sold to her cousin, who has a nearby grocery store, for $2 per pound. Cynthia believes that demand follows the normaldistribution, with a mean of 100 pounds and a standard deviation of 20 pounds. How many pounds should she order each day? Refer to the standard normal table LOADING... for z-values.
Answer:
111 pounds
Explanation:
The number of pounds Cynthia should order each day can be calculated as follows
Calculation
Standard deviation = 20
Mean = 100
Cost of actual utilization = 8-3 = 5
Cost of Under utilization = 4-2 = 2
Probability of sale = Co/(Cu+Co)
Probability of sale = 5/(5+2)
Probability of sale =0.714
Z score at above probability = z = 0.57
hence cynthia should order= mean+z*standard deviation
Order = 100+0.57*20
Order = 111.4 or 111 pounds
The following data relate to direct labor costs for the current period: Standard costs 6,000 hours at $12.00 Actual costs 7,500 hours at $11.60 What is the direct labor rate variance?
A. $15,000 unfavorable
B. $3,000 favorable
C. $17,400 unfavorable
D. $2,400 favorable
Answer: $3000 favorable
Explanation:
The information provided in the question are:Standard costs 6,000 hours at $12.00 and the Actual costs 7,500 hours at $11.60.
The direct labor rate variance will be calculated as:
= (7,500 × $ 12) - (7,500 × $11.60)
= $90,000 - $87,000
= $3,000 Favorable
It is favorable since the standard rate is more than the actual rate.
Our company manufactures and sells electric staplers for $16 each. If 10,000 units were sold in December, and management forecasts 4% growth in sales each month, the number of electric stapler sales budgeted for March should be:_____.
A) 10,000.
B) 11,249.
C) 10,400.
D) 10,816.
E) 11,000.
Answer:
B) 11,249.
Explanation:
The computation of the number of electric stapler sales budgeted for Marchis shown below:
On Jan
= 10,000 units × 1.04
= 10,400 units
On feb
= 10,400 units × 1.04
= 10,816 units
On march
= 10,816 units × 1.04
= 11,248.64 units
Hence, the correct option is B. 11,249
therefore all other options are wrong
We simply multiplied the unit sales with the growth rate
The Equal Employment Opportunity Commission (EEOC) investigated Chen's complaint of workplace discrimination against his employer and sent him a notice stating that it found no reasonable cause for his complaint. What is Chen's next step if he wants to pursue the claim?
Answer: Chen has 90 days after he receives his "right-to-sue"letter from the EEOC to sue his employer in federal court
Explanation:
From the question, we are informed that The Equal Employment Opportunity Commission (EEOC) investigated Chen's complaint of workplace discrimination against his employer and sent him a notice stating that it found no reasonable cause for his complaint.
Chen's next step if he wants to pursue the claim is that Chen has 90 days after he receives his "right-to-sue"letter from the EEOC to sue his employer in federal court.
Which of the following entries correctly reflects the entry for recording the wages of all factory workers?
a. Work in Process Inventory Wages Expense Cash
b. Work in Process Inventory Manufacturing Overhead Wages Payable
c. Wage Expense Work in Process Inventory
d. Direct Labor Expense Indirect Labor Expense Wages Payable
Answer; b. Work in Process Inventory Manufacturing Overhead Wages Payable
Explanation;
Factor workers are considered to be directly related to the production of the good. As a result, the wages paid to them are added to the inventories produced to show that they are part of the cost of the goods produced. Their wages will therefore be debited to Work in Process Inventory.
The wages will then be credited to the Manufacturing Overhead Wages Payable as this is the liability account that deals with wages owed to people working in the factory.
Listed below are several transactions. For each transaction, indicate whether the cash effect of each transaction is reported in a statement of cash flows as an operating, investing, financing, or noncash activity. Also, indicate whether the transaction is a cash inflow or cash outflow, or has no effect on cash. The first answer is provided as an example
Transaction Financing Type of Activity Cash Inflow or Outflow
1. Issuance of common stock.
2. Sale of land for cash
3. Purchase of treasury stock.
4. Collection of an account receivable
5. Issuance of a note payable
6. Purchase of inventory
7. Repayment of a note payable
8. Payment of employee salaries.
9. Sale of equipment for a notereceivable.
10. Issuance of bonds
11. Investment in bonds.
12. Payment of interest on bonds payable.
13. Payment of a cash dividend
14. Purchase of a building
15. Collection of a note receivable. Cash inflow
Answer:
1. financing : cash inflow
2. investing : cash inflow
3. financing : cash outflow
4. operating : cash inflow
5. financing : cash inflow
6. operating : cash outflow
7. financing : cash outflow
8. operating : cash outflow
9. non-cash activity : no effect on cash
10. financing : cash inflow
11. Investing : cash outflow
12. operating : cash outflow
13. Investing : cash outflow
14. Investing : cash outflow
15. investing : cash inflow
Explanation:
The Cash flow Statement reports Cash Flow from 3 sources, namely (1) Cash flow from Operating , (2) Cash flow from Financing and (3) Cash Flow from Investing Activities
Cash flow from Operating Activities - Reports cash flows arising from ordinary course of business trading. Example is collection of an account receivable.
Cash flow from Financing Activities - Reports cash flow arising from acquisitions and sale of investment or non-current assets. Example is purchase of a building.
Cash Flow from Investing Activities - Reports cash flow arising from sources of finance. Example is Issuance of bonds.
Non-cash activity - Non-cash activity have no effect on cash and are not included in Statement of Cash flow. Example is a ale of equipment for a note receivable.
The following information is from ABC Company's general ledger: Beginning and ending inventories, respectively, for raw materials were $16,000 and $20,000 and for work in process were $40,000 and $44,000. Raw material purchases and direct labor costs incurred were $72,000 each, and manufacturing overhead applied amounted to $40,000. Determine the total cost of goods manufactured during the period.
Answer:
cost of goods manufactured= $176,000
Explanation:
Giving the following information:
Direct materials:
Beginning inventory= $16,000
Ending inventory= $20,000
Purchase= $72,000
WIP:
Beginning inventory= $40,000
Ending inventory= $44,000
Direct labor= $72,000
Manufacturing overhead applied= $40,000
To calculate the cost of goods manufactured, we need to use the following formula:
cost of goods manufactured= beginning WIP + direct materials + direct labor + allocated manufacturing overhead - Ending WIP
Direct material used= beginning inventory + purchases - ending inventory
Direct material used= 16,000 + 72,000 - 20,000= 68,000
cost of goods manufactured= 40,000 + 68,000 + 72,000 + 40,000 - 44,000
cost of goods manufactured= $176,000
Which of the following fall risk factors apply to William Jefferson? Select all that apply.
a. Confusion
b. Postural hypotension with dizziness
c. Unable to ambulate independently
d. History of falls
e. Impaired judgment
f. Incontinence
g. Sensory deficit
h. Increased anxiety
i. Medications affecting blood pressure or consciousness
j. Age (older than 65)
k. Decreased level of cooperation
Answer:
Treatment of dementia and or delirium comes with the following risk factors:
d) if it is related to head injury
j) Age
H) Increase anxiety
I) Medications affecting blood pressure or consciousness
Explanation:
Dementia refers to the gradual deterioration in memory and at least one other cognitive area in an alert person.
This can be caused by Age , Down’s Syndrome , Head injury etc.
Cheers!
A company has two products: A and B. It uses activity-based costing and has prepared the following analysis showing budgeted cost and activity for each of its three activity cost pools:
Activity Cost Pool Budgeted Cost Product A Product B
Activity 1 $87,000 3,000 2,800
Activity 2 $62,000 4,500 5,500
Activity 3 $93,000 2,500 5,250
Annual production and sales level of Product A is 34,300 units, and the annual production and sales level of Product B is 69,550 units. What is the approximate overhead cost per unit of Product A under activity-based costing?
a. $3.00
b. $2.00
c. $10.28
d. $15.00
e. $2.33
Answer:
a. $3.00
Explanation:
Calculation of activity rate for activity 1
Activity rate = Budgeted cost of activity 1/Total budgeted activity
=$87,000 / (3,000 + 2,800)
=$87,000/5,800
=$15
Calculation of activity rate for activity 2.
Activity rate = Budgeted cost of activity 2 /Total budgeted activity
=$62,000 / (4,500+5,500)
=$62,000 / 10,000
=$6.20
Calculation of activity rate for activity 3
Activity rate = Budgeted cost of activity 3 / Total budgeted activity
=$93,000 / (2,500+5,250)
=$93,000 / 7,750
=$12
Calculation of total overhead cost of product A.
Total overhead cost = Activity1 + Activity2 + Activity3
Total overhead cost = (3,000×$15) + (4,500×$6.20) + (2,500×$12)
Total overhead cost = $45,000+$27,900+$30,000
Total overhead cost = $102,900
Thus, the total overhead cost allocated to product A is $102,900.
Calculation of overhead cost per unit.
Overhead cost per unit = Total overhead cost allocated / Number of units produced
= $102,900 / 34,300
= $3 per unit
Thus, the overhead cost per unit of product A is $3
Do-well bonds have a face value of 1000 and are currently quoted at 86.725. The bonds have coupon rate of 6.5 percent. What is the current yield on these bonds?
Answer:
The current yield is 7.50 per cent.
Explanation:
The face value of the bonds = 1000
Current quoting = 86.725
The coupon rate = 6.5 %
Now we have to find the current yield by using the above information. Below is the calculation for current yield.
Price = 86.725% of 1000 = 867.25
Coupon = 0.065 * 1000 = 65
The Current yield = (Annual coupon/price) × 100
Current yield is = (65 / 867.25) * 100
Current yield is = 7.50 per cent.
Classify the following cash flows as either operating, investing, or financing activities assume indirect method.
1. Received cash from sale of equipment at a gain.
2. Received cash dividends from investments.
3. Cash paid to purchase investments in securities.
4. Issued preferred stock for cash.
5. Paid interest on the debt.
6. Paid accounts payable with cash.
7. Paid cash for rent.
8. Received cash from the sale of property at a loss.
9. Paid short-term debt with cash. 10. Paid long-term debt with cash.
Answer:
Cash Flow Method
1. Received cash from sale of Investing activities
equipment at a gain -
2. Received cash dividends Operating activities
from investments.
3. Cash paid to purchase Investing activities
investments in securities.
4. Issued preferred stock for Financing activities
cash.
5. Paid interest on the debt. Operating activities
6. Paid accounts payable with Operating activities
cash.
7. Paid cash for rent. Operating activities
8. Received cash from the sale Investing activities
of property at a loss.
9. Paid short-term debt with cash. Operating activities
10. Paid long-term debt with cash. Financing activities
Light Me Up Lamps has variable expenses of 40% of sales and monthly fixed expenses of . The monthly target operating income is . What is Light Me Up Lamps' operating leverage factor at the target level of operating income?
Answer: B. 3.25
Explanation:
Operating Leverage enables a company know how much their income will increase by if they manage to increase their revenue.
The formula is;
= Contribution Margin / Net Income
[tex]\frac{Fixed Costs + Net Income}{ Net Income} \\= \frac{80,000 + 180,000}{80,000} \\= 3.25[/tex]
= 3.25
For what reason would government agencies and other firms use request for proposals(RFPs)? Name an example of a project that might require an RFP.
Answer:
Request for Proposals(RFPs)a) Reasons for government agencies and other firms to use request for proposal:
1. The proposal involves a complex project.
2. The project requires detailed technical information.
3. Hard data is required for analysis and comparison.
4. There is need for objective comparison of vendors' responses.
5. To outline a project's requirements to suppliers so that they can provide detailed solutions.
6. To establish joint understanding of the requirements with the suppliers.
7. To form the project's baseline and point for contract negotiation.
b) An example of a project that might require an RFP is a project to construct a stadium on an Island. In such a case, the prospects of the project have to be explored at the formation stage, with the costs and effectiveness of the solutions to be provided by various suppliers carefully studied for possible integration. A project may be cancelled after the submission of an RFP because it is understood that the project may not be feasible in terms of economy, efficiency, and effectiveness.
Explanation:
RFP is different from a request for quotation (RFQ). For RFQ, the need or problem is specific with specific solution, and there is no need for detailed technical information. An RFP requires a general problem that requires possible solutions to be offered. The acceptance of RFP or RFQ establishes the contract between the firm or governmental agency and the supplier.
Raggs, Ltd. a clothing firm, determines that in order to sell x suits, the price per suit must be pequals160 minus 0.75 x. It also determines that the total cost of producing x suits is given by Upper C (x )equals4000 plus 0.5 x squared. a) Find the total revenue, Upper R (x ). b) Find the total profit, Upper P (x ). c) How many suits must the company produce and sell in order to maximize profit? d) What is the maximum profit? e) What price per suit must be charged in order to maximize profit?
Answer:
Please refer to the below for answers.
Explanation:
As per the above information, the following can be deduced;
•The price per suit (P)= 160-0.75x
•Total cost of producing x suit is given as C(x) = 4,000+0.5x^2
(a) The total revenue is R(x);
= (Numbers of units) * (Price per unit)
R(x) = x * (160-0.75x)
R(x) = 160x - 0.75x^2
(b) The total profit is P(x);
= Total revenue - Total costs
P(x) = R(x) - C(x)
P(x) = (160x - 0.75x^2) - (4,000 + 0.5x^2)
P(x) = 160x - 0.75x^2 - 4,000 - 0.5x^2
P(x) = -1.25x^2 + 160x - 4,000
(c). To find the maximum value of P(x), we will need to find first the derivative of P'(x)
d/dx*P(x) = d/dx(-1.25x^2 + 160x - 4,000)
P'(x) = - d/dx(1.25x^2) + d/dx(160x) - d/DX(4,000)
P'(x) = -2.5x + 160
The next is to find the critical points.
P'(x) = 0
-2.5x + 160 = 0
-2.5x . 10 + 160 . 10 = 0 . 10
-25x + 1,600 = 0
-25x + 1,600 - 1,600 = 0 - 1,600
-25x = -1,600
x = 64
We will also use the second derivative test to know if there is an absolute maximum because f(c) is the absolute maximum value if f''(c) < 0
Therefore,
d/dx*P'(x) = d/dx (-2.5x + 160)
P''(x) = -d/dx (-2.5x) + d/dx (160)
P''(x) = -2.5
Hence, (64) is negative , and so profit is maximized when 64 suits are produced and sold.
(d) The maximum profit is denoted as;
P(64) = -1.25(64)^2 + 160(64) - 4,000
P(64) = -64^2 * 1.25 + 10,240 - 4,000
P(64) = 6,240 - 64^2 * 1.25
P(64) = 6,240 - 5,120
P(64) = $1,120
Therefore , the clothing firms makes $1,120 as profit by producing and selling 64 suits.
(e) The price per unit to needed to make the maximum profit is thus;
P = 160 - 0.75x
Where x is 64
P = 160 - 0.75(64)
P = 160 - 48
P = $112
Some of the following problems would be suitable for solution by engineering economic analysis.
Which ones are they?
(a) Would it be better to buy a car with a diesel engine or a gasoline engine?
(b) Should an automatic machine be purchased to replace three workers now doing a task by hand?
(c) Would it be wise to enroll for an early morning class to avoid traveling during the morning traffic rush hour?
(d) Would you be better off if you changed your major?
(e) One of the people you might marry has a job that pays very little money, while another has a professional job with an excellent salary. Which one should you marry?
Answer:
(a) Would it be better to buy a car with a diesel engine or a gasoline engine?
Explanation:
Note that this option has an economic appeal which is cost comparison. Engineering analysis here would seek to determine the economic advantage of such purchase.
For example, one may consider from the engineering economics perspective the fuel consumption ratio per mile for diesel engines and gasoline engines their relative cost per liter.
What agency provides over 25,000 government publications?
1. The Department of Health, Education, and Welfare
2. The Office of Consumer Affairs
3. The Environmental Protection Agency
4. The Government Printing Office
Answer:
Correct Answer:
4. The Government Printing Office
Explanation:
The United States Government Publishing Office is an agency of the legislative branch of the United States federal government with the mandate to inform the Nation by producing, procuring, and disseminating printed and electronic publications of the Congress as well as the executive departments and establishments of the Federal Government.
The correct answer is the 4. Government Printing Office (GPO). The GPO is an agency of the United States federal government that is responsible for producing and distributing various government publications, including books, reports, and other documents
The Government Printing Office (GPO) provides over 25,000 government publications. GPO is an agency of the legislative branch of the U.S. government and produces a wide range of printed and electronic publications.: The Government Printing Office (GPO) is the agency responsible for providing over 25,000 government publications.
The GPO is an agency of the legislative branch of the U.S. government and produces a wide range of printed and electronic publications.The GPO has been providing printing services to the federal government since 1861. The agency produces publications for a variety of government agencies, including the Department of Defense, the Department of State, and the Department of Justice. The GPO also produces publications for Congress, including the Congressional Record and the Congressional Directory.
Additionally, the GPO provides printing and publishing services for the U.S. Government Publishing Office bookstore and for other private sector clients.The GPO has been responsible for printing many important government documents throughout U.S. history, including the Emancipation Proclamation and the Federalist Papers. Today, the agency continues to play an important role in providing government publications to the American public.
know more about Government Printing Office (GPO).
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Shelley wants to cash in her winning lottery ticket. She can either receive fourteen, $188,000 semiannual payments starting today, or she can receive a single-amount payment today based on a 6% annual interest rate. What is the single-amount payment she can receive today
Answer:
$2,123,661.75
Explanation:
We are to find the present value of the payments
but first we are to determine the future value of the payments
The formula for calculating future value = A (B / r)
B = [(1 + r)^n] - 1
R = interest rate = 6% / 2 = 3%
N = number of years = 14
(1.03^14 - 1 ) / 0.03 = 17.086324
$188,000 x 17.086324 = $3,212,228.94
Present value = future value(1 + r ) ^-N
$3,212,228.94(1.03)^-14 = $2,123,661.75
On January 1, 2021, Laramie Inc. acquired land for $6.2 million. Laramie paid $1.2 in cash and signed a 6% note requiring the company to pay the remaining $5 million plus interest on December 31, 2022. An interest rate of 6% properly reflects the time value of money for this type of loan agreement. For what amount should Laramie record the purchase of land
Answer:
The amount Laramie should record the purchase of land is $6.2 million.
Explanation:
The costs of a fixed asset refer to the purchase price and other relevant costs which are incurred in order to the location and working condition required to operate the fixed asset in way that it is intended.
The other relevant costs that are added to the purchase price to arrive at the cost of the fixed assets include professional fees, non-refundable taxes or levies, and among others.
If any trade discount or rebate is given, this will be deducted from the purchase price to arrive at the cost.
Any interest required to be paid on the delayed payment in order to reflects the time value of money are not part of the cost of the asset but expensed in the year they are incurred.
From the question, the land acquired is a fixed asset. Based on the explanation above, the total cost of the asset is $6.2 million. The interest from the 6% interest rate on the remaining $5 million will be part of the cost of the land but it will be expensed in the year they are incurred.
Therefore, the amount Laramie should record the purchase of land is $6.2 million.
Match each activity that generates portfolio income to the context in which it is generated.
Let's match each portfolio asset with its defintion
trading paper assets. It involves buying and selling of stocks, bonds, mutual funds, derivatives, and currencies. The paper asset is a representation of an underlying asset that can be of many types: stock, bonds, etc. Literally it is a piece of paper where the ownership of an asset is stated.
stocks: It represents ownership in a corporation. The capital of such company is divided in equally-valued shares which are sold in the financial markets and the buyers become its owners in the proportion of the value of the shares they have purchased.
mutual funds: It is a financial investment that pools money from investors to invest in securities. They have certain advantages if compared to investing individually on securities. They enable to reach economies of scale when conducting investments, they involve a higher level of diversification, more liquidity and they are controlled by professionals.
derivative: It is a contract whose value derives from other financial assets. More specifically, its value depends on an underlying, which can be an asset, an index, etc. Derivative contracts can be issued with a multiplicity of objectives: to protect other investment against price variations (insurance), to speculate, etc.
You buy a stock at $100 and sell it for $140;what is the percentage return if the margin requirement is 40 % and the interest rate of borrowed funds is 10%.
Answer:
Return on your investment (ROI) = 60%
Explanation:
Return on investment would be the proportion of the amount invested that is earned as profit. Note the following :
The amount earned as cash return would be determined as the capital gains less the interest on the loan.
Also, the amount invested would refer to the personal capital contribution made by the investor. This implies the total cost of the stock less the interest earned on the amount borrowed.
The principles above are illustrated as follows:
Capital gain on stock = stock price at the end - stock price at the beginning
Stock price at the end = 140
Capital gain = 140 - 100 = 40
Cost of fund = interest rate × amount borrowed
Amount borrowed = 40% × 100 = 40
Cost of fund = 10% × (40% × 100) = 4
Return on investment = Capital gains - cost of funds /(Total cost - amount borrowed)
ROI = (40 - 4)/(100 - 40)× 100 = 20%
Return on your investment (ROI) = 60%