Create an Excel File to answer the following questions:

1. A bond has a 5% coupon rate, and matures in 18 years, and has par value $1000. Find the price of the bond today if the yield to maturity is 4% first assuming annual payments, then again with semi-annual.

2. What is the yield to maturity on a semiannual bond with a 9% coupon rate, $1000 par value, and 3 years to maturity if the price of the bond today is $800?

3. Consider two bonds, both with a current YTM of 3.6%. The first pays no coupon (Cr=0%) and matures in 26 years. The second pays an 8% coupon annually and matures in 4 years.

a) Find the price of both bonds under the current YTM of 3.6%

b) Find the price of both bonds if yields drop to 3.3% and the % change in price

c) Find the price of both bonds if yields rise to 3.9% and the % change in price

d) Which bond has more interest rate risk?

Gladstone Company tracks the number of units purchased and sold throughout each accounting period but applies its inventory costing method at the end of each period, as if it uses a periodic inventory system. Assume its accounting records provided the following information at the end of the annual accounting period, December 31.

Assuming that for Specific identification method (item 1d) the March 14 sale was selected two-fifths from the beginning inventory and three-fifths from the purchase of January 30. Assume that the sale of August 31 was selected from the remainder of the beginning inventory, with the balance from the purchase of May 1.

Required:

1. Compute the amount of goods available for sale, ending inventory, and cost of goods sold at December 31 under each of the following inventory costing methods: (Round intermediate calculations to 2 decimal places and final answers to the nearest whole dollar amount.)

1. 2-a. Of the four methods, which will result in the highest gross profit?

• Last-in, first-out

• Weighted average cost

• First-in, first-out

• Specific identification

1. 2-b. Of the four methods, which will result in the lowest income taxes?

• Last-in, first-out

• Weighted average cost

• First-in, first-out

• Specific identification

Inventory Costing Methods—Periodic Method The following information is for the Bloom Company; the company sells just one product: Units Unit Cost Beginning Inventory: Jan. 1 200 $10 Purchases: Feb. 11 500 14 May 18 400 16 Oct. 23 100 18 Sales: March 1 400 July 1 380 Calculate the value of ending inventory and cost of goods sold using the periodic method and (a) first-in, first-out, (b) last-in, first-out, and (c) weighted-average cost method. Do not round until your final answers. Round your final answers to the nearest dollar. A. First-in, First-out: Ending Inventory $ Cost of goods sold $ B. Last-in, first-out: Ending Inventory $ Cost of goods sold $ C. Weighted Average Ending Inventory $ Cost of goods sold $

Exercise 4-8 Equivalent Units; Cost per Equivalent Unit; Assigning Costs to Units-Weighted-Average Method [LO4-2, LO4-3, LO4-4]

Helix Corporation uses the weighted-average method in its process costing system. It produces prefabricated flooring in a series of steps carried out in production departments. All of the material that is used in the first production department is added at the beginning of processing in that department. Data for May for the first production department follow:

Required:

1. Calculate the first production department's equivalent units of production for materials and conversion for May.

2. Compute the first production department's cost per equivalent unit for materials and conversion for May.

3. Compute the first production department's cost of ending work in process inventory for materials, conversion, and in total for May.

4. Compute the first production department's cost of the units transferred to the next production department for materials, conversion, and in total for May.

Gladstone Company tracks the number of units purchased and sold throughout each accounting period but applies its inventory costing method at the end of each period, as if it uses a periodic inventory system. Assume its accounting records provided the following information at the end of the annual accounting period, December 31.

Assuming that for Specific identification method (item 1d) the March 14 sale was selected two-fifths from the beginning inventory and three-fifths from the purchase of January 30. Assume that the sale of August 31 was selected from the remainder of the beginning inventory, with the balance from the purchase of May 1.

Required:

1. Compute the amount of goods available for sale, ending inventory, and cost of goods sold at December 31 under each of the following inventory costing methods: (Round intermediate calculations to 2 decimal places and final answers to the nearest whole dollar amount.)

1. 2-a. Of the four methods, which will result in the highest gross profit?

• Last-in, first-out

• Weighted average cost

• First-in, first-out

• Specific identification

1. 2-b. Of the four methods, which will result in the lowest income taxes?

• Last-in, first-out

• Weighted average cost

• First-in, first-out

• Specific identification

Gladstone Company tracks the number of units purchased and sold throughout each accounting period but applies its inventory costing method at the end of each period, as if it uses a periodic inventory system. Assume its accounting records provided the following information at the end of the annual accounting period, December 31.

Assuming that for Specific identification method (item 1d) the March 14 sale was selected two-fifths from the beginning inventory and three-fifths from the purchase of January 30. Assume that the sale of August 31 was selected from the remainder of the beginning inventory, with the balance from the purchase of May 1.

Required:

1. Compute the amount of goods available for sale, ending inventory, and cost of goods sold at December 31 under each of the following inventory costing methods: (Round intermediate calculations to 2 decimal places and final answers to the nearest whole dollar amount.)

1. 2-a. Of the four methods, which will result in the highest gross profit?

• Last-in, first-out

• Weighted average cost

• First-in, first-out

• Specific identification

1. 2-b. Of the four methods, which will result in the lowest income taxes?

• Last-in, first-out

• Weighted average cost

• First-in, first-out

• Specific identification

Consider a 3-month put option. Suppose that the underlying stock price is $25, the strike $26, the interest rate is 5% p.a., stock volatility is 6% per month. Use the same data to answer questions e) – h).

e) Build the binomial tree for the underlying asset (stock). Note: the tree nodes can be edited. Show computations for first up and first down nodes.

f) Compute the price of the European put option using a 3-step binomial tree. Show computations for terminal and two non-terminal nodes.

g) If the market price on the European put option is $1.5, what should be the price of the European call option of the same strike and maturity to prevent arbitrage?

h) Compute the price of the American put option using a 3-step binomial tree. Show computations for two non-terminal nodes.

A bond offers an annual coupon rate of 5%, with interest paid semiannually. The bond matures in seven years. The price of this bond per 100 of par value is 112.54, what is its yield-to-maturity?