Suppose a 2-year 7% coupon-paying bond is priced at par, and a 1-year zero (maturing at $100) is priced at $95.238095238. What is the implied 2-year zero rate? What is the implied one-year zero rate, one year from now? These bonds have annual coupon periodicities. Use discrete discounting (1+r)^(-t).
In: Finance
The following information indicates percentage returns for stocks L and M over a 6-year period:
|
Year |
Stock L Returns |
Stock M Returns |
|
1 |
14.02% |
20.19% |
|
2 |
14.59% |
18.23% |
|
3 |
16.99% |
16.41% |
|
4 |
17.29% |
14.41% |
|
5 |
17.5% |
12.43% |
|
6 |
19.27% |
10.41% |
In combining [L−M] in a single portfolio, stock M would receive 60% of capital funds.
Furthermore, the information below reflects percentage returns for assets F, G, and H over a 4-year period, with asset F being the base instrument:
|
Year |
Asset F Returns |
Asset G Returns |
Asset H Returns |
|
1 |
16.17% |
17.06% |
14.39% |
|
2 |
17.24% |
16.44% |
15.3% |
|
3 |
18.44% |
15.34% |
16.48% |
|
4 |
19.23% |
14.13% |
17.42% |
Using these assets, you have a choice of either combining [F−G] or [F−H] in a single portfolio, on an equally-weighted basis.
Required: Calculate the absolute percentage difference in the coefficient of variation (CV) between the stock portfolio [L−M] and the portfolio which outlines the optimal combination of assets.
Answer% Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places (for example: 28.31%).
In: Accounting
An investor purchased a 3 year annual coupon bond one year ago.
Its PAR value is $1,000 and coupon rate is 6%, paid annually. At
the time you purchased the bond, its yield to maturity was 6.5%.
The investor sells the bond now after receiving the first coupon
payment.
(a) What is the annual Realised Compound Yield (RCY) from holding
the bond for 1 year if the yield to maturity remains at 6.5%?
(b) What if the yield to maturity becomes 6.0% when the investors
sells the bond?
(c) DC is attempting to construct a bond portfolio with a Macaulay
duration of 9 years. He has $1,000,000 to invest and is considering
allocating it between two zero coupon bonds. The first zero coupon
bond is exactly 6 years, and the second zero coupon bond is exactly
16 years. Both of these bonds are currently offering at a market
price of $100. If the yield curve is flat at 7.5%, duration will
remain unchanged. Is it possible for DC to construct a bond
portfolio having a duration of 9 years using these two types of
zero coupon bonds? If possible, how? (Describe the actual portfolio
on your working.) If not, why not?
In: Finance
1.The comparative temporary investments and inventory balances of a company follow:
| Current Year | Previous Year | |
| Temporary investments | $36,000 | $30,000 |
| Inventory | 72,000 | 75,000 |
Based on this information, what is the amount and percentage of increase or decrease that would be shown on a balance sheet with horizontal analysis?
| Change in Amount | Increase/Decrease | Percentage | |
| Temporary investments | $ | % | |
| Merchandise inventory | $ | % |
2. Income statement information for Turay Corporation follows:
| Sales | $200,000 | |
| Cost of merchandise sold | 140,000 | |
| Gross profit | 60,000 |
Prepare a vertical analysis of the income statement for Turay Corporation.
| Turay Corporation | ||
| Vertical Analysis of the Income Statement | ||
| Amount | Percentage | |
| Sales | $200,000 | % |
| Cost of merchandise sold | 140,000 | % |
| Gross profit | $60,000 | % |
3. The following items are reported on a company’s balance sheet:
| Cash | $120,000 |
| Marketable securities | 40,000 |
| Accounts receivable (net) | 50,000 |
| Inventory | 90,000 |
| Accounts payable | 150,000 |
Determine (a) the current ratio and (b) the quick ratio. Round your answers to one decimal place.
| a. Current ratio | |
| b. Quick ratio |
4. A company reports the following:
| Sales | $1,460,000 |
| Average accounts receivable (net) | 100,000 |
Determine (a) the accounts receivable turnover and (b) the number of days' sales in receivables. Round interim calculations to the nearest dollar and final answers to one decimal place. Assume a 365-day year.
| a. Accounts receivable turnover | |
| b. Number of days' sales in receivables | days |
5. A company reports the following:
| Cost of merchandise sold | $558,000 |
| Average inventory | 45,000 |
Determine (a) the inventory turnover and (b) the number of days' sales in inventory. Round interim calculations to the nearest dollar and final answers to one decimal place. Assume 365 days a year.
| a. Inventory turnover | |
| b. Number of days' sales in inventory | days |
6.
The following information was taken from Tyson Company’s balance sheet:
| Fixed assets (net) | $774,000 |
| Long-term liabilities | 430,000 |
| Total liabilities | 1,218,000 |
| Total stockholders’ equity | 580,000 |
Determine the company's (a) ratio of fixed assets to long-term liabilities and (b) ratio of liabilities to stockholders' equity. If required, round your answers to one decimal place.
| a. Ratio of fixed assets to long-term liabilities | |
| b. Ratio of liabilities to stockholders' equity |
In: Accounting
Suppose 10 year ago your mother deposited $3400 in an investment account earning 5% a year. After 3 years she withdrew $1,122. There were no additional deposits or withdrawals. Obtain today's value of the investment account?
A. $4,239.39
B. $3,959.48
C. $,416.24
D. $3,710.62
In: Finance
Assume you have a 1 year investment horizon. A bond has 10% year coupon rate and pays the coupon once per year. The bond matures in 10 years and is priced to yield 8% this year. If you expect the yield to maturity on the bond to be 7% at the beginning of the next year, what is your holding period return, assuming you have received the coupon for this year.
In: Finance
On July 1, Year 1, Danzer Industries Inc. issued $48,800,000 of 10-year, 9% bonds at a market (effective) interest rate of 11%, receiving cash of $42,968,258. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year. Required: 1. Journalize the entry to record the amount of cash proceeds from the issuance of the bonds on July 1, Year 1.* 2. Journalize the entries to record the following:* a. The first semiannual interest payment on December 31, Year 1, and the amortization of the bond discount, using the straight-line method. (Round to the nearest dollar.) b. The interest payment on June 30, Year 2, and the amortization of the bond discount, using the straight-line method. (Round to the nearest dollar.) 3. Determine the total interest expense for Year 1. 4. Will the bond proceeds always be less than the face amount of the bonds when the contract rate is less than the market rate of interest? 5. Compute the price of $42,968,258 received for the bonds by using the present value tables. (Round to the nearest dollar.) *Refer to the Chart of Accounts for exact wording of account titles.
In: Accounting
Suppose you expect to earn $10 this year and $10 next year. Each dollar you earn this year can be either spent or saved at an interest rate of 10%. If you want to spend more than $10 this year, you can borrow money at 10% interest and repay it next year. Next year, you plan to pay your debts (if any), then spend all your earnings and all your savings (if any).
1. Draw your budget line between “dollars spent this year" and “dollars spent next year".
2. Suppose the government imposes a 50% income tax on all your earnings this year and next year (not including your interest earnings). Draw your new budget line.
3. Suppose the government imposes a 50% sales tax on everything you buy this year and next year. Draw your new budget line.
4. Suppose the government imposes a 50% income tax on all your earnings this year and next year, including your interest earnings. Draw your new budget line.
5. True or False: If interest earnings are not subject to income tax, then an income tax and a sales tax will lead you to spend exactly the same amount both this year and next year.
In: Economics
To get average a/r, inventory, etc., take prior year ending + current year ending /(divided) by 2.
Use the Figure 8-9 Pinnacle Manufacturing F/S’s to complete the year-to-year changes in account balances for the following (first one completed for example):
Account % change 2015 to 2016 % change 2014 to 2015
Net Sales 1.45% 2.70%
Cost of Goods Sold
Operating Expenses
Income from Operations
Net Receivables
Inventory
Accounts payable
Long-term debt
Calculate the following ratios (found in chapter 7 on pages 196-199) and document in following format-
Ratio 2016 2015 2014
Current Ratio
Debt to Equity
Inventory Turnover
Gross Profit %
Think about your conclusions from the analytical procedures calculated in a & b. Jot down a few observations.
Refer to the Pinnacle balance sheet & income statement posted on Blackboard for this problem. Estimate the dollar amount of the potential misstatement in the following accounts. Identify the issue and possible explanation for the variance between 2015 & 2016. Focus on all accounts that are not direct (operating expenses-allocated).
Salaries – management & office
Property taxes (remember to look at b/s to determine if they sold or bought property)
Bad debts (tied to sales)
Depreciation expense
Analyze the account balances for accounts receivable (disregard inventory). Discuss your observations on this analysis and any additional information that you may want to consider during the current year audit. Analyze the a/r turnover, days sales outstanding, and bad debt as % of gross sales for 2016, 2015, & 2014.
| Figure 8-9 | ||||
| Pinnacle Manufacturing Financial Statements | ||||
| Pinnacle Manufacturing Company | ||||
| Income Statement | ||||
| For the Year ended December 31 | ||||
| 2016 | 2015 | 2014 | ||
| Net sales | $150,737,628 | $148,586,037 | $144,686,413 | |
| Cost of goods sold | 109,284,780 | 106,255,499 | 101,988,165 | |
| Gross profit | 41,452,848 | 42,330,538 | 42,698,248 | |
| Operating expenses | 37,177,738 | 38,133,969 | 37,241,108 | |
| Income from operations | 4,275,110 | 4,196,569 | 5,457,140 | |
| Other revenues and gains | — | — | — | |
| Other expenses and losses | 2,181,948 | 2,299,217 | 2,397,953 | |
| Income before income tax | 2,093,162 | 1,897,352 | 3,059,187 | |
| Income tax | 883,437 | 858,941 | 1,341,536 | |
| Net income for the year | 1,209,725 | 1,038,411 | 1,717,651 | |
| Earnings per share | $1.21 | $1.04 | $1.72 | |
| Pinnacle Manufacturing Company | ||||
| Balance Sheet | ||||
| As of December 31 | ||||
| Assets | 2016 | 2015 | 2014 | |
| Current assets | ||||
| Cash and cash equivalents | $7,721,279 | $7,324,846 | $8,066,545 | |
| Net receivables | 13,042,165 | 8,619,857 | 7,936,409 | |
| Inventory | 32,236,021 | 25,537,198 | 25,271,503 | |
| Other current assets | 172,278 | 143,206 | 131,742 | |
| Total current assets | 53,171,743 | 41,625,107 | 41,406,199 | |
| Property, plant and equipment | 62,263,047 | 61,635,530 | 58,268,732 | |
| Total assets | $115,434,790 | $ 103,260,637 | $99,674,931 | |
| Liabilities | ||||
| Current liabilities | ||||
| Accounts payable | $ 12,969,686 | $ 9,460,776 | $ 7,586,374 | |
| Short/current long-term debt | 15,375,819 | 10,298,668 | 9,672,670 | |
| Other current liabilities | 2,067,643 | 1,767,360 | 1,682,551 | |
| Total current liabilities | 30,413,148 | 21,526,804 | 18,941,595 | |
| Long-term debt | 24,420,090 | 22,342,006 | 22,379,920 | |
| Total liabilities | 54,833,238 | 43,868,810 | 41,321,515 | |
| Stockholders’ equity | ||||
| Common stock | 1,000,000 | 1,000,000 | 1,000,000 | |
| Additional paid-in capital | 15,717,645 | 15,717,645 | 15,717,645 | |
| Retained earnings | 43,883,907 | 42,674,182 | 41,635,771 | |
| Total stockholders’ equity | 60,601,552 | 59,391,827 | 58,353,416 | |
| Total liabilities & stockholders’ equity | $115,434,790 | $103,260,637 | $99,674,931 | |
In: Accounting
Write a minimum 1,050-word analysis in which you conduct a year over year comparative and ratio analysis to measure profitability and liquidity. Include the following: Create a vertical analysis for the income statement and a horizontal analysis of the balance sheet. Describe the major variances in the horizontal and vertical analyses. Summarize your overall findings based on your calculations. Prepare a conclusion that includes the advice you might provide to the company based on your analysis. Cite a minimum of two peer-reviewed references. Format your assignment consistent with APA guidelines.
In: Economics