YAn 18-year-old man and his 17-year-old wife had $800 of wages from part-time jobs and no other income. Neither is required to file a tax return. Taxes were taken out of their pay, so they filed a joint return only to get a refund of the withheld taxes. What questions would you ask these clients, and what documents may you want to review?

Assume that 25-year-old Denise wastes $10 per week buying lottery tickets, averaging $520 per year. Now let's assume that Denise "sees the light" and decides to take that $520 she would have spent on lottery tickets and deposit it at the end of each year in an annuity paying 6% compounded annually.

By now, Denise is 45 years old. She's got a pretty good job, but she's starting to think about retirement and realizing that Social Security just isn't enough to live on after age 65. Since her IRA pays a little better interest than that 6% annuity paid, she decides to move all the 6% money into the IRA account with the other money. IRA account pays 7% compounded monthly.

a. How much total money does she begin with in the IRA account at this point?

Up to this point, Denise has been saving $1000 a year ($520+$480). Because she's making better money now, she wants to increase her investment in herself by putting $150 a month ($1800 a year) into the IRA account on top of the money that's already in there.

Consider the following two bond issues.

Bond M: 4% 30-year bond

Bond N: 6% 30-year bond

Neither bond has an embedded option. Both bonds are trading in the market at the same yield.

Which bond will fluctuate more in price when interest rates change? Why?

18.Rank the following bonds, from highest to lowest interest rate risk: 2-year zero coupon, 2-year 5% coupon bond, 30-year 5% coupon bond, 30-year, zero coupon bond.

A.30-year zero coupon bond, 30-year 5% coupon bond, 2-year 5% coupon bond, 2-year zero coupon bond

B.30-year zero coupon bond, 30-year 5% coupon bond, 2-year zero coupon bond, 2-year 5% coupon bond

C.30-year 5% coupon bond, 30-year zero coupon bond, 2-year 5% coupon bond, 2-year zero coupon bond

D.2-year 5% coupon bond, 2-year zero coupon bond, 30-year 5% coupon bond, 30-year zero coupon bond

E.2-year zero coupon bond, 2-year 5% coupon bond, 30-year 5% coupon bond, 30-year zero coupon bond

19.A corporate bond with a 5.75 percent coupon has 15 years left to maturity. It has had a credit rating of BB and a yield to maturity of 6.25 percent. The firm has recently gotten more financially stable and the rating agency is upgrading the bonds to BBB. Thenew appropriate discount rate will be 6.00 percent. What will be the change in the bond's price in dollars? (Assume interest payments are paid semi-annually and a par value of $1,000.)

A.increase $28.75

B.decrease $22.25

C.increase $22.25

D.decrease $23.72

E.increase $23.72

20.A 6.00percent coupon bond with 12 years left to maturity is priced to offer a 6.50percent yield to maturity. You believe that in one year, the yield to maturity will be 6.25 percent. What is the change in price the bondwill experience in dollars? (Assume semi-annual interest payments and $1,000 par value.)A.$12.50B.$19.67C.$20.22D.$21.55E.$25.00

Edmonds, Christopher T., Ryan D. Leece, Beth Y. Vermeer, and Thomas E. Vermeer (2020). The Information Value of Qualified and Adverse Audit Reports: Evidence from the Municipal Sector. Auditing: a Journal of Practice & Theory 39(1), February, 21-41.

1. Based on a review of the abstract, summarize the findings in one or two sentences.

2. Read Section II, Institutional Background. Summarize it in around 100 words using your own language. Be sure to mention the Single Audit Act of 1984.

Over the past 40 years, the SEC and others have consistently asserted that the information contained in an independent audit report is important to investors and, further, that expanded audit reporting enhances the transparency and stability of municipal markets (GFOA 2015; SEC 2012). Although the SEC cites anecdotal evidence to support the importance of the information provided by municipal independent audit reports, to our knowledge, there is no recent U.S. empirical evidence on the information value of qualified/adverse audit reports in the municipal sector. Using hand-collected data from 2000 to 2012, we find that municipal bond markets penalize governments with qualified/ adverse audit opinions for both primary market issuances and secondary trading. Specifically, in our propensity score matched sample, we find that municipalities receiving a qualified/adverse opinion suffer borrowing costs that are 34 basis points, on average, higher than municipalities receiving an unqualified opinion, holding all else constant. Overall, the weight of evidence is consistent with rejecting the null hypothesis that audit opinions on the fairness of GAAP financial statements are independent of borrowing costs in municipal markets. However, our archival research design cannot completely eliminate the threat of a correlated omitted variable. To our knowledge, recent research has not examined whether investors value the information content of qualified/adverse opinions on the fairness of the financial statements. Our results suggest that these auditor assurances are value relevant and that municipal investors differentiate between governments receiving unqualified and qualified/adverse opinions. However, similar to the for-profit sector, most governments receive an unqualified opinion (97 percent of our sample), which does not allow for differentiation among the majority of municipal audit reports. Our finding that the audit report is value relevant to municipal investors should be of interest to the SEC as they consider expanding municipal audit reporting, such as including communication of critical audit matters and auditor tenure (similar to the PCAOB auditor reporting standard adopted on June 1, 2017 ). Future research should examine whether the impact on municipal debt costs depends on the type of opinion received (i.e., qualified versus adverse) and/or the specific reasons provided (i.e., scope restriction versus departure from GAAP) for the nonstandard opinion. In an untabulated analysis, we found that the average yield for adverse audit opinions is higher than the average yield for qualified audit opinions (4.4 compared to 3.99, t-test statistic 1⁄4 1.95; p , 0.0653). However, we were unable to find significant differences in a multivariate model. Small samples also prevented us from determining whether investors differentiate based on the specific reasons provided (i.e., scope restriction versus departure from GAAP) for the nonstandard opinion. We also found no association between the choice of an independent CPA firm/state auditor and municipal debt costs (p-value 1⁄4 0.127). Future research should further explore this question as more data become available.

SECTION 2:

The overall purpose of an audit is to express an opinion on whether the historical financial statements are fairly stated in accordance with applicable accounting standards (Arens, Elder, and Beasley 2013). In both governmental and non-publicly traded companies, audits of historical financial statements must comply with generally accepted auditing standards (GAAS) and 8 statements on auditing standards (SASs) established by the American Institute of Certified Public Accountants. Although independent CPA firms audit most local governments, some municipalities are either audited by state audit agencies or the state agency reviews reports prepared by independent public auditors to ensure compliance with standards. While audits of governments, non-publicly traded companies, and U.S. publicly traded companies share a similar purpose, the municipal securities market has not been subject to the same level of audit regulation as other sectors of the U.S. capital market (SEC 2012). U.S. publicly traded companies are required to have audits under the Securities Act of 1933 and the Securities and Exchange Act of 1934 (1933 and 1934 Acts). Furthermore, an audit opinion that is qualified due to a scope limitation or departure from GAAP will not meet the stringent requirements under Rule 2-02(b) of Regulation S-X. While the SEC has broad regulatory control over the for-profit sector, the 1933 and 1934 Acts were passed with expansive exemptions for the municipal securities market (Gellis 1996). In fact, except for the antifraud provisions contained in these Acts, current federal securities laws do not provide the authority to the SEC or the Municipal Securities Rulemaking Board (MSRB) to require audited financial statements for municipal securities issuers. Although the SEC and MSRB have no direct authority to require municipal audited financial statements, larger municipal issuers typically have their financial statements audited due to rating agency requirements, other regulatory requirements, and voluntary disclosure guidelines from industry groups. Rating agencies generally demand audited financial statements to assign or maintain ratings. For example, Moody’s Investors Service requires audited financial statements within 12 months after the end of the fiscal year to assign or maintain a general obligation (GO) bond rating (Moody’s 2016). Further, Moors & Cabot, Inc., a leading financial advisor of municipal securities in the United States, notes that most analysts require audited financial statements as a condition of buying GO obligations. The two primary regulatory statutes requiring audited financial statements from local governments are the Single Audit Act of 1984 (federal government level regulation) and local government statutes (state level regulation). The Single Audit Act of 1984 requires that local governments with federal expenditures of $500,000 or more of federal financial assistance within a fiscal year have a Single Audit that includes an audit opinion on the historical financial statements. The Single Audit Act covers all 50 states and many of the more than 80,000 local governmental units (Freeman, Shoulders, Allison, and Smith 2013). In a similar manner, at the state level, the Utah State Auditor requires an annual financial statement audit for local government entities with greater than $750,000 in total annual revenues or expenses (Office of the Utah State Auditor 2016). In addition to the regulatory requirements of the Single Audit Act of 1984 and individual states, the Government Finance Officers Association (GFOA) Certificate of Achievement for Excellence in Financial Reporting is the primary voluntary industry group program requiring audited financial statements. Established in 1945 to encourage state and local governments to go beyond the minimum requirements of generally accepted accounting principles, the GFOA awarded the Certificate of Achievement to 4,231 organizations in 2015 (GFOA 2018). Although the SEC and MSRB cannot require audited financial statements from municipal issuers, rating agencies, other regulatory requirements, and voluntary industry programs ensure that local governments that issue GO bonds have their financial statements audited. Overall, the absence of audited municipal financial statements is more prevalent with less sophisticated issuers and non-governmental conduit borrowers (SEC 2012).

Assignment

Examine the Main and Address classes. You are going to add two classes derived from Address: BusinessAddress and PersonAddress.

Create BusinessAddress class

1. Select package home and create a new Java class called BusinessAddress
2. Make the class extend the Address class
3. Add two private String fields businessName and address2
4. Generate constructor and all getters and setters
5. Add a printLabel() method

The printLabel method should print (using System.out.println())

First line – the businessName field

Second line – the address2 field if it is not null or empty

Third line – the StreetAddress field if it is not null or empty

Fourth line – city field followed by a comma and space, the state field followed by two spaces, and the zip field

Create PersonAddress class

1. Select package home and create a new Java class called PersonAddress
2. Make the class extend the Address class
3. Add a private String field personName
4. Generate constructor and all getters and setters
5. Add a printLabel() method

The printLabel method should print (using System.out.println())

First line – the personName field

Second line – the StreetAddress field

Third line – city field followed by a comma and space, the state field followed by two spaces, and the zip field

Modify Main class

Add the following three BusinessAddress objects to the list.

Add the following three PersonAddress objects to the list.

Example Output

Columbus State

Eibling 302B

550 East Spring St.

Columbus, OH 43215

====================

AEP

P.O. Box 2075

Columbus, OH 43201

====================

Bill's Coffee

2079 N. Main St.

Columbus, OH 43227

====================

Saul Goodman

1200 N. Fourth St.

Worthington, OH 43217

====================

Mike Ehrmentraut

207 Main St.

Reynoldsburg, OH 43211

====================

Gustavo Fring

2091 Elm St.

Pickerington, OH 43191

====================

My code

package home;

public class Main {

    public static void main(String[] args) {
       Address[] addressList = new Address[6];

       // TODO Add 3 person addresses to list
        addressList[3] = new PersonAddress("1200 N. Fourth St.","Worthington","OH","43217","Saul Goodman");
        addressList[4] = new PersonAddress("207 Main St.","Reynoldsburg","OH","43217","Mike Ehrmentraut");
        addressList[5] = new PersonAddress("2091 Elm St.","Pickerington","OH","43191","Gustavo Fring");

        // TODO Add 3 business address to list
        addressList[0] = new BusinessAddress("550 East Spring St.","Columbus","OH","43215","Columbus State","Eibling 302B");
        addressList[1] = new BusinessAddress(null,"Columbus","OH","43201","AEP","P.O. Box 2075");
        addressList[2] = new BusinessAddress("2079 N. Main St.","Columbus","OH","43227","Bill’s Coffee",null);

       for (Address address : addressList) {
           address.printLabel();
            System.out.println("====================");
        }
    }
}

package home;

public class BusinessAddress extends Address {
    // two private String fields businessName and address2
    private String businessName;
    private String address2;
    //Constructor

    public BusinessAddress(String streetAddress, String city, String state, String zip, String businessName, String address2) {
        super(streetAddress, city, state, zip);
        this.businessName = businessName;
        this.address2 = address2;
    }

    //getters and setters

    public String getBusinessName() {
        return businessName;
    }

    public void setBusinessName(String businessName) {
        this.businessName = businessName;
    }

    public String getAddress2() {
        return address2;
    }

    public void setAddress2(String address2) {
        this.address2 = address2;
    }

    @Override
    public void printLabel() {
        String result ="";
        if(address2==null)
            result = businessName+"\n"+super.toString();
        else
            result = businessName+"\n"+address2+"\n"+super.toString();
        System.out.println(result);
    }
}

}

package home;

public class PersonAddress extends Address {
    private String  personName;

    //Constructor

    public PersonAddress(String streetAddress, String city, String state, String zip, String personName) {
        super(streetAddress, city, state, zip);
        this.personName = personName;
    }

    //getter and setter

    public String getPersonName() {
        return personName;
    }

    public void setPersonName(String personName) {
        this.personName = personName;
    }

    @Override
    public void printLabel() {
        System.out.println(personName+"\n"+super.toString());
    }
}

package home;

public abstract class Address {
    private String streetAddress;
    private String city;
    private String state;
    private String zip;

    public Address(String streetAddress, String city, String state, String zip) {
        this.streetAddress = streetAddress;
        this.city = city;
        this.state = state;
        this.zip = zip;
    }

    public String getStreetAddress() {
        return streetAddress;
    }

    public void setStreetAddress(String streetAddress) {
        this.streetAddress = streetAddress;
    }

    public String getCity() {
        return city;
    }

    public void setCity(String city) {
        this.city = city;
    }

    public String getState() {
        return state;
    }

    public void setState(String state) {
        this.state = state;
    }

    public String getZip() {
        return zip;
    }

    public void setZip(String zip) {
        this.zip = zip;
    }

    public String toString() {
        return streetAddress + "\n" +
                city + ", " + state + "  " + zip + "\n";
    }

    public abstract void printLabel();
}

Financial Statement Interpretation

Please take the company Apple Inc. and perform a Financial Analysis using the available data for the most recent fiscal year (i.e. 12/31/17) and compare that year to the previous fiscal year (i.e. 12/31/16).

Your analysis should include at least one analytical equation from each of the five sections of Financial Analysis which are listed below:

· Liquidity

· Asset Management

· Debt Management

· Profitability

· Market Value

In your analysis should include the following interpretations:

1. Has the firm improved its’ performance from the previous year?

2. Is the firm managed efficiency?

3. As a potential investor would you consider this a stock you would purchase?