A proposed corporate bond issue is usually subjected to a credit
risk assessment by
credit rating agencies. The results of such an assessment provide a
basis for potential
investors to make decisions regarding the proposal.
Some investors consider duration to be a useful factor when
deciding whether to invest
in corporate bonds. However, other investors do not consider
duration to be that useful
and as such, they rely solely on the work of credit rating
agencies. Such investors
consider the information provided by credit rating agencies to be
more useful than
duration when choosing the bonds to invest in.
Required:
Prepare a 2,500 word evaluative report that covers the
following:
(a) A discussion of the factors that contribute to credit risk and
an explanation of the
relationship between credit risk and interest rate risk. [15
Marks]
(b) Identification and explanation of any two (2) approaches that
may be used to assess
the degree of credit risk of a proposed bond issue. [10
Marks]
(c) A critical discussion of the usefulness of duration as a
measure of interest rate risk
relating to corporate bonds. [15 Marks]
(d) An evaluation whether there is a relationship between using
duration and credit
ratings when choosing bonds that an investor should invest in. [10
Marks]
[TOTAL: 50 MARKS]
In: Finance
11. Tybee Industries Inc. uses a job order cost system. The following data summarize the operations related to production for January, the first month of operations:
| a. Materials purchased on account, $29,050. | |
| b. Materials requisitioned and factory labor used: |
|
Job |
Materials |
Factory Labor |
| 301 | $2,870 | $2,870 |
| 302 | 3,690 | 3,770 |
| 303 | 2,300 | 1,920 |
| 304 | 8,510 | 7,050 |
| 305 | 5,000 | 5,250 |
| 306 | 3,770 | 3,240 |
| For general factory use | 1,030 | 4,110 |
| c. Factory overhead costs incurred on account, $5,400. | |
| d. Depreciation of machinery and equipment, $2,000. | |
| e. The factory overhead rate is $52 per machine hour. Machine hours used: |
| Job | Machine Hours | ||||||||
| 301 | 27 | ||||||||
| 302 | 35 | ||||||||
| 303 | 29 | ||||||||
| 304 | 70 | ||||||||
| 305 | 39 | ||||||||
| 306 | 25 | ||||||||
| Total | 225
|
General Ledger
| ASSETS | |
| 110 | Cash |
| 121 | Accounts Receivable |
| 125 | Notes Receivable |
| 126 | Interest Receivable |
| 131 | Materials |
| 132 | Work in Process |
| 133 | Factory Overhead |
| 134 | Finished Goods |
| 141 | Supplies |
| 142 | Prepaid Insurance |
| 143 | Prepaid Expenses |
| 181 | Land |
| 191 | Machinery and Equipment |
| 192 | Accumulated Depreciation-Machinery and Equipment |
| LIABILITIES | |
| 210 | Accounts Payable |
| 221 | Utilities Payable |
| 231 | Notes Payable |
| 236 | Interest Payable |
| 241 | Lease Payable |
| 251 | Wages Payable |
| 252 | Consultant Fees Payable |
| EQUITY | |
| 311 | Common Stock |
| 340 | Retained Earnings |
| 351 | Dividends |
| 390 | Income Summary |
| REVENUE | |
| 410 | Sales |
| 610 | Interest Revenue |
| EXPENSES | |
| 510 | Cost of Goods Sold |
| 520 | Wages Expense |
| 531 | Selling Expenses |
| 532 | Insurance Expense |
| 533 | Utilities Expense |
| 534 | Office Supplies Expense |
| 540 | Administrative Expenses |
| 561 | Depreciation Expense-Machinery and Equipment |
| 590 | Miscellaneous Expense |
| 710 | Interest Expense |
1. Journalize the entries to record the summarized operations. Record each item (items a-f) as an individual entry on January 31. Record item g as 2 entries. Refer to the Chart of Accounts for exact wording of account titles.
In: Accounting
Given the returns and probabilities for the three possible states listed here, calculate the covariance between the returns of Stock A and Stock B. For convenience, assume that the expected returns of Stock A and Stock B are 0.11 and 0.15, respectively. (Round your answer to 4 decimal places. For example .1244)
|
Probability |
Return(A) |
Return(B) |
|
|
Good |
0.35 |
0.30 |
0.50 |
|
OK |
0.50 |
0.10 |
0.10 |
|
Poor |
0.15 |
-0.25 |
-0.30 |
In: Finance
Explain the differences between the three main methods of inventory costing. How does the choice of inventory method affect the income statement?
In: Accounting
1. In three dimensions, what is the greatest angle that can be achieved between four equivalent bonds? Formatting help: Just enter a number like 231.12, do not include "degrees".
2.central atom is found to have one double bond, one single bond, and one non-bonding pair of electrons. How many electron domains does the central atom have?
3.When determining the molecular geometry of a molecule, which of the following needs to be considered? Choose all that apply A. Number of bonding domains on the central atom. B. Number of non-bonding electron pairs on the central atom. C. Number of core electrons on the central atom. D. Number of unpaired valence electrons in the central atom.
In: Chemistry
1. What is the “central dogma” of biology?
2. What are the three differences between RNA and DNA?
3. What is the process of transcription?
4. Where does transcription occur? Why?
5. What are the three types of RNA? What do they do?
6. Explain the process of translation. How do the different types of RNA work together?
7. What is a codon?
8. How does a ribosome know where to start and stop translation?
In: Biology
Which of the three complement pathways will be activated? Why? ( compare between people tested positive for COVID-19 with symptoms and people tested positive for COVID-19 without symptoms )
In: Biology
In your opinion, what are the three major differences between the Net Present Value Rule of capital budgeting and the Internal Rate of Return Rule of capital budgeting? Justify your choice of three differences as being the most significant. (minimum 200 words)
In: Finance
Taking at least 12 data so that there is a relationship between
three variables
you should decide. X2 = 8, X3-8 when X1=? Predict it
and
here get the results in a rectangle
statistics-economics
In: Statistics and Probability
Describe three types of trading. How are they different? what is the difference between Asset Management and Wealth Management? what is the purpose of Research in international business? why are credit ratings important in International business?
In: Finance