Anthony has an income of $10,000 this year, and he expects an income of $5,000 next year. He can borrow and lend money at an interest rate of 10%.

Consumption goods cost $1 per unit this year and there is no inflation.

Utility function is U(c1, c2)=4ln(c1)+2ln(c2)

a. How would his utility change if the interest rate goes up to 15%? Is he better off or worse off? Explain.

b. What about if there is a 10% inflation? Show how his budget constraint and his utility changes with a graph. A simple illustration is fine.

c.Graph his budget constraint and find his optimum bundle if the interest rate to borrow is 15% but return to his savings is 10% with no inflation.

d. Discuss the importance of financial markets and how they can improve our utility.

Q21. Consider a 2-year bond. The coupon rate of the bond is 10%, and the bond pays coupons semiannually. The bond is selling at a yield to maturity of 8.0% annually, or 4.0% semi-annually.

(a) What is the duration of the bond measured in half-years and in years? (10 points)

(b) If the semi-annually yield changes from 4.0% to 5.0%, what is the predicted change in the price of the bond (a dollar amount) using duration? (7 points)

(c) Suppose you are the company that is issuing this coupon bond. To immunize your liability, you would like to invest in a portfolio consists of one-year zero-coupon bonds and three-year zero-coupon bonds. What are the durations of the one-year zero and the three-year zero, respectively? What weight of the one-year zero will you need to hold for immunization? (5 points)

1. The net income reported on the income statement for the current year was $288,417. Depreciation recorded on fixed assets and amortization of patents for the year were $41,876, and $11,524, respectively. Balances of current asset and current liability accounts at the end and at the beginning of the year are as follows:

What is the amount of cash flows from operating activities reported on the statement of cash flows prepared by the indirect method?

a. $315,644

b. $389,458

c. $276,574

d. $385,205

2.

Determine the relationship of $219,652 to $115,020, expressed as a ratio.

Select the correct answer.

a. 1.9 to 1

b. 1.1 to 1

c. 0.5 to 1

d. 0.7 to 1

3.

Based on the following data for Privett Company, what is the quick ratio, rounded to one decimal point?

a. 16.5

b. 1

c. 2

d. 3.5

4.

The balance sheets at the end of each of the first two years of operations indicate the following:

Using the balance sheets for Kellman Company, if net income is $113,275 and interest expense is $33,061 for Year 2, what is the return on total assets for the year (round percent to two decimal points)?

a. 9.25%

b. 10.50%

c. 7.25%

d. 10.99%

Note: This problem is for the 2018 tax year.

Roberta Santos, age 41, is single and lives at 120 Sanborne Avenue, Springfield, IL 60781. Her Social Security number is 123-45-6780. Roberta has been divorced from her former husband, Wayne, for three years. She has a son, Jason, who is 17, and a daughter, June, who is 18. Jason's Social Security number is 111-11-1112, and June's is 123-45-6788. Roberta does not want to contribute $3 to the Presidential Election Campaign Fund.

Roberta, an advertising executive, earned a salary from ABC Advertising of $80,000 in 2018. Her employer withheld $9,000 in Federal income tax and $3,100 in state income tax.

Roberta has legal custody of Jason and June. The divorce decree provides that Roberta is to receive the dependency deductions for the children. Jason lives with his father during summer vacation. Wayne indicates that his expenses for Jason are $5,500. Roberta can document that she spent $6,500 for Jason's support during 2018. In prior years, Roberta gave a signed Form 8332 to Wayne regarding Jason. For 2018, she has decided not to do so. Roberta provides all of June's support.

Roberta's mother died on January 7, 2018. Roberta inherited assets worth $625,000 from her mother. As the sole beneficiary of her mother's life insurance policy, Roberta received insurance proceeds of $300,000. Her mother's cost basis for the life insurance policy was $120,000. Roberta's favorite aunt gave her $13,000 for her birthday in October.

On November 8, 2018, Roberta sells for $22,000 Amber stock that she had purchased for $24,000 from her first cousin, Walt, on December 5, 2012. Walt's cost basis for the stock was $26,000, and the stock was worth $23,000 on December 5, 2014. On December 1, 2018, Roberta sold Falcon stock for $13,500. She had acquired the stock on July 2, 2014, for $8,000.

An examination of Roberta's records reveals that she received the following:

• Interest income of $2,500 from First Savings Bank.
• Groceries valued at $750 from Kroger Groceries for being the 100,000th customer.
• Qualified dividend income of $1,800 from Amber.
• Interest income of $3,750 on City of Springfield school bonds.
• Alimony of $16,000 from Wayne; divorce finalized in 2015.
• Distribution of $4,800 from ST Partnership. Her distributive share of the partnership passive taxable income was $5,300. She had no prior passive activity losses. Assume that the qualified business income deduction applies and the W–2 wage limitation does not.

From her checkbook records, she determines that she made the following payments during 2018:

• Charitable contributions of $4,500 to First Presbyterian Church and $1,500 to the American Red Cross (proper receipts obtained).
• Paid $5,000 to ECM Hospital for the medical expenses of a friend from work.
• Mortgage interest on her residence of $7,800 to Peoples Bank.
• Property taxes of $3,200 on her residence and $1,100 (ad valorem) on her car. $800 for landscaping expenses for residence.
• Estimated Federal income taxes of $2,800 and estimated state income taxes of $1,000.
• Medical expenses of $5,000 for her and $800 for Jason. In December, her medical insurance policy reimbursed $1,500 of her medical expenses. She had full-year health care coverage.
• A $1,000 ticket for parking in a handicapped space.
• Attorney's fees of $500 associated with unsuccessfully contesting the parking ticket.
• Contribution of $250 to the campaign of a candidate for governor.

Because she did not maintain records of the sales tax she paid, she calculates the amount from the sales tax table to be $994.

PLEASE FILL OUT A 2018 SCHEDULE D

For each of the following independent events listed below for Year 1, determine the effect on the indicated items (i.e., pension expense, projected benefit obligation, and plan assets).

Enter the appropriate amounts in the designated cells below. Round all amounts to the nearest whole number. Indicate an increase in the relevant item as positive numbers and a decrease as negative numbers using a leading minus (-) sign. When there is no effect, enter a zero (0).

Waterways Corporation is preparing its budget for the coming year, 2020. The first step is to plan for the first quarter of that coming year. The company has gathered information from its managers in preparation of the budgeting process. Sales Unit sales for November 2019 111,000 Unit sales for December 2019 103,000 Expected unit sales for January 2020 114,000 Expected unit sales for February 2020 114,000 Expected unit sales for March 2020 116,000 Expected unit sales for April 2020 127,000 Expected unit sales for May 2020 139,000 Unit selling price $12 Waterways likes to keep 10% of the next month’s unit sales in ending inventory. All sales are on account. 85% of the Accounts Receivable are collected in the month of sale, and 15% of the Accounts Receivable are collected in the month after sale. Accounts receivable on December 31, 2019, totaled $185,400. Direct Materials Direct materials cost 80 cents per pound. Two pounds of direct materials are required to produce each unit. Waterways likes to keep 5% of the materials needed for the next month in its ending inventory. Raw Materials on December 31, 2019, totaled 11,400 pounds. Payment for materials is made within 15 days. 50% is paid in the month of purchase, and 50% is paid in the month after purchase. Accounts Payable on December 31, 2019, totaled $104,595. Direct Labor Labor requires 12 minutes per unit for completion and is paid at a rate of $9 per hour. Manufacturing Overhead Indirect materials 30¢ per labor hour Indirect labor 50¢ per labor hour Utilities 50¢ per labor hour Maintenance 30¢ per labor hour Salaries $41,000 per month Depreciation $18,100 per month Property taxes $2,500 per month Insurance $1,200 per month Maintenance $1,200 per month Selling and Administrative Variable selling and administrative cost per unit is $1.50. Advertising $15,000 a month Insurance $1,500 a month Salaries $71,000 a month Depreciation $2,500 a month Other fixed costs $2,900 a month Other Information The Cash balance on December 31, 2019, totaled $98,000, but management has decided it would like to maintain a cash balance of at least $700,000 beginning on January 31, 2020. Dividends are paid each month at the rate of $2.70 per share for 4,740 shares outstanding. The company has an open line of credit with Romney’s Bank. The terms of the agreement requires borrowing to be in $1,000 increments at 9% interest. Waterways borrows on the first day of the month and repays on the last day of the month. A $530,000 equipment purchase is planned for February.

For the first quarter of 2020, prepare a sales budget.

For the first quarter of 2020, prepare a production budget.

For the first quarter of 2020, prepare a direct materials budget. (Round cost per pound to 2 decimal places, e.g. 0.25 and all other answers to 0 decimal places, e.g. 2,520.)

For the first quarter of 2020, prepare a direct labor budget. (Round time per unit to nearest hour, e.g. 30 minutes will be rounded to 0.5 hours)

For the first quarter of 2020, prepare a manufacturing overhead budget. (Round overhead rate to 2 decimal places, e.g. 5.25 and all other answers to 0 decimal places, e.g. 2,520. List Variable Costs first.)

For the first quarter of 2020, prepare a selling and administrative budget. (Enter per unit expenses rounded to 2 decimal places. E.g. 1.25)

For the first quarter of 2020, prepare a schedule for expected cash collections from customers.

For the first quarter of 2020, prepare a schedule for expected payments for materials purchases. (Round answers to 0 decimal places, e.g. 2,520.)

For the first quarter of 2020, prepare a cash budget. (Round answers to 0 decimal places, e.g. 2,520.)

A project will produce cash inflows of $3,100 a year for 3 years. The project's initial cost is $10,400. What is the profitability index value if the required rate of return is 16 percent?

Group of answer choices

0.90

0.33

1.09

0.67

-0.88

Foto Company makes 10,000 units per year of a part it uses in the products it manufactures. The unit product cost of this part is computed as follows:

An outside supplier has offered to sell the company all of these parts it needs for $42.10 a unit. If the company accepts this offer, the facilities now being used to make the part could be used to make more units of a product that is in high demand. The additional contribution margin on this other product would be $36,000 per year.

If the part were purchased from the outside supplier, all of the direct labor cost of the part would be avoided. However, $5.40 of the fixed manufacturing overhead cost being applied to the part would continue even if the part were purchased from the outside supplier. This fixed manufacturing overhead cost would be applied to the company's remaining products.

Required:

a. How much of the unit product cost of $47.10 is relevant in the decision of whether to make or buy the part? (Round "Per Unit" to 2 decimal places.)

b. What is the financial advantage (disadvantage) of purchasing the part rather than making it?

c. What is the maximum amount the company should be willing to pay an outside supplier per unit for the part if the supplier commits to supplying all 10,000 units required each year? (Round "Per Unit" to 2 decimal places.)

How much interest will be earned in the second year on an investment paying 7% interest, compounded annually, if $350 was just credited to the account for interest at the end of year 1?

a. $374.50

b. $325.50

c. $350.00

d. $5,724.50