6. Suppose that a loan is offered with quarterly payments and a 13.36% APR. What is the loan's effective annual
rate (EAR)?
A. 14.21%
B. 14.04%
C. 13.92%
D. 13.81%
E. 13.65%

7. Suppose that a loan is offered with monthly payments and a 10.56% APR. What is the loan's effective annual
rate (EAR)?
A. 10.78%
B. 10.85%
C. 10.92%
D. 11.09%
E. 11.17%

8. Gretchen is 30 years old and has just changed to a new job. She has $37,500 in the retirement plan from her
former employer. She can roll all of that money into the retirement plan of the new employer. She will also
contribute $4,800 at the end of each year into her new employer's plan. If the rolled-over money and the new
contributions both earn an annual return of 5.85%, compounded annually, how much should she expect to
have when she retires in 35 years?
A. $792,398
B. $799,885
C. $810,643
D. $820,912
E. $839,696

9. Olivia is 30 years old and has just changed to a new job. She has $37,500 in the retirement plan from her
former employer. She can roll all of that money into the retirement plan of the new employer. She will also
contribute $400 at the end of each month ($4,800 per year) into her new employer's plan. If the rolled-over
money and the new contributions both earn an annual return of 5.85%, compounded monthly, how much
should she expect to have when she retires in 35 years?
A. $860,728
B. $843,576
C. $839,696
D. $820,912
E. $810,643

Write the adjusting entry for the following transactions: Insurance expense: On February 28, 2020 Stark Industries paid $1,212 for a sixmonth insurance policy on the automobile purchased that date; on March 31, 2020, Stark Industries renewed and paid for the one-year policy on the equipment at a cost of $960.

The board of directors of Baldwin Inc. met today to discuss the capital structure and dividend policy of the company. The board discussed the optimal capital structure of 60 percent debt and 40 percent equity and the likely effect of the capital structure on the company’s weighted average cost of capital (WACC) and the firm value. During the meeting it came up that debt provides tax benefits to the firm because interest is tax deductible whereas dividend is not. Therefore, the debt ratio of 60 percent was considered acceptable. However, Gregg, the CFO of the company, stressed that debt can put pressure on the firm because interests and principal payments are fixed obligations that the company must pay, no matter the profit of the company. He stated that if these obligations are not met, the company may risk some sort of financial distress and files for bankruptcy. Gregg continued to explain that if the company files for bankruptcy there are direct and indirect costs that Baldwin must incur. Mr. Milosvoski, a board member suggested that there are ways to reduce the cost of debt by hiring an expert to handle the company’s debt agreements between the shareholders and bondholders. He stated that protective covenants are incorporated as part of the loan agreement and must be taken seriously because a broken covenant can lead to default. He mentioned negative covenant and a positive covenant as types of protective covenants the company should take seriously. John Miller, another board member stated that one reason bankruptcy costs are so high is that different creditors and their lawyers contend with each other. He suggested that if debt can be consolidated, or if bondholders can be allowed to purchase stock of the company bankruptcy cost will be reduced. In this way, stockholders and debtholders are not pitted against each other because they are not separate entities. He cited examples in Japan where large banks generally take significant stock positions in the firms to which they lend money. The employee representative on the board, Ms. Johnson used the free cash flow hypothesis to state that firms with high free cash flow are very likely to undertake more wasteful activity which has a serious implication for capital structure. Since dividends leave the firm, they reduce free cash flow. Thus, according to her, an increase in dividends should benefit the stockholders by reducing the ability of corporate managers to pursue wasteful activities. She continued that since interest and principal also leave the firm, debt can reduce free cash flow and wasteful spending. But because corporate managers are not legally obligated to pay dividends, she suggested that debt of the company be increased. Philip Suzuki, director of Public Relations and a board member was of the view that determining optimal debt-equity ratio is not an easy task and varies across industries so Baldwin should follow the rules of the pecking-order theory when financing capital projects. No agreement was reached on the company’s capital structure, but the CEO and Gregg believed that the 60-40 debt-equity capital structure will minimize the cost of capital and improve the firm value. The board is retaining you as the financial consultant to assist with the company’s capital structure and dividend payout decisions. The Chairman of the board wants you to address the following questions:

1.Do you agree with Ms. Johnson’s statement that an increase in dividend is beneficial to the stockholders of Baldwin? Explain with three reasons why or why not. Additionally, Baldwin Inc. is planning to pay dividends of $3 per share to shareholders in 2020 (total dividend is $3 million). But because of personal taxes on dividend income, the company wants to postpone the dividend to next 5 years when they believe a new tax legislation will be passed by Congress to give tax exemption on dividend and investment income. Suggest three alternatives to the board of how the available cash can be used in place of the dividend. Finally, Baldwin Inc. wants you to help them prepare a dividend policy which will guide the first dividend payout of the company in 2025. List five characteristics of a sensible dividend policy you want the board to know.

LeBron James incorporates a new business, Phi Slamma Jamma, Inc., on December 1, 20xx. The company uses the accrual method of accounting. In addition to the accounts you see below, the company uses Consulting Revenues #400, Sales #401, Gains #405 and the Salaries Expense #500 accounts. Journalize each transaction. P2. Prepare an adjusted trial balance as of December 31, 20XX. You will need to set up ledgers (or t-accounts) for each account used.   

42-10. AQUESTION OF ETHICSBetween 1970 and 1981, Sanford Weill served as the chief executive officer (CEO) of Shearson Loeb Rhodes and several of its predecessor entities (collectively “Shearson”). In 1981, Weill sold his controlling interest in Shearson to the American Express Co., and between 1981 and 1985, he served as president of that firm. In 1985, Weill developed an interest in becoming CEO for BankAmerica and secured a commitment from Shearson to invest $1 billion in BankAmerica if he was successful in his negotiations with that firm. In early 1986, Weill met with BankAmerica directors several times, but these contacts were not disclosed publicly until February 20, 1986, when BankAmerica announced that Weill had sought to become its CEO but that BankAmerica was not interested in his offer. The day after the announcement, BankAmerica stock traded at prices higher than the prices at which it had traded during the five weeks preceding the announcement. Weill had discussed his efforts to become CEO of BankAmerica with his wife, who had discussed the information with her psychiatrist, Dr. Willis, prior to BankAmerica’s public announcement of February 20. She had also told Dr. Willis about Shearson’s decision to invest in BankAmerica if Weill succeeded in becoming its CEO. Willis disclosed to his broker this material, confidential information and purchased BankAmerica common stock. After BankAmerica’s public announcement and the subsequent increase in the price of its stock, Willis sold his shares and realized a profit of approximately $27,500. The court held that Willis was liable for insider trading under the misappropriation theory. [United States v. Willis, 737 F.Supp. 269 (S.D.N.Y. 1990)]1. The court stated in its opinion in this case that “[i]t is difficult to imagine a relationship that requires a higher degree of trust and confidence than the traditional relationship of physician and patient.” It then quoted the concluding words of the Hippocratic oath: “Whatsoever things I see or hear concerning the life of men, in my attendance on the sick or even apart therefrom, which ought not be noised abroad, I will keep silence thereon, counting such things to be as sacred secrets.” The court held that Willis had violated his fiduciary duty to Mrs. Weill, his patient, by investing in BankAmerica stock. Do you agree that Willis’s private investments, which were based on information learned through his sessions with Mrs. Weill, constituted a violation of his duty to his patient? After all, Willis had not “noised abroad” Mrs. Weill’s secrets—that is, he had not told others (except for his stockbroker) about the information. If you had been in Willis’s shoes, would you have felt ethically restrained from trading on the information?2. Can you think of any ways in which Willis’s trading could have been harmful to Mrs. Weill’s interests? Does your answer to this question have a bearing on how you answered Question 1?3. Do you think that the misappropriation theory of liability imposes too great a burden on outsiders, such as Willis? Why or why not? How might you justify, from an ethical point of view, the application of the misappropriation theory to “outsider trading”?

In 2010, the U.S. population was about 309 million. The overall birth rate was 13.0 births per 1000, and the overall death rate was 7.4 deaths per 1000.
a) Approximately how many births were there in the United States?
b) About how many deaths were there in the United States?
c) Based on births and deaths alone (not counting immigration or emigration), about how much did the U.S. population increase during 2010?
d) Suppose that during 2010 the U.S. population actually increase by 3.5 million. Based on this fact and your results from part (c), estimate how many people immigrated to the United States. What proportion of the overall population growth was due to immigration?

In 2010, the U.S. population was about 309 million. The overall birth rate was 13.0 births per 1000, and the overall death rate was 7.4 deaths per 1000.
a) Approximately how many births were there in the United States?
b) About how many deaths were there in the United States?
c) Based on births and deaths alone (not counting immigration or emigration), about how much did the U.S. population increase during 2010?
d) Suppose that during 2010 the U.S. population actually increase by 3.5 million. Based on this fact and your results from part (c), estimate how many people immigrated to the United States. What proportion of the overall population growth was due to immigration?