If a financial manager with an interest liability on a future date were to sell Futures and interest rates end up going up, the position outcome would be:
A) Futures price falls; short earns a profit.
B) Futures price rises; short earns a loss.
C) Future price falls; long earns a loss.
D) Futures price rises; long earns a profit.
Answer: A
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On February 1, 2013, Janet buys a bond for $10,000 that makes coupon payments of $600 after each of the following two years and returns its principal of $10,000 at the end of the second year. In other words, it is a standard coupon bond with a 6 percent annual interest rate making payments once each year.On February 1, 2014, Janet receives her first coupon payment of $600. At that time, the market interest rate on bonds like hers has fallen to 4 percent. She sells her bond to Justin at that time, for a price equal to the present value of the bond's payments.
a.How much does Justin pay Janet for the bond?Both Janet and Justin have tax rates of 30 percent on interest income and 20 percent on capital gains. (Note that if someone has a capital loss, you may assume that he or she can reduce taxes by the amount of the capital loss times the tax rate of 20 percent.) b.Calculate Janet's after-tax rate of return for the past year (from Feb. 1, 2013, to Feb. 1, 2014).Justin holds onto the bond from February 1, 2014, to February 1, 2015, so it matures and he receives the second coupon payment and the principal. c.What is Justin's after-tax rate of return for the year from Feb. 1, 2014, to Feb. 1, 2015?Explain and show all your work for each part. You may assume, of course, that the market works and does not malfunction. What will be an ideal response?
A measure of central tendency, given as the value above which half of the values fall and below which half of the values fall is called the median
Indicate whether the statement is true or false
The Credit column of the Income Statement section of the work sheet for a merchandising business will likely contain more than just revenue account balances
Indicate whether the statement is true or false
Lisa Larue operated a beauty parlour under the name You Look Marvelous. Initially it was a sole proprietorship, but after being in business for a year, Lisa decided to incorporate as YLM Ltd
The bank with which she had been dealing for the past year demanded that she now sign a demand promissory note, which she did, as "Lisa Larue". When the note was not paid by YLM, the bank sued Lisa personally. Which of the following is TRUE? A) Lisa is not liable. The whole point of incorporating was to obtain limited liability. B) Lisa is liable because she did not make clear in the note that she was signing on behalf of YLM Ltd. C) Lisa is not liable because the bank knew that Lisa had incorporated and therefore intended not to assume personal liability for the business's debts. D) Lisa is liable because she is the sole shareholder E) Lisa is not liable as the promissory note is void due to mistake