William Corp. bonds have a current yield of 7% and mature in 10 years. Smith Corp. bonds have a
current yield of 5% and mature in 10 years. Given this information, which of the following
statements is MOST correct?
A) Smith Corp. bonds are riskier than William Corp. bonds.
B) William Corp. bonds will have a higher yield to maturity than Smith Corp. bonds.
C) Smith Corp. bonds will sell for a lower price than William Corp. bonds.
D) If both bonds have the same yield to maturity, then the price of Smith Corp. bonds must be
less than the price of William Corp. bonds.
D
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The following information pertains to Newman Company. Assume that all balance sheet amounts represent both average and ending balance figures and that all sales were on credit. Assets Cash and short-term investments $ 40,000 Accounts receivable (net) 30,000 Inventory 25,000 Property, plant, and equipment 215,000 Total Assets $310,000 Liabilities and Stockholders' Equity Current liabilities $
60,000 Long-term liabilities 95,000 Stockholders' equity—Common 155,000 Total liabilities and stockholders' equity $310,000 Income Statement Sales $90,000 Cost of goods sold 45,000 Gross margin $45,000 Operating expenses 20,000 Net income $25,000 Number of shares of common stock 6,000 Market price of common stock $40 Dividends per share $1.00 Cash provided by operations $40,000 What is the rate earned on total assets for this company? a. 8.1% b. 6.8% c. 10.5% d. 16.1%
"Claims to economic resources" are known as
a. Assets and liabilities b. Liabilities and stockholders' equity c. Owners' equity and stockholders' equity d. Retained earnings and revenues
The primary ethical concern in the transmission metaphor of communication involves ______.
a. opportunities for responsible feedback b. the personal character of the sender and message integrity c. how our message impacts those around us d. an appreciation and understanding of agency and constraint
Answer the following statements true (T) or false (F)
1. When a bond is issued at a premium, the interest expense calculation using the effective-interest amortization method uses the carrying amount of the bonds and the market rate of interest. 2. Using the effective-interest amortization method, the calculation for the amount of premium amortization is the difference between the cash paid for interest and the calculated interest expense based on the effective interest rate. 3. Using the effective-interest amortization method, the amount of premium amortization remains the same over the life of the bond.