Answer:
a. Transportation problems
Explanation:
In Business management, problems which deal with the direct distribution of products from supply locations to demand locations are called transportation problems.
Transportation is a supply chain technique which primarily includes all of the process involved in the distribution of finished goods and services from the production line to the consumers or end users, so as to meet their needs or wants.
You have just been instructed to develop a schedule for introducing a new product into the marketplace. Below are the elements that must appear in your schedule. Arrange these elements into a work breakdown structure (down through level 3), and then draw the arrow diagram. You may feel free to add additional topics as necessary.1. Production layout2. Market testing3. Review plant cost4. Select distributors5. Analyze selling cost6. Analyze customer reactions7. Storage and shipping cost8. Select salespeople9. Training salespeople10. Trained distributors
Answer:
Attached below is the arrangement of these elements with additional topics and arrow diagram
Explanation:
The given Elements are : Production layout , market testing , Review plant cost, select distributors, Analyze selling cost, Analyse customer reactions, storage and shipping cost, select salespeople, training sales people, trained distributors. including additional topics as well
Consider Kodak's core competency before Fisher's arrival. As the market shifted from film to digital did the company's historical core competency still quality as a core competency? Did it pass the core competency test question(s)? If so, which one(s)?
a. Test 1
b. Test 2
c. Test 3
Answer: None of the three tests were passed as the market transitioned.
Explanation: one of the core competencies of Kodak were
1. Film was the basics of their critics products and services. As the market transitioned from the use of films for camera and devices to digital, Kodak refused or was reluctant to take the necessary risk to expand and forge beyond it current market and product to the digitalized market as a result suffered the consequence.
A company has evaluated several projects using net present value. All projects are similar in amount invested and risk. Rank the projects in the order they should be accepted.
Answer:
First option - $2067
second option - $340
third option - $62
not acceptable - ($615)
Explanation:
Please find attached the question used in answering this question.
Net present value is the present value of after tax cash flows from an investment less the amount invested.
Only projects with a positive NPV should be accepted. A project with a negative NPV should not be chosen because it isn't profitable.
When choosing between positive NPV projects, choose the project with the highest NPV first because it is the most profitable.
g A company's most recent balance sheet reported total assets of $1.9 million, total liabilities of $0.8 million, and total equity of $1.1 million. Its Debt to equity ratio is: Group of answer choices
Answer:
0.73
Explanation:
Debt to equity ratio is calculated as Total debt / Total equity
= $0.8 million / $1.1 million
= 0.73
Therefore, debt to equity ratio is 0.73
If a stock has a preemptive right, it gives current stockholders the right to purchase any new shares issued by the firm, so as to maintain their level of ownership. This right helps protect current stockholders against both dilution of control and dilution of value.
a. True
b. False
Answer: True
Explanation:
When new shares are issued, the preemptive right helps maintain the position of the shareholder. The preemptive right is vital to shareholders as it protects them against the dilution of ownership interests.
Also, it gives current stockholders the right to purchase any new shares issued by the firm, so as to maintain their level of ownership.
intext:"Gideon Company uses the direct write-off method of accounting for uncollectible accounts. On May 3, the Gideon Company wrote off the $2,000 uncollectible account of its customer, A. Hopkins. The entry or entries Gideon makes to record the write off of the account on May 3 is"
Answer:
Dr Allowance for Doubtful Accounts 2,000
Cr Accounts Receivable - A. Hopkins 2,000
Explanation:
Preparation of the Journal entry that Gideon will makes in order to record the write off of the account on May 3
Based on the information given we were told that on May 3 the Company wrote off the amount of $2,000 a uncollectible account of its customer which was A. Hopkins, this means that the Journal entry will be recorded as:
May 3
Dr Allowance for Doubtful Accounts 2,000
Cr Accounts Receivable - A. Hopkins 2,000
If the Fed increases ior enough, such that it will raise the intersection point with the vertical portion of reservesupply, then the equilibrium fed funds rate will:_________
Answer: Increase
Explanation:
Based on the above scenario given in the question whereby when the Fed increases ior enough, such that it will raise the intersection point with the vertical portion of reservesupply, then the equilibrium fed funds rate will increase.
There'll be a rise in the equilibrium fed funds since the intersection point has been raised.
Mustang Corporation had 100,000 shares of $2 par value common stock outstanding. On December 31, 2015, the company's board of directors declares a 20 percent stock dividend. This stock dividend will be distributed on January 20, 2016 to the stockholders of record on January 15, 2016. The market price of the company's stock is $10 per share on December 31, 2015. Required:Complete the necessary journal entry to record the declaration of the stock dividend by selecting the account names and dollar amounts.
Answer:
December 31, 2015
DR Retained Earnings $40,000
CR Common Stock Dividend Distributable $40,000
(To record declaration of stock dividend)
Working
Common Stock Dividend Distributable
= No. of shares * Par value * % stock dividend
= 100,000 * 2 * 20%
= $40,000
Barb bought a house with 20% down and the rest financed by a 30-year mortgage with monthly payments calculated at a nominal annual rate of interest 8.4% compounded monthly. She notices that one-third of the way through the mortgage she will still owe 200,000. Determine the purchase price of the house.
Answer:
$282,706
Explanation:
Calculation to Determine the purchase price of the house
First step
In order for us to determine the purchase price of the house we would be using TVM Calculation to find the PMT
Hence,
PMT =
PV = 200,000
FV = 0
N = 240
I = 0.084/12
Thus,PMT = $1,723.01
The Second step will be to Calculate the Loan Amount Using TVM Calculation,
PV =
FV = 0
PMT = -1,723.01
N = 360
I = 0.084/12
Thus, PV = $226,164.98
Last step is to Determine the purchase price of the house
Using this formula
Purchase price=PV/(100%-20% down)
Let plug in the formula
Purchase price =226,164.98/(0.80)
Purchase price = $282,706
Therefore the purchase price of the house will be $282,706
Neelon Corporation has two divisions: Southern Division and Northern Division. The following data are for the most recent operating period: Total Company Southern Division Northern Division Sales $ 418,000 $ 193,000 $ 225,000 Variable expenses $ 130,880 $ 79,130 $ 51,750 Traceable fixed expenses $ 186,000 $ 77,000 $ 109,000 Common fixed expense $ 79,420 $ 36,670 $ 42,750 The common fixed expenses have been allocated to the divisions on the basis of sales. What is the company's overall net operating income if it operates at the break-even points for its two divisions?
Answer:
Neelon Corporation
Total Company Southern Northern
Division Division
Sales $ 418,000 $ 193,000 $ 225,000
Variable expenses $ 130,880 $ 79,130 $ 51,750
Traceable fixed expenses $ 186,000 $ 77,000 $ 109,000
Common fixed expense $ 79,420 $ 36,670 $ 42,750
Net operating income $ 21,700 $200 $21,500
Explanation:
a) Data and Calculations:
Total Company Southern Northern
Division Division
Sales $ 418,000 $ 193,000 $ 225,000
Variable expenses $ 130,880 $ 79,130 $ 51,750
Traceable fixed expenses $ 186,000 $ 77,000 $ 109,000
Common fixed expense $ 79,420 $ 36,670 $ 42,750
Net operating income $ 21,700 $200 $21,500
Neelon Corporation reaches break-even point when it will make no profit or loss. This implies that its break-even point is reached when sales revenue equals both variable and fixed costs. The excess that Neelon Corporation generates from sales revenue over total costs is regarded as operating income.
Assume that the firm is 40% financed by debt and 60% financed by equity. Its cost of debt is 8% and the cost of equity is 15%. The tax rate is 40%. What is the firm’s WACC?
Answer:
10.92%
Explanation:
A firm is 40% financed by debt
= 40/100
= 0.40
The firm is also 60% financed by equity
= 60/100
= 0.60
Its cost of debt is 8%
=8/100
=0.08
Cost of equity is 15%
= 15/100
= 0.15
Tax rate is 40%
= 40/100
= 0.40
Therefore, the firm's WACC can be calculated as follows
WACC= 0.40×0.08×(1-0.40) + 0.60×0.15
= 0.032×0.6 + 0.09
= 0.0192 + 0.09
= 0.1092×100
= 10.92%
Hence the firm's WACC is 10.92%
Employees who are not a target of sexual harassment but work where it is occurring can file what type of lawsuit
Answer: Third-party lawsuit
Explanation:
A third party lawsuit is a form of lawsuit which is brought against another individual or another party in regards to the injuries which are being suffered by the plaintiff.
A third party lawsuit can be filed by the employees who are not a target of sexual harassment but work where it is occurring.
Down Under Products, Ltd., of Australia has budgeted sales of its popular boomerang for the next four months as follows:
Sales in Units
April 54,000
May 75,000
June 94,000
July 82,000
The company is now in the process of preparing a production budget for the second quarter. Past experience has shown that end-of-month inventory levels must equal 20% of the following month’s sales. The inventory at the end of March was 10,800 units. Required: Prepare a production budget for the second quarter; in your budget, show the number of units to be produced each month and for the quarter in total.
down under products Ltd.
prodcution budget
april may june other
budgeted unit sales
total needs
required production in units
Answer:
Results are below.
Explanation:
Giving the following information:
Sales in Units
April 54,000
May 75,000
June 94,000
July 82,000
Desired ending inventory= 20% of the following month’s sales.
The inventory at the end of March was 10,800 units.
To calculate the production for each month, we need to use the following formula:
Production= sales + desired ending inventory - beginning inventory
April:
Sales= 54,000
Ending inventory= 75,000*0.2= 15,000
Beginning inventory= (10,800)
Total= 58,200 units
May:
Sales= 75,000
Ending inventory= 94,000*0.2= 18,800
Beginning inventory= (15,000)
Total= 78,800 units
June:
Sales= 94,000
Ending inventory= 82,000*0.2= 16,400
Beginning inventory= (18,800)
Total= 91,600 units
Total for the quarter= 228,600 units
In the above case, Sales in Units in the month of April is 54,000, in the month of May is 75,000, in the month of June is 94,000 and in the month of July is 82,000.
What is sales?A sale is defined as a transaction between the parties in which the purchaser acquires goods, services, or assets in return for money. In some cases, other assets are pay off to a seller.
Computation of production:
According to the available information,
Desirable closing inventory= 20% of the following month’s sales.
The inventory at the end of March was 10,800 units.
To calculate the production in each month, the formula is:
[tex]\text{Production= Sales + Desired Ending Inventory - Beginning Inventory}[/tex]
Production in the month of April:
According to the given information,
Sales= 54,000
Ending inventory:
[tex]=75,000\times \dfrac{20}{100}\\= 15,000[/tex]
Beginning inventory= 10,800
Now, apply the given values in the above formula:
[tex]\text{Production= Sales + Desired Ending Inventory - Beginning Inventory}\\\\\text{Production} =54,000+15,000-10,800\\\\\text{Production}=58,200\text{Units}[/tex]
Production in the month of May:
Sales= 75,000
Ending inventory:
[tex]=94,000\times \frac{20}{100}\\\\= 18,800[/tex]
Beginning inventory= 15,000
Now, apply the given values in the above formula:
[tex]\text{Production= Sales + Desired Ending Inventory - Beginning Inventory}\\\\\text{Production} =75,000+18,800-15,000\\\\\text{Production}=78,800\text{Units}[/tex]
Production in the month of June:
Sales= 94,000
Ending inventory:
[tex]872,000\times\dfrac{20}{100}= 16,400[/tex]
Beginning inventory= 18,800
Now, apply the given values in the above formula:
[tex]\text{Production= Sales + Desired Ending Inventory - Beginning Inventory}\\\\\text{Production} =94,000+16,400-18,800\\\\\text{Production}=91,600\text{Units}[/tex]
Therefore, the Total for the quarter :
[tex]=\text{May's Production + June's Production+Juily's Production}\\\\=58,200+78,800+91,600 \text{Units}\\= 228,600 \text{Units}[/tex]
Learn more about sales, refer to:
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Milano Gallery purchases the copyright on an oil painting for $510,000 on January 1, 2017. The copyright legally protects its owner for 12 more years. The company plans to market and sell prints of the original for 19 years.
Requried:
Prepare entries to record the purchase of the copyright on January 1, 2017, and its annual amortization on December 31, 2017.
Answer:
See journal entries below.
Explanation:
The copy right is known as an intangible asset that is purchased to a business hence debited to factor in its purchase value while the bank is credited for the payment for the purchase.
Although the copyright is amortized for 12 years, the copyright protection expires after 12 years - which is the legal year irrespective of its plan to market and sell the painting for 19 years.
• Entries to record to record the purchase of copyrights on January 1, 2017.
Date
January 1,2017
Copyright Dr $510,000
Bank Cr $510,000
(Being purchase of 12 years painting copyrights)
• Annual amortization on December 31, 2017
December 31, 2017
Amortization Dr $42,500
Copyright Cr $42,500
(Being annual amortization cost on 12 years painting copyright)
Delta Corporation has a higher times interest earned ratio than Gamma Corporation. From this information, we can assume that Delta is relatively better able to meet its interest payments.
a. True
b. False
Answer: True
Explanation:
The times interest earned ratio indicates how a company will be able to meet its debts obligations which is based on the current income of the company.
Since Delta Corporation has a higher times interest earned ratio than Gamma Corporation, it means that Delta is relatively better able to meet its interest payments.
Delta in its effective terms means the measurement of the rate of change in the premium whereas the gamma is meant as the measure of the movement of the risk. Delta is linked with the ranges of 0 and 1 and gamma is linked with the range of long and short-run in the market.
The correct answer is True
The time's interest earned ratio indicates how a company will be able to meet its debts obligations which are based on the current income of the company.
Since Delta Corporation has a higher times interest earned ratio than Gamma Corporation, it means that Delta is relatively better able to meet its interest payments.
To know more about the delta and gamma, refer to the link below:
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Would activity-based costing or activity-based management be useful for the airport store? Why or why not?
Answer with Explanation:
Activity based costing will not be useful because the airport store has hundreds of items which share a indirect costs like rentals, warehouse expenses, delivery costs, electricity, maintenance costs, etc.
The reason why its use in the case of airport store is not beneficial is as under:
Time Consuming: All indirect costs can't be absorbed in hundreds of product and would take more than one month to allocate indirect costs to each product. List of Restricted Product Price: Another reason is that the airport stores are given a price schedule which restrict selling of products at higher costs. This means if the contribution arising from the product then we can't change its price as it is restricted by the airport authorities.The indirect cost remains fixed and is not changing in this case which means it is not determinable which product consumes greater share of indirect cost as sometimes shelves will be not 100% occupied hence determining cost drivers for each cost pool would be a difficult task.Purpose is Lost: The purpose of ABC is to allocate the indirect costs to each product which apportioned on a fairer basis and lower the indirect cost by lowering the usage of cost drivers. The indirect costs can't be lowered as maintenance cost is fixed, electricity consumption remains the same, rentals are also fixed, this means that the purpose of allocation and controlling of cost drivers is lost.Suitable for Manufacturers not for Stores: The manufacturer's products deal with dozens of costs that are variable if the cost driver changes. The cost driver changes are not changing the indirect cost in the case of airport store which means that if a product which occupied 1 shelve is now occupying 2 shelves is not increasing the rental cost.Hence ABC is not suitable for airport store.
The cities of Tampa Bay and St. Petersburg, located on opposite sides of the Tampa Bay, are associated with what manufacturing industry
Answer:
The cities of Tampa Bay and St. Petersburg, are associated with the electronics and stationary manufacturing industry. For example office equipment, electronics, and optical products are manufactured in great quantities in both cities.
Explanation:
The Big Five Personality refers to the structures and propensities of people that explain their patterns of thought, emotion, and behavior. Although there are literally thousands of traits that can be used to describe an individual's personality, most traits reflect one of five broad dimensions or factors of personality: conscientiousness, agreeableness, neuroticism, openness to experience, and extraversion. It is especially useful for managers to understand the personality traits of their employees since these traits often have important implications for workplace attitudes and behaviors, such as performance and commitment. The following activity takes you through the thought process of a manager trying to hire a new sales associate based on personality assessments of the candidates. Imagine that you are a midlevel manager at a paper company and you are in the process of hiring a new sales associate. So far, you have scheduled interviews with three potential candidates. You just concluded your first interview and want to spend some time reflecting on the notes you took. In particular, you want to make sure that you have a solid grasp of each candidate's personality traits since you know how important that can be on the job. Read through the notes and classify them according to the Big Five Taxonomy of personality. Conscientiousness Agreeableness Neuroticism Took Initiative Openness to Experience Cold Hardworking Extraversion
Answer and Explanation:
Please find attachments
The big five taxonomy of personality refers to the "Big five" personality traits believed to be the traits on which many different personalities of people revolve. They include:extraversion, agreeableness, openness, conscientiousness, and neuroticism.
In the example above, based on the manager's interview with Cynthia. The manager can understand her personality by classifying using the big five personality traits based on information gathered from her and recommendations:
Cynthia took initiative: this falls under openness which are people who are creative and adventurous and like to learn new things
Cynthia could be hardworking: this falls under conscientiousness characterized by people who are generally organized and careful about things
Cynthia follows procedures: this falls under agreeableness which is the tendency to be trust and be cooperative
Cynthia seemed nervous: this falls under neuroticism which is the tendency for one to be emotionally unstable and usually have mood swings, anxiety or be sad
Cynthia was described as cold: this is also fall under neuroticism as Cynthia could be depressed
Archie Co. purchased a framing machine for $60,000 on January 1, 2021. The machine is expected to have a four-year life, with a residual value of $5,000 at the end of four years. Using the sum-of-the years'-digits method, depreciation for 2022 and book value at December 31, 2022, would be: (Do not round intermediate calculations.)
Answer:
$16,500
Explanation:
Depreciation is a method used in expensing the cost of an asset.
sum-of-the years'-digits method = (useful life remaining / sum of years) x (cost of asset - residual value)
sum of the years = 1 + 2 + 3 + 4 = 10
(3 / 10) x ($60,000 - $5,000) = $16,500
Suppose that in 2011, per-person GDP in Singapore was $53,591, and in Egypt, it was $5,547, as measured in 2005 purchasing power parity U.S. dollars.
It is accurate to say that the income level in Singapore is higher / lower than in Egypt. Why is this comparison accurate?
a. There are significant differences in incomes between high- and low-income countries.
b. Egypt is characterized by a higher share of industrial production in total output than Singapore is.
c. Singapore is characterized by a larger share of household production in total output than Egypt is.
d. Egypt is characterized by a larger share of household production in total output than Singapore is.
Answer:
a. There are significant differences in incomes between high- and low-income countries.
Explanation:
Data provided in the question
Per person GDP in Singapore = $53,591
Per person GDP in Egypt = $5,547
Based on the above information
As we can see that the level of income in Singapore is higher than Egypt also when there is an important difference in the high income and low income countries the same is shown accurately
hence, the correct option is a.
Consider two bonds, a 3-year bond paying an annual coupon of 5%, and a 20-year bond, also with an annual coupon of 5%. Both bonds currently sell at par value. Now suppose that interest rates rise and the yield to maturity of the two bonds increases to 8%. a. What is the new price of the 3-year bond?
Answer:
$922.69
Explanation:
The price of the 3-year bond can be computed using the below bond price formula:
Price=face value/(1+r)^n+coupon*(1-(1+r)^-n)/r
face value is $1000
r is the new interest rate of 8%
n is the number of annual coupons the bond would pay which is 3
coupon=face value*coupon rate=$1000*5%=$50
price=1000/(1+8%)^3+50*(1-(1+8%)^-3)/8%
price of 3-year bond=$922.69
Colleen, an active union member, applies for a job at a company that her union has targeted so that she can start organizing efforts in favor of the union. She is also being paid by the union for her efforts. Which of the following practices is Colleen employing?a. Embeddingb. Saltingc. Corporate intelligence d. Subversion
Answer:
Correct Answer:
a. Embedding
Explanation:
Colleen could only be able to acquire the needed information about the company which her Union targets by applying to work in the company. The act of infusing herself with the company is called Embedding.
She would be able to be closer to other workers as well encourage them on the need to join the unions. This she could not be able to achieve if she was outside the company.
The following financial information was summarized from the accounting records of Train Corporation for the current year ended December 31: Rails Division Locomotive Division Corporate Total Cost of goods sold $45,500 $30,500 Direct operating expenses 27,600 23,000 Sales 92,300 67,600 Interest expense $2,100 General overhead 18,900 Income tax 4,000 The income from operations for the Locomotive Division is a.$44,600 b.$67,600 c.$14,100 d.$37,100
Answer:
$14,100
Explanation:
To find the answer, we use the following formula:
Income from operations = Sales - Cost of Goods Sold - Direct Operating Expenses - General Overhead
Income from operations = $67,600 - 30,500 - 23,000
= $14,100
On July 9, Mifflin Company receives an $8,500, 90-day, 8% note from customer Payton Summers as payment on account. Compute the amount due at maturity for the note and interest. (Use 360 days a year.)
Answer:
$8,670 and $170
Explanation:
The computation of the amount due at the time of maturity and the interest is shown below:
For interest, it is
= Received amount × rate of interest × number of months ÷ total number of months in a year
= $8,500 × 8% × 90 ÷ 360 days
= $170
And, the amount due at the time of maturity of the note is
= Received amount + interest
= $8,500 + $170
= $8,670
On January 1, the listed spot and futures prices of a Treasury bond were 95.4 and 95.6. You sold $100,000 par value Treasury bonds and purchased one Treasury bond futures contract. One month later, the listed spot price and futures prices were 95 and 94.4, respectively. If you were to liquidate your position, your profits would be a Group of answer choices $125 profit. $1,060.50 loss. None of the options are correct. $125 loss. $1,062.50 profit.
Answer:
None of the options are correct.
Explanation:
We start by calculating the net change of the treasury bond position.
= $95,125 - $95,000
= $125
The long treasury bond position gains $125 after a month.
We will also calculate the net change of the treasury bond futures contract.
= $94,125 - $95,187.50
= -$1,062.50
Therefore, Net profits is;
= $125 - $1,062.50
= -$937.50
Terrance needs to comminicate with managers in several different locations regarding a sensitive complex topic. Therefore he should choose the communication medium highest in information richness which would be a:______
a. Voice mail message.
b. Group email.
c. Videoconference.
d. Recorded presentation.
In a task assignment situation, in how many different ways can five jobs be assigned to five machines if each job must be assigned to each machine and each machine must be assigned one job?
A. 5
B. 1
C. 3,125
D. 120
E. 25
Answer: D. 120
Explanation:
The first machine being assigned a job can be assigned one from 5 jobs.
Once that happens, the next machine can only be assigned from any one of 4 jobs.
The next machine, any one of 3 jobs.
The next machine, any one of 2 jobs.
The Last machine gets the last job remaining.
The different ways a job can be assigned therefore are;
= 5 * 4 * 3 * 2 * 1
= 120
Dvorak Company produces a product that requires 5 standard pounds per unit. The standard price is $2.50 per pound. If 1,000 units required 4,500 pounds, which were purchased at $3.00 per pound, what is the direct materials (a) price variance, (b) quantity variance, and (c) total direct materials cost variance
Answer:
Direct material price variance= $2,250 unfavorable
Direct material quantity variance= $1,250 favorable
Total variance= $1,000 unfavorable
Explanation:
To calculate the direct material price and quantity variance, we need to use the following formulas:
Direct material price variance= (standard price - actual price)*actual quantity
Direct material price variance= (2.5 - 3)*4,500
Direct material price variance= $2,250 unfavorable
Direct material quantity variance= (standard quantity - actual quantity)*standard price
Standard quantity= 5*1,000= 5,000
Direct material quantity variance= (5,000 - 4,500)*2.5
Direct material quantity variance= $1,250 favorable
Total variance= 1,250 - 2,250= $1,000 unfavorable
Standard costs are used in companies for a variety of reasons. Which of the following is NOT one of the benefits of using standard costs?
a. to indicate where changes in technology and machinery need to be made
b. to estimate the cost of inventory
c. to plan direct materials, direct labor, and variable factory overhead
d. to control costs
Answer:
a. to indicate where changes in technology and machinery need to be made.
Explanation:
Standard cost in business management refers to the amount of money a product is supposed to cost in manufacturing it. It is a management tool that can be used to measure efficiency in the level of output or production of goods and services at a specific period of time.
In Financial accounting, the difference between the actual cost of each unit of a product and its standard cost is referred to as variance. In order to determine the standard cost of a product, the expected quantity of the product is multiplied by an expected price.
Standard costs are used in companies for a variety of reasons such as;
1. Standard costs are used to estimate the cost of inventory.
2. Standard costs are used to plan direct materials, direct labor, and variable factory overhead.
3. Standard costs are used to control costs.
However, standard costs cannot be used to indicate where changes in technology and machinery need to be made rather an actual cost should be used.
Additionally, the standard cost of each unit of a product manufactured in a business firm is categorized into two (2) and these are;
1. Price standard.
2. Quantity standard.
A bond issue with a face amount of $1,200,000 bears interest at the rate of 9%. The current market rate of interest is 10%. These bonds will sell at a price that is:
Answer: The selling price of the bond will be less than $1,200,000
Explanation:
From the question, we are informed that a bond issue with a face amount of $1,200,000 bears interest at the rate of 9% and that the current market rate of interest is 10%.
Since the market rate is 10% which is higher than coupon rate of 9%, this means that the market price for the bond will be smaller than the bond's face value.
Therefore, the selling price of the bond will be less than $1,200,000.
