Answer:
a. June 30
Dr Sales returns and allowances $1,840
Cr Sales refund payable $1,840
b. June 30
Dr Inventory returns estimated $640
Cr Cost of goods sold $640
Explanation:
a. & b. Preparation of the June 30 fiscal-year-end adjusting journal entry for future returns and allowances related to sales and cost of sales.
a. June 30
Dr Sales returns and allowances $1,840
Cr Sales refund payable $1,840
($92,000 × 2%)
(To record future returns and allowances related to sales)
b. June 30
Dr Inventory returns estimated $640
Cr Cost of goods sold $640
($32,000 × 2%)
(To record cost of sales)
a.To record expected sales to be refunded ($92,000 × 2%)
To record expected sales to be refunded= $1,840
b. To record expected cost of returns= ($32,000 × 2%)
To record expected cost of returns = $640
If you encounter a process that has limited flexibility, shorter lead times, and cheaper products, customization most likely is occuring:
Answer: late in the supply chain
Explanation:
Assemble to order refers to a strategy whereby the products ordered by customers are manufactured quickly while they are customizable to an extent
Even though the basic parts of the product are manufactured already, they're not yet assembled until an order comes in.
If a process that has limited flexibility, shorter lead times, and cheaper products, customization most likely is occuring late in the supply chain.
In a situation where a process with limited flexibility, shorter lead times, and cheaper products, customization of the product or service will most likely occur D. Late in the Supply Chain
Given the process's limited flexibility and shorter lead times, customization, which is a process that tailors a product or service to meet specific customer's or market's demands, cannot occur early, at every step of the Supply Chain, or before procurement of raw materials.
Thus, customization occurs later in the Supply Chain when the goods are about to be delivered to the customer because delivery and satisfying customers or the market are the ultimate goals of any Supply Chain management.
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A US Treasury is quoted at $137.111 based on $100 par. Today is 12/31/2020. Assume that transaction date and settlement date is the same. The coupon rate is 8%. The bond has 30-year maturity. What is the yield-to-maturity
Answer: 5.46%
Explanation:
You can use excel to solve for this.
Number of periods = 30
Coupon = Payment = 8% * 100 = $8
PV = $137.11
FV = $100 par value
Do this and the YTM would be: 5.46%
This makes sense because the bond is trading at a premium which means that the YTM is less than the coupon rate.
ABC Corporation owns 75 percent of XYZ Company's voting shares. During 20X8, ABC produced 50,000 chairs at a cost of $79 each and sold 35,000 chairs to XYZ for $90 each. XYZ sold 18,000 of the chairs to unaffiliated companies for $117 each prior to December 31, 20X8, and sold the remainder in early 20X9 to unaffiliated companies for $130 each. Both companies use perpetual inventory systems. Based on the information given above, what amount of cost of goods sold did ABC record in 20X8 prior to consolidation
Answer:
$2,765,000
Explanation:
Calculation to determine what amount of cost of goods sold did ABC record in 20X8 prior to consolidation
Cost of goods sold= $79 each* 35,000
Cost of goods sold=$2,765,000
Therefore the amount of cost of goods sold that ABC record in 20X8 prior to consolidation is $2,765,000
Using the information given and assuming that ABC Corporation sells the chairs it produces to XYZ Company only, the cost of goods sold is $3,150,000.
Data and Calculations:
Shareholding of ABC Corporation in XYZ = 75%
ABC production units in 20X8 = 50,000 chairs
Number of units sold to XYZ = 35,000 chairs
Cost of product per unit = $90
Thus, if ABC Corporation sells the chairs it produces to XYZ Company only, the cost of goods sold is $3,150,000 ($90 x 35,000).
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Natal Technologies is developing a superior ultrasound machine for which it is required to invest $800,000. Based on the company's analysis, the product will generate $200,000 from the first year till perpetuity. According to this, the payback period is ________.
a. 10 years.
b. 6 years.
c. 3 months.
d. 4 years.
Answer:
d. 4 years.
Explanation:
The payback period is the length of time that it takes for the future cash flows to equal the amount invested in a project. It takes 4 years to get $800,000 for Natal Technologies product.
The total market value of the equity of ITM is $6 million, and the total value of its debt is $4
million. The treasurer estimates that the beta of the stock currently is 1.2 and that the expected
risk premium on the market is 10%. The Treasury bill rate is 4%, and investors believe that
ITM’s debt is essentially free of default risk.
a. What is the required rate of return on ITM stock?
b. Estimate the WACC assuming a tax rate of 40%.
c. Estimate the discount rate for an expansion of the company’s present business.
d. Suppose the company wants to diversify into the manufacture of rose-colored glasses.The beta
of optical manufacturers with no debt outstanding is 1.4. What is the required rate of return on
ITM’s new venture? (Assume that the risky project will not enable the firm to issue any
additional debt.)
Answer:
a. The required rate of return on Okefenokee stock is 16%.
b. WACC = 10.56%.
c. Estimate the discount rate for an expansion of the company's present business.
It should be the same as the WACC = 10.56%
d. The required rate of return on Okefenokee's new venture is Ke = 18 %.
Explanation:
Here the given is,
E = $6 million, D = $4 million, Beta = 1.2,
Rmp = the expected risk premium on the market =10%.
Rf = The Treasury bill rate = 4%
a. The required rate of return on Okefenokee stock,
[tex]Ke = Rf + Beta \times Rmp = 4 + 1.2 \times 10 = 16%[/tex]%.
b. Tax rate, T = 40%
The proportion of debt =[tex]Wd = D / (D + E) = 4 / (6 + 4) = 0.4[/tex]
Proportion of equity, We = 1 - Wd = 1 - 0.4 = 0.6
Cost of debt, Kd = Risk-free rate as debt is free of default = 4%
[tex]WACC = Wd \times Kd \times (1 - T) + We\times Ke\\\\ = 0.4 \times4\times (1 - 40) + 0.6 \times 16\\\\ = 10.56%[/tex]
WACC = 10.56%.
c. Estimate the discount rate for an expansion of the company's present business.
It should be the same as the WACC = 10.56%
d. Suppose the company wants to diversify into the manufacture of rose-colored glasses. The beta of optical manufacturers with no debt outstanding is 1.4. What is the required rate of return on Okefenokee's new venture? (You should assume that the risky project will not enable the firm to issue an additional debt)
[tex]Ke = Rf + Beta \times Rmp\\\\Ke = 4 + 1.4 \times 10 = 18%[/tex]
Ke = 18 %.
SCI just paid a dividend ( D0 ) of $3.12 per share, and its annual dividend is expected to grow at a constant rate (g) of 6.50% per year. If the required return ( rs ) on SCI’s stock is 16.25%, then the intrinsic value of SCI’s shares is per share. Which of the following statements is true about the constant growth model?
The constant growth model can be used if a stock’s expected constant growth rate is less than its required return.
The constant growth model can be used if a stock’s expected constant growth rate is more than its required return. Use the constant growth model to calculate the appropriate values to complete the following statements about Super Carpeting Inc.:
• If SCI’s stock is in equilibrium, the current expected dividend yield on the stock will be per share.
• SCI’s expected stock price one year from today will be per share.
• If SCI’s stock is in equilibrium, the current expected capital gains yield on SCI’s stock will be .
Answer:
a.
Last Dividend, D0 = $3.12
Growth Rate, g = 6.50%
Required Return, rs = 16.25%
[tex]D1 = D0 \times(1 + g)\\D1 = $3.12\times1.065\\[/tex]
D1 =$ 3.3228
Intrinsic Value, P0 = D1 / (rs - g)
Intrinsic Value, P0 = $3.3228 / (0.1625 - 0.0650)
Intrinsic Value, P0 = $34.08
b.
The constant growth model can be used if a stock’s expected constant growth rate is less than its required return.
c.
Dividend Yield = D1 / P0
Dividend Yield = $3.3228 / $34.08
Dividend Yield = 0.0975 or 9.75%
d.
Price in 1 year, P1 = P0 * (1 + g)
Price in 1 year, P1 = $34.08 * 1.065
Price in 1 year, P1 = $36.30
e.
Capital Gain Yield = (P1 - P0) / P0
Capital Gain Yield = ($36.30 - $34.08) / $34.08
Capital Gain Yield = 0.0650 or 6.50%
Sales $ 610,000 Cost of goods sold 430,000 Salaries 111,000 ($25,200 is indirect) Utilities 17,000 ($6,000 is indirect) Depreciation 48,800 ($17,200 is indirect) Office expenses 26,200 (all indirect) 1. Prepare a departmental income statement for 2019. 2.
Answer:
Sales $610,000
Less: Cost of Goods sold ($430,000)
Gross Profit $180,000
Less:
Salaries $111,000
Utilities $17,000
Depreciation $48,800
Office expenses $26,200 ($203,000)
Operating loss ($23,000)
A bond issued by Vodafone has a coupon rate of 6.15% with semiannual payments, a par value of $1,000,and remaining maturity of exactly 25 years. The bond is currently trading at a price in the market that reflects a yield to maturity for the bond of 3.86%. What is the current value of the bond
Answer:
$1,365.15
Explanation:
Coupon rate = 6.15%
Par Value = 1000
Years = 25
Coupon = 30.75
No of the periods = 50 (25*2)
Semi YTM = 1.93% (3.86%/2)
Price = PV(Semi YTM, No of the periods, -Coupon, -Par Value)
Price = PV(1.93%, 50, -30.75, -1000)
Price = $1,365.15
So, the current value of the bond is $1,365.15.
Sandhill Co. Bonita Industries Net cash provided by operating activities $ 81,330 $91,400 Average current liabilities 49,800 94,900 Net income 181,900 181,900 Capital expenditures 37,660 69,250 Dividends paid 4,570 9,920Compute free cash flow for both companies and compare. (Show a negative free cash flow with either a-sign e.g.-15,000 or in parenthesis e.g. (15,000).) Bonita Industries Windsor Inc. Free cash flow $ $ v 's free cash flow is better.
Answer:
Free cash flow = Net cash flow from operating activities - Capital expenditures - Dividends paid
Sandhill free cash flow
= 81,330 - 37,660 - 4,570
= $39,100
Bonita industries
= 91,400 - 69,250 - 9,920
= $12,230
Sandhill Free cash flow is better.
On December 1, 2020, Junction Company issued at 104, 800 of its 9%, 10-year, $1,000 par value, nonconvertible bonds with detachable stock purchase warrants. Each bond carried two detachable warrants; each warrant was for one share of common stock at a specified option price of $15 per share. Shortly after issuance, the warrants were quoted on the market for $3 each. No fair value can be determined for the bonds without the warrants. Interest is payable on December 1 and June 1. Provide the entry to record issuance of the bonds by Junction Company on December 1, 2020.
Answer:
Junction Company
Journal Entry
December 1, 2020:
Debit Cash $832,000
Credit Bonds Payable $800,000
Credit Bonds Premium $27,038
Credit Warrants Liability $4,962
To record the issuance of the bonds.
Explanation:
a) Data and Calculations:
December 1, 2020:
Face value of nonconvertible bonds with detachable stock purchase warrants = $800,000
Issue price of bonds = $832,000 (1.04 * 800 * $1,000)
Number of bonds issue = 800
Par value per bond = $1,000
Maturity period = 10 years
Coupon interest rate = 10%
Option price of each warrant = $15 per common stock share
Market price of the option = $3
Value of warrant = $4,800 ($3 * 800 * 2)
Allocation of bond price:
Bonds = $827,038 ($800,000/$804,800 * $832,000)
Warrants = $4,962 ($4,800/$804,800 * $832,000)
Suppose Skyler invests in an annuity that pays 3.2% annual interest, compounded monthly. If she contributes $155 every month for 10 years, how much interest would she earn during that time
Answer: $3,286.47
Explanation:
Find the future value of the annuity after 10 years.
Number of periods = 10 * 12 months = 120 months
Interest = 3.2% / 12 = 3.2/12%
Future value of annuity = Annuity * ( (1 + rate)^ number of periods- 1) / rate
= 155 * ( ( 1 + 3.2%/12) ¹²⁰- 1) / 3.2%/12
= $21,886.47
The find the amount that the money would have come to without being invested:
= 155 * 120 months
= $18,600
Interest is:
= 21,886.47 - 18,600
= $3,286.47
Delta River Company sold manufacturing equipment with a cost of $44,000 and accumulated depreciation of $32,000 for $9,000. The journal entry to record this transaction will include:_________
a) a credit to Accumulated Depreciation â Equipment for $32,000.
b) a debit to a loss account for $3,000.
c) a credit to a gain account for $8,000.
d) a credit to the Equipment account for $12,000.
Answer:
b) a debit to a loss account for $3,000.
Explanation:
Based on the information given the journal entry to record this transaction will include: a DEBIT TO A LOSS ACCOUNT FOR $3,000.
Debits Cash $9,000
Debit Accumulated Depreciation - Equipment $32,000
Debit loss account ($3,000)
($44,000-$32,000+$9,000)
Credit Equipment $44,000
Wiley Hill opened Hill's Repairs, Inc. on March 1 of the current year. During March, the following transactions occurred and were recorded in the company's books:
1. Wiley invested $41,000 cash in the corporation.
2. Wiley contributed $116,000 of equipment to the corporation.
3. The company paid $3,600 cash to rent office space for the month.
4. The company received $32,000 cash for repair services provided during March.
5. The company paid $7,800 for salaries for the month.
6. The company provided $4,600 of services to customers on account.
7. The company paid cash of $2,100 for monthly utilities.
8. The company received $4,700 cash in advance of providing repair services to a customer.
9. The company paid $6,600 cash in dividends to Wiley. (sole shareholder)
Based on this information, the balance in Stockholders' Equity reported on the Balance Sheet at the end of March would be:
A. $178,200.
B. $173,500.
C. $165,300.
D. $6,800.
E. $29,500.
Answer: B. $173,500.
Explanation:
First calculate the Net income:
= Repair services + Services on account - Rent - Salaries - Utilities
= 32,000 + 4,600 - 3,600 - 7,800 - 2,100
= $23,100
Equity is:
= Cash investment + Equipment investment + Net income - Dividends
= 41,000 + 116,000 + 23,100 - 6,600
= $173,500
The Molding Division of Cotwold Company manufactures a plastic casing used by the Assembly Division. This casing is also sold to external customers for $39 per unit. Variable costs for the casing are $12 per unit and fixed cost is $6 per unit. Cotwold executives would like for the Molding Division to transfer 22,000 units to the Assembly Division at a price of $33 per unit. Assume that the Molding Division has excess capacity, but the Assembly Division requires the casing to be made from a specific blend of plastics. This would raise the variable cost per unit to $37.
Answer:
1. No, the Molding Division accept the $33 transfer price proposed by management.
2. The minimum transfer price that the Molding Division will accept is $37.
3. Mutually beneficial transfer price = $38.00
Explanation:
Note: This question is not complete as the requirements are missing. The requirements are therefore provided to complete the question before answering it as follows:
Required:
1. Should the Molding Division accept the $33 transfer price proposed by management?
2. Determine the minimum transfer price that it will accept.
3. Determine the mutually beneficial transfer price so that the two divisions equally split the profits from the transfer. (Round your answer to 2 decimal places.)
The explanation of the answers is now provided as follows:
Note: Since it is assumed that the Molding Division has excess capacity, the relevant cost to consider whether or not to accept is the variable cost per unit. The fixed cost per unit is not relevant as it will be incurred whether or not the transfer is accepted.
We can now proceed as follows:
1. Should the Molding Division accept the $33 transfer price proposed by management?
No, the Molding Division accept the $33 transfer price proposed by management. This is because it is lower than the variable cost per unit of $37 for casing from a specific blend of plastics required by the Assembly Division.
2. Determine the minimum transfer price that it will accept.
The minimum transfer price that the Molding Division will accept is $37. This is equal to the variable cost per unit of $37 for casing from a specific blend of plastics required by the Assembly Division.
3. Determine the mutually beneficial transfer price so that the two divisions equally split the profits from the transfer. (Round your answer to 2 decimal places.)
This can be determined as follows:
Profit per unit from selling to external customers = Selling price per unit to external customers - Variable cost per unit for casing from a specific blend of plastics required by the Assembly Division = $39 - $37 = $2.00
Mutually beneficial transfer price = Variable cost per unit for casing from a specific blend of plastics required by the Assembly Division + (Profit per unit from selling to external customers / 2) = $37 + ($2 / 2) = $38.00
A revenue account is increased by debits. is decreased by credits. has a normal balance of a debit. is increased by credits.
Answer: is increased by credits
Explanation:
Revenue accounts are increased by credits because they are an equity account and equity accounts increase by credit. This is because the corresponding entry would be an asset such as cash and as the asset has to increase by being debited, revenue must be increased by credit.
Other accounts that are increased by credit include liabilities. Accounts that increase by debits apart from assets include purchases and expenses.
Given a real rate of interest of 3.2%, an expected inflation premium of 5.1%, and risk premiums for investments A and B of 7.4% and 8.9% respectively, find the following: a. The risk-free rate of return, rf b. The required returns for investments A and B
Answer:
a. Risk-free rate of return:
= Real rate of return + Inflation premium
= 3.2% + 5.1%
= 8.3%
b. Required return for investment A:
= Risk free rate of return + Risk premium
= 8.3% + 7.4%
= 15.7%
Required return for investment B
= 8.3% + 8.9%
= 17.2%
Timken roller bearing is a manufacturer of seamless tubes for drill bit collars. Company is planning to add larger capacity robotic arms to one of its assembly lines 3 years from now. If it is done now, the cost of the equipment is $2.4 million. Assume that the company's real MARR is 15% per year and the inflation rate is 2.8% per year. Determine the equivalent amount the company can spend 3 years from now in then-current dollars.
a. $4,943,200.
b. $2,943,200.
c. $3,943,200.
d. unknown.
Answer:
the equivalent amount the company can spend 3 years from now in then-current dollars is $3,943,200
Explanation:
The computation of the equivalent amount the company can spend 3 years from now in then-current dollars is shown below:
= $2,400,000 × (1 + 17.8%)^3
= $2,400,000 × 1.63942
= $3,943,200
Hence, the equivalent amount the company can spend 3 years from now in then-current dollars is $3,943,200
. A new bond issue is being issued at a market price of $922 with a 11.4% interest rate and will be due in 16 years. If the firm has a 32 percent tax rate, calculate the after-tax cost of debt.
Answer:
8.53%
Explanation:
Par value = $1000
Current bond = $922
Coupon = 1000*11.4% = $114
Years = 16
Pretax cost of debt = YTM(Nper, PMT, -PV, FV)
Pretax cost of debt = YTM(16, 114, -922, 1000)
Pretax cost of debt = 0.1255
Pretax cost of debt = 12.55%
After tax cost of debt = Pretax cost of debt * (1 - Tax rate)
After tax cost of debt = 12.55% * (1 - 32%)
After tax cost of debt = 0.1255 * 0.68
After tax cost of debt = 0.08534
After tax cost of debt = 8.53%
Accounts receivable arising from sales to customers amounted to $85,000 and $75,000 at the beginning and end of the year, respectively. Income reported on the income statement for the year was $285,000. Exclusive of the effect of other adjustments, the cash flows from operating activities to be reported on the statement of cash flows is Group of answer choices $285,000. $295,000. $445,000. $275,000.
Answer:
$295,000
Explanation:
Cash flow from Operating Activities
Net Income $285,000
Adjustment for change in working capital :
Decrease in Accounts receivable $10,000
Net Cash Provided by Operating Activities $295,000
Ryan Company deposits all cash receipts on the day they are received and makes all cash payments by check. Ryan's June bank statement shows $27,861 on deposit in the bank. Ryan's comparison of the bank statement to its cash account revealed the following
Deposit in transit 3,350
Outstanding checks 1,350
Answer: $29,861
Explanation:
In order to adjust the bank statement balance to the books, the following is done:
= Bank statement + Deposit in transit - Outstanding checks
= 27,861 + 3,350 - 1,350
= $29,861
The focus on establishing relationships with all customers has given way to a more targeted effort to seek higher-value customers.
A. True
B. False
In comparing the deviations of returns, which one of the following assets has historically had the largest standard deviation of annual returns?
a. large company stocks
b. long-term corporate bonds
c. long-term government bonds
d. U.S. Treasury bills
Answer:
A
Explanation:
Read the following descriptions and identify the type of risk or term being described:
a. This type of risk relates to fluctuations in exchange rates.
b. This type of risk is inherent in a firmâs operations. A standard measure of the risk per unit of return. This can be used to reduce the stand-alone risk of an investment by combining it with other investments in a portfolio.
c. A standard measure of the risk per unit of return
d. This type of risk relates to fluctuations in exchange rates
Answer:
Foreign exchange risk
Explanation:
These are the risks that an international financial transaction could accrue because of fluctuations in the currency.
A standard measure of the risk per unit of return and this type of risk relates to fluctuations in exchange rates.
Therefore, according to the following descriptions, the type of risk or term being described is Foreign exchange risk.
A fixed coupon bond with 10 years left until maturity and a coupon that is paid semi-annually is currently trading at a yield of 6%. If the price of the bond is $1,223.16, then the coupon rate is ____%. Par value is $1,000.
Answer:
9%
Explanation:
FV = 1000
No of compounding period = 2
No of years = 10
Nper = 20
Yield to maturity = 6%/2 = 3%
PV = 1223.16
Coupon payment = PMT(Rate, Nper, Pv, Fv)
Coupon payment = $45
Coupon rate = Coupon payment * Compounding per year / FV
Coupon rate = $45 * 2 / 1000
Coupon rate = 0.09
Coupon rate = 9%
Health Scan, Inc. paid $50,000 for X-ray equipment four years ago. The equipment was expected to have a useful life of 10 years from the date of acquisition with annual operating costs of $35,000. Technological advances have made the machine purchased four years ago obsolete with a zero salvage value. An improved X-ray device incorporating the new technology is available at an initial cost of $43,000 and annual operating costs of $23,000. The new machine is expected to last only six years before it, too, is obsolete. Asked to analyze the financial aspects of replacing the obsolete but still functional machine, Health Scan's accountant prepared the following analysis. After looking over these numbers, the Center's manager rejected the proposal.
Six-year savings [($35,000 − $23,000) × 6] $72,000
Cost of new machine (43,000)
Undepreciated cost of old machine (30,000)
Advantage (disadvantage) of replacement $(1,000)
Calculate the net benefit (cost) of purchasing the new machine.
Which is a risk in IS development?
Answer:
Very simply, a risk is a potential problem. It's an activity or event that may compromise the success of a software development project. Risk is the possibility of suffering loss, and total risk exposure to a specific project will account for both the probability and the size of the potential loss.
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MC Qu. 159 Copy Center pays an average wage... Copy Center pays an average wage of $11 per hour to employees for printing and copying jobs, and allocates $17 of overhead for each employee hour worked. Materials are assigned to each job according to actual cost. If Job M-47 used $300 of materials and took 20 hours of labor to complete, what is the total cost that should be assigned to the job
Answer:
$860
Explanation:
Materials cost = $300
Labor cost = Labor hours * Wages per hour
Labor cost = 20 hours * $11
Labor cost = $220
Overhead cost = $17 * 20 hours
Overhead cost = $340
Total cost = Materials cost + Labor cost + Overhead cost
Total cost = $300 + $220 + $340
Total cost = $860
So, the total cost that should be assigned to the job is $860.
When Maria suggests a product modification to a supplier of her company, she is performing which of these roles according to Mintzberg?
Answer: Spokesperson
Explanation:
Managers have a role to play according to Mintzberg, of being spokespeople for their companies. They are to represent the company outside and speak on its behalf in order to get it better deals and an improved image.
This is what Maria did here. By suggesting a product modification for the benefit of her company, she was being a spokesperson who was speaking up for the company so that it gets a better deal.
DEFINE visible trade and invisible trade
Answer:
visible trade in economics, exchange of physically tangible goods between country involving import and export it is distinguished from invisible trade
Sheridan, Inc., has issued a three-year bond that pays a coupon rate of 7.0 percent. Coupon payments are made semiannually. Given the market rate of interest of 4.6 percent, what is the market value of the bond
Answer:
$1,066.54
Explanation:
Calculation to determine the market value of the bond
Using this formula
Market value of bond = Coupon payment per period * [1-(1+i)^-n]/i + par value/(1+i)^n
Where,
i = interest rate per period
n = number of periods
Let plug in the formula
Market value of bond = 7%/2 * [1-(1+0.046/2)^-3*2]/(0.046/2) + 1000/(1+0.046/2)^3.2
Market value of bond = 3.5% * [1-(1+0.023)^-6]/(0.023) + 1000/(1+0.023)^6
Market value of bond=$1,066.54
Therefore the market value of the bond will be $1,066.54
