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Interest Rates and the Cost of Debt

Forward contract and pricing

A one year long forward contract on a non-dividend-paying stock is entered into when the stock price is $40 and the risk free rate of interest is 10% annually with continuous compounding. a.) what is the forward price? b.) six months later, the price of the stock is $45 and the risk-free interest rate is still 10%. What are

Buying a house and making monthly payments

Please show formula and calculation: 1) You want to buy a house and wish to borrow $300,000. What would the monthly payment be if the loan requires equal monthly payments for 30 years at an interest rate of 5% of apr. What would your outstanding loan balance be immediately after you make your first payment? 2) You are pan

Sirius XM Flexible budgeting

Set up the flexible budget at three levels for the income statement. Companies prepare budgets based on absorption and/or variable costing. Due to lack of information, we're limiting our budgeting to the absorption approach. You still need to estimate cost behavior based on trends for Sirius XM Information

Security Interest

I'm confused and need help with answering this scenario: You are the chief executive officer of Money Games Inc.(MGI), which has begun to market Borrow & Spend, a video game set in the world of finance. To buy ads, MGI borrows $50,000 from First Savings Bank. On MGI's behalf, you sign a note for the loan and offer its account

Business Financial Reports

Argue either for or against this statement and be sure to defend your reasoning. Reports are written for business executives who want them. Thus, you don't have to be concerned about holding your reader's interest.

Investment Problems Involving Statistics

1. Suppose you make an investment of $10,000. This first year the investment returns 9%, the second year it returns 5%, and the third year in returns 4%. How much would this investment be worth, assuming no withdrawals are made? 2. How much would you need to deposit every month in an account paying 9% a year to accumulate by

FASB ASC: Effective Interest Rate

1. You acquire the outstanding loan (note) of Shepard Company, who is having financial difficulty. Because of the financial difficulty, Shepard Company's credit rating has been downgraded and you acquire the note at a discount. To determine the purchase price of the note you discount it at the effective rate of interest rather

Investment Value

I need help with the following question: Mark and Kate are establishing a fund for their son's college education. What lump sum must they deposit in an account that gives 8% annual interest rate, compounded monthly, in order for them to have $60,000 in the fund at the end of 10 years?

Most likely effect of increase in income tax rates would be to

1. Of the following, the most likely effect of an increase in income tax rates would be to? 2. A 10-year annual payment corporate coupon bond has an expected return of 11% and a required return of 10%. The bond's market price is 3, A bond that pays interest semiannually has a 6% promised yield and a price of $1045. An

Interest Rate

A recent edition of The Wall Street Journal reported interest rates of 2.25 percent, 2.60 percent, 2.98 percent, and 3.25 percent for three-year, four-year, five-year, and six-year Treasury note yields, respectively, According to the unbiased expectation theory of the term structure of interest rates, what are the expected one-y

Determining the accumulated balance

Use the compound interest formula for compounding more than once a year to determine the accumulated balance after the stated period. A $14,000 deposit at an APR of 4.6% with quarterly compounding for 7 years. The amount after 7 years will be (Round to the nearest cent as needed)?

bank balance based on the compounded interest

Global Trends in Consumer Savings With the impacts of the recession of 2009 and the ensuing slow recovery, many Americans are looking to place more discretionary money into savings plans and investments than into vacations and luxury items. If an individual saves S4S00 and elects to place the total dollar amount into a savin

Finding the future value

Decide whether the following statement makes sense (or is clearly true) or does not make sense (or is clearly false). Explain your reasoning. If interest rates stay 5% apr and I continue to make my monthly $75 deposits into my retirement plan, I should have at least $40,000 saved when I retire in 25 years. The statement_____

Compound Interest Example Problem

If someone is 21 years old, deposits $5000 each year into a traditional Individual Retirement Account (IRA) for 49 years at 6% interest compounded annually, and retires at age 70, how much money will be in the account upon retirement?

Calculating Compound Interest to Find Balance in Account

Use the appropriate compound interest formula to compare the balance in the account after the stated period of time. $15,000 is invested for 3 years with an Apr of 5% and daily compounding. The balance in the account after 3 years is __________

Present Value/compound interest

The present value of $100,000 to be received in five years at an interest rate of 16%, compounded annually, is $47,610. Required: Using a present value table (Table 6-4 and Table 6-5), your calculator, or a computer program present value function, calculate the present value of $100,000 for each of the following items (par

AT&T's long term debt position

if you pull the numbers on AT&T for Q4 2011 you'll see that they're even worse. In Q4 the company had a net loss of $6B (ouch!). As you pointed out, this is largely a result of increased Operating Expenses. But the company definitely posted a loss. On a side note, here's a 10-yr chart of Net Income showing how AT&T earning

Determining the Rates of Return

You live in Detroit, MI, the headquarters for many U.S. auto manufacturers, and work for one of them. Analysts have determined that rates of return on securities are better explained by multifactor models, and that the rate of return of a portfolio of U.S. auto manufacturers is explained as: please see attachment.

Nominal Annual Interest Rate

You agree to make 24 deposits of $500 at the beginning of each month into a bank account. At the end of the 24th month, you will have $13,000 in your account. If the bank compounds interest monthly, what nominal annual interest rate will you be earning?


(1) Brooks Company has a debt-equity ratio of 0.75. Return on assets is 10.4 percent, and total equity is $900,00. What is the equity multiplier? Return on equity? Net income? (2) If the SGS Corp. has a 13 percent ROE and a 25 percent payout ratio, what is its sustainable growth rate? (3) Conrad Co. had $285,000 in taxable

Sustainable Growth Rate; Retention Rate; Payout Rate; Margin

-Chapter 2, problem 1 (page 35). -Chapter 2, problem 2 (page 35). -Chapter 2, problem 4 (page 35). -Chapter 2, problem 5 (page 35). -Chapter 3, problem 2 (page 75). -Chapter 3, problem 6 (page 76). CHAPTER 2: PROBLEM 1 Current Assets $7,500 Net Fixed Assets $28,900 Current Liabilities $5,900 Long-Term

Find the interest r from the exponential equation

An interesting polynomial rootfinding problem occurs in the computation of annuities. An amount of Pi dollar is put into account at the beginning of years 1,2,...N. It is compounded annually at a rate of r (e.g. r=.05 means a 5 percent rate of interest). At the beginning of years N1+1...N1+N2, a payment of P2 dollars is remove

Risk premium on the market

(1) Suppose an ExxonMobil Corporation bond will pay $4,500 ten years from now. If the going interest rate on safe 10-year bonds is 4.25%, how much is the bond? (2) The expected return on KarolCo. stock is 16.5 percent. If the risk-free rate is 5 percent and the beta of KarolCo is 2.3, then what is the risk premium on the mark

How much of Coca-Cola's long-term debt is due in 2007

1. How much of Coca-Cola's long-term debt is due in 2007? 2. How much of Coca-Cola's long term debt is due in each of the next 4 years (2008-2011)? 3. Why might financial analysts be interested in these scheduled debt payments? What options does the company have with regard to making its payments?

Newell Manufacturing: Analyzing installment note and imputed interest. How much interest expense would Newell record in 2012 for the installment loan? What would the loan balance be on December 31, 2012; one day before Newell makes the second loan payment?

On January 1, 2011, Newell Manufacturing purchased a new drill press that had a cash purchase price of $6,340. Newell decided insted to pay on an installment basis. The installment contract calls for four annual payments of $2,000 each beginning in one year. Newell was not required to make an initial down payment for the drill p