Purchase Solution

Yields on marketable securities; trade credit discounts

Not what you're looking for?

Ask Custom Question

1. Your firm invests in only three different classes of marketable securities: commercial paper, Treasury bills, and federal agency securities. Recently, yields on these money market instruments of three months' maturity were quoted at 6.10, 6.25, and 5.90 percent. Match the available yields with the types of instruments your firm purchases.

2. (Trade credit discounts) Determine the effective annualized cost of forgoing the trade credit discount on the following terms:
a. 1/10, net 20
b. 2/10, net 30
c. 3/10, net 30
d. 3/10, net 60
e. 3/10, net 90
f. 5/10, net 60

3. (EOQ calculations) The local hamburger fast-food restaurant purchases 20,000 boxes of hamburger rolls every month. Order costs are $50 an order, and it costs 25 cents a box for storage.
a. What is the optimal order quantity of hamburger rolls for this restaurant?
b. What questionable assumptions are being made by the EOQ model?

4. (EOQ calculations) A local car manufacturing plant has a $75 per-unit per-year carrying cost on a certain item in inventory. This item is used at a rate of 50,000 per year. Ordering costs are $500 per order.
a. What is the EOQ for this item?
b. What are the annual inventory costs for this firm if it orders in this quantity? (Assume constant demand and instantaneous delivery.)

Purchase this Solution

Solution Summary

The yields on marketable securities and trade credit discounts are examined.

Solution Preview

Please see attachment.

1. Your firm invests in only three different classes of marketable securities: commercial paper, Treasury bills, and federal agency securities. Recently, yields on these money market instruments of three months maturity were quoted at 6.10, 6.25, and 5.90 percent. Match the available yields with the types of instruments your firm purchases.
Commercial paper 6.25%
Treasury bills 5.90%
Federal Agency securities 6.10%

The criteria, for associating yields, is based on risk. The three different securities have different levels of risk. Treasury bills are backed by the trust of the federal govt and so do not have any default risk. Commercial bills, however, are issued by organisations and have potential for default. Investors require a premium as compensation for taking on risk. Commercial bills among the three has the highest risk ...

Solution provided by:
Education
  • B. Sc., University of Nigeria
  • M. Sc., London South Bank University
Recent Feedback
  • "Thank you."
  • "thank you Chidi Ngene.. if you have any APA references would be great"
  • "Thank you so much for your help, your explanations were easy to understand and apply!"
  • "are you able to highlight the equations used either on the xlsx or a word doc as to how each graph was formed- overall looks fine i just need help understanding this myself"
  • "Chidi Ngene, M. Sc. Was extremely helpful as without the help and guidance I would have failed, but with the help I passed. I still have a lot to learn and in need of the guidance to understand and learn more on the subject. I would recommend Chidi Ngene and BrainMass to anyone that are in need of help. Thank you!!"
Purchase this Solution


Free BrainMass Quizzes
Business Ethics Awareness Strategy

This quiz is designed to assess your current ability for determining the characteristics of ethical behavior. It is essential that leaders, managers, and employees are able to distinguish between positive and negative ethical behavior. The quicker you assess a person's ethical tendency, the awareness empowers you to develop a strategy on how to interact with them.

Team Development Strategies

This quiz will assess your knowledge of team-building processes, learning styles, and leadership methods. Team development is essential to creating and maintaining high performing teams.

Understanding Management

This quiz will help you understand the dimensions of employee diversity as well as how to manage a culturally diverse workforce.

Understanding the Accounting Equation

These 10 questions help a new student of accounting to understand the basic premise of accounting and how it is applied to the business world.

Marketing Management Philosophies Quiz

A test on how well a student understands the basic assumptions of marketers on buyers that will form a basis of their marketing strategies.