Answer and Explanation:
1. The computation of cost of goods sold, gross profit, and net income is shown below:-
a. Cost of goods sold is
Bandera Manufacturing Company
Cost of Goods Sold
For the year January 31
Particulars Amount
Finished Goods Inventory, Jan 1 $73,590
Add: Cost of Goods Manufactured $306,090
Total Goods Available for Sales $379,680
Less: Finished Goods Inventory, Jan 31 $67,080
Cost of Goods Sold $312,600
b. Gross profit is
Bandera Manufacturing Company
Gross Profit
For the year Jan 31
Particulars Amount
Sales $651,250
Less: Cost of Goods Sold $312,600
Gross Profit $338,650
c. Net income is
Bandera Manufacturing Company
Net Income
For the year Jan 31
Particulars Amount
Gross Profit $338,650
Operating Expenses
Selling expenses $102,250
Administrative expenses $54,050
Less: Total Operating Expense $156,300
Net Income $182,350
2. a. The preparation of January income statement for Digital Vibe Manufacturing Company is shown below:-
Digital Vibe Manufacturing Company
Income Statement
For the Month Ended January 31
Particulars Amount
Sales $232,300
Less: Cost of goods sold $103,400
Gross profit $128,900
Less: Operating expense
Selling expense $59,400
Administrative expense $26,100
Total operating expense $85,500
Net income $43,400
b. The computation of Materials Inventory, Work in Process Inventory, and Finished Goods Inventory balances are shown below:-
Particulars Amount
Materials purchased $48,300
Less: Materials used for production $37,200
Ending balance of materials $11,100
Particulars Amount
Materials used for production $37,200
Add: Direct labor wages $55,500
Add: Factory overhead $78,200
The total cost of manufacturing $170,900
Less: Transferred to finished goods $129,900
Ending balance of work-in-process $41,000
Transfer from work-in-process $129,900
Less: Cost of goods sold $103,400
Ending balance of finished goods $26,500
Suppose that on January 6, 2018, Excel Motors paid $240,000,000 for its 45% investment in Dynamic Motors. Excel has significant influence over Dynamic after the purchase. Assume Dynamic earned net income of $10,000,000 and paid cash dividends of $15,000,000 to all outstanding stockholders during 2018. (Assume all outstanding stock is voting stock.) Read the requirements Requirement 1. What method should Excel Motors use to account for the investment in Dynamic Motors?2. Journalize all required 2018 transactions related to Excel Motors's Dynamic investment. Include an explanation for each entry.3. Post all 2018 transactions to the investment T account. What is its balance after all transactions are posted? How would be this balance be classified on the balance sheet dated December 31 2018?
Answer:
1. What method should Excel Motors use to account for the investment in Dynamic Motors?
equity method since Excel Motors exercises significant influence (more than 20% of outstanding stocks) over Dynamic Motors
2. Journalize all required 2018 transactions related to Excel Motors's Dynamic investment. Include an explanation for each entry.
January 6, 2018, investment in Dynamic Motors
Dr Investment in Dynamic Motors 240,000,000
Cr Cash 240,000,000
Sometime during 2018, cash dividends are distributed
Dr Cash 6,750,000
Cr Investment in Dynamic Motors 6,750,000
Under equity method, cash dividends decrease investment account
December 31, 2018, net income is reported
Dr Investment in Dynamic Motors 4,500,000
Cr Investment revenue 4,500,000
Under equity method, net income increases investment account
3. Post all 2018 transactions to the investment T account. What is its balance after all transactions are posted? How would be this balance be classified on the balance sheet dated December 31 2018?
Investment in Dynamic Motors
debit credit
240,000,000 (January 6, 2018)
6,750,000 (sometime during 2018)
4,500,000 (December 31, 2018)
$237,750,000 ⇒ Investment account should be reported as a non-current asset account.
Cash
debit credit
240,000,000 (January 6, 2018)
6,750,000 (sometime during 2018)
$233,250,000 ⇒ negative balance since we were not given the initial cash amount. Cash is a current asset account.
Investment revenue
debit credit
$4,500,000 (December 31, 2018)
*Revenues are not reported on the balance sheet, but they do increase retained earnings account.
Assuming a 360-day year, when a $20,000, 90-day, 5% interest-bearing note payable matures, total payment will be
Answer:
total payment will be $21,000.
Explanation:
The Payment at maturity will include, the Principle amount (amount borrowed) and the Interest that accrued over the period of the note payable.
Total Payment Calculation :
Principle amount = $20,000
Interest ($20,000 × 5%) = $1,000
Total Payment = $21,000
Which of the following statements are true? A. The creditors of a firm must be satisfied before any earnings can be distributed to the common shareholders.B. The more financial leverage that a firm uses, the greater will be its risks and expected return.C. When referring to ratio comparisons, time-series analysis compares a firm to that of an industry leader.D. Earnings per share is calculated by dividing retained earnings by the number of shares of common stock outstanding.E. The operating profit margin must take into account interest and taxes.
Answer: .B. The more financial leverage that a firm uses, the greater will be its risks and expected return
Explanation:
Financial leverage measures how much debt a company is using in acquiring assets. A high financial leverage means that the company is insuring more debt which means that the company has a higher risk attached.
The company will also have a higher expected return as they will have to pay off the debt that they used. Higher financial leverage also leads to more volatility in earnings.
You write one MBI July 127 call contract (equaling 100 shares) for a premium of $12. You hold the option until the expiration date, when MBI stock sells for $135 per share. You will realize a ______ on the investment.
Answer:
The answer is "$400"
Explanation:
The price value of the exercise:
= $127
The expiration date price value is:
= $135
Calculating the profit for Calls buyer:
= $135-$127
= $8
The value of 1 call = 100 shares
calculating the total profit :
=$ 8 × 100
= $ 800
One alternative purchase price:
= $12
Call option Total purchase price:
= $12 × 100
= $1200
The buyer's total loss:
= $1200 - $800
= $400
The Loss for the buyer: [tex]\frac{\text{profit for the seller}}{\text{writer}}[/tex]
Hence profit for the writer = $400
The international equilibrium price (or world price) and quantity for a traded item is determined by:
Answer: The intersection of the export supply schedule and the import schedule
Explanation:
An equilibrium price is the price that is derived at the point where the supply of goods and demand of goods matches.
It should be noted that the international equilibrium price (or world price) and quantity for a traded item is determined by intersection of the export supply schedule and the import schedule. At the point they intersect, the price will be gotten. Than, the market can be said to be in a state of equilibrium.
How much would Israel’s nominal GDP growth be next year if it experienced real GDP growth next year the same as its average over the past 50 years, with an inflation rate of 3% and population growth of 1%?
Please find part of questiom attached Answer:
6.25%
Explanation:
If inflation rate is 3%
And real GDP growth rate is 3.25 from question attachment
Nominal GDP growth rate which adds up inflation and output
=real GDP rate +inflation rate +population growth
=3.25%+3%
=6.25%
Therefore nominal GDP growth rate is 6.25%
This is because nominal GDP adds up the monetary value of all goods for the current year at current prices of all output and does not remove inflation like real GDP does. Also Population of 1% is already used in calculating real GDP so no need to add it nominal GDP calculation here
A company receives a 5%, 90-day note for $3,600. The total interest due on the maturity date is: (Use 360 days a year.)
Answer:
$45
Explanation:
The total interest due on note can be calculated by multiplying the Value of note with interest rate for required days. The formula for interest should be
Total Interest due = Value of Note x Interest Rate x 90/360
DATA
Value of note = $3,600
Interest rate = 5%
Number of days = 90
Total days n a year = 360
Solution
Total interest due = 3,600 x 5% x 90/360
Total interest due = $45
Prepaid Advertising has a debit balance in the Trial Balance section of the worksheet of $1500 and a credit entry of $550 in the adjustments section of the worksheet the balance of Prepaid Advertising in the Adjusted Trial Balance section of the worksheet is a:_______
a) $1050 bin
b) $1050 credh
c) $4500 de
d) $550 de
Prepaid Advertising has a debit balance in the Trial Balance section of the worksheet of $1500 and a credit entry of $550 in the adjustments section of the worksheet the balance of Prepaid Advertising in the Adjusted Trial Balance section of the worksheet is a $1050 credh. Therefore, option B is correct.
What is worksheet ?The worksheet is an accounting technique that integrates accounting information for classification and modification. Prior to the creation of financial statements, the worksheet's primary goal is to confirm the veracity of accounting data.
Cells in a worksheet (sometimes referred to as a spreadsheet) can be used to enter and compute data. Columns and rows have been used to arrange the cells. A workbook is where a worksheet is always kept. Many worksheets can be found in a workbook. Consider it a book.
In its most basic sense, a worksheet is just a piece of paper that is used for working. They are frequently used in school, finance, and tax and may be to complete a task, log, or accompany work.
Thus, option B is correct.
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A country is said to have a _______ exchange rate when the government keeps the exchange rate against other currencies at or near a particular target, while a country is said to have a _______ exchange rate when the rate is allowed to move with the market. a. fixed, fixed b. Floating, floating c. flat, flexible d. stable, free market e. static, variable
Answer:
Fixed
Explanation:
The government keeps the exchange rate FIXED the the same rate.
Economic conditions are a ______ predictor of U.S. presidential election outcomes. a. fair b. poor c. volatile d. good
Answer: d. good
Explanation:
Economic conditions in the U.S. directly affect the citizenry and so they will act to vote for a person who will either bring about better conditions if conditions are currently bad, or the incumbent if conditions are good.
If economic conditions are not so great, the person who will be voted for is probably the person who promised more to the people in the way of combating the poor economic performance.
So yes, economic conditions are a good predictor of U.S. presidential election outcomes.
Ulrica wants to initiate a suit against Valley Farms by filing a complaint. The complaint should include
Answer:
the facts establishing Ulrica's basis for relief
Explanation:
A relief is a term used in legal proceedings or judicial process to describes the standards in which the court of law rules on either right, penalty or ensure previous court order stands, for the purpose of ensuring compensation is made for unlawful act meted out on people or party to the dispute.
Hence, in this case, Ulrica's complaint should include the facts establishing his basis for relief
Which of the following affects the wage a firm is willing to pay its workers?
A. The productivity of workers.
B. Consumer demand for the goods and/or services that the firm creates.
C. The amount of fringe benefits the firm is required by law to pay.
D. The level of payroll taxes the firm must pay.
E. All of the above affect the wage a firm is willing to pay its workers.
Answer: E. . All of the above affect the wage a firm is willing to pay its workers
Explanation:
The wage a firm is willing to pay its workers is affected by:
• The productivity of workers.
• Consumer demand for the goods and/or services that the firm creates.
• The amount of fringe benefits the firm is required by law to pay.
• The level of payroll taxes the firm must pay.
It should be noted that when there's increase in productivity and rise in demand for a good by consumers, companies will be willing to pay more for their workers.
Likewise a decrease in tax and fringe benefits affects companies paying ability.
The process of first creating and then developing and strengthening capabilities internally
A. is a one-step process that centers around properly training and empowering employees to
B. requires first developing the ability to do something, however imperfectly or inefficiently perform their assigned activities in a tightly-prescribed manner developed by the company's foremost technical experts second, translating this ability into a tried-and-true competence and/or capability by learning to do the activity consistently well and at an acceptable cost, and then continuing to polish, refine, and sharpen their performance of the competence or capability, striving not just for ongoing improvements but, ultimately, for best-in-industry or best-in-world proficiency
C. entails organizing a group of employees with the needed know-how and expertise intoa single department, providing departmental members with thgmtools and training needed to learn the desired competence/capability, informing the department of the target levels of proficiency and cost that the company needs, and then motivating departmental members with an attractive package of rewards and incentives if they meet or beat the proficiency-cost targets
D. can be shortcut by weeding out underperforming employees, replacing them with people having stronger skills sets and know-how, providing the new personnel with clear and detailed instructions on how to perform the desired capability, supervising their efforts, and having them repeat the activity a sufficient number of times to polish and sharpen their proficiency levels
E. stands a better chance of succeeding if a company creates competence teams and capability teams, provides team members with first-rate training and adequate resources, and empowers the team members to exercise their creativity and ingenuity to become proficient in performing their assigned competence/capability
Answer:
B. requires first developing the ability to do something, however imperfectly or inefficiently perform their assigned activities in a tightly-prescribed manner developed by the company's foremost technical experts second, translating this ability into a tried-and-true competence and/or capability by learning to do the activity consistently well and at an acceptable cost, and then continuing to polish, refine, and sharpen their performance of the competence or capability, striving not just for ongoing improvements but, ultimately, for best-in-industry or best-in-world proficiency
Explanation:
If a company chooses to develop it's competencies and capabilities internally and not externally by maybe choosing to outsource experts or merging or collaborating with companies with required competence and expertise, then they would have to follow through with the process of developing and nurturing internal capability and competencies. To proceed with internal competence, a company would need to hire experts if there are none in the company, these experts would train staff who follow through with the process in the option chosen above.
"PDQ Corporation has declared a rights offering to stockholders of record. The company has 5,000,000 shares outstanding and is selling an additional 1,000,000 shares via the rights offer. Which statements are TRUE regarding a customer who owns 500 shares of PDQ stock?"
Answer: C. II and III
Explanation:
There are 5,000,000 shares of PDQ Corporation as of when they declared the rights offering. This means that every share will get a right to buy stock.
However, as only 1,000,000 shares are being offered per the 5,000,000 shares outstanding it means that one stock may be purchased for every 5 rights.
A customer who owns 500 shares will therefore get 500 rights.
However with one stock up for sale per 5 rights they will receive the opportunity to buy;
= 500/5
= 100 shares
Baldwin has an asset turnover of 1.55 (Asset Turnover = Sales/Assets). That means:________.
1. Every $1.00 of assets in the firm generates $1.55 of profit.
2. Every $1.55 of profit in the firm comes from each $1.00 of sales.
3. Every $1.55 of assets in the firm generates $1.00 of sales.
4. Each $1.00 of assets in the firm generates $1.55 of sales revenue.
Answer:
4. Each $1.00 of assets in the firm generates $1.55 of sales revenue.
Explanation:
Given that
The asset turnover ratio is 1.55 times
Also, it could be calculated by applying the following formula
Asset turnover ratio is
= Sales ÷ Average assets
In this the comparison is made for generating the sales by considering the assets
Therefore in the given case, the last option is correct and hence the same is to be considered
g Discuss the benefits and pitfalls of using social media within businesses and if you think it is ethical for business to fire employees for personal use of social media. How can you monitor and control your own social media activities to prevent such a professional conflict
Explanation:
The use of social media within companies can generate some essential benefits for organizations, if social media are used in a professional way to promote business, they can generate greater interaction and relationship building with the potential audience that helps a lot in increasing the value and positioning of a company in the market.
However, the personal use of social media in the workplace, can generate significant conflicts, such as idleness, loss of productivity, delay in the delivery of tasks, etc.
When judging whether it is ethical or not for companies to fire employees for personal use of social media, the set of company policies should be considered, if there is a well-established rule about banning the use of social media during working hours and the employee does not comply after being warned, then the dismissal was not carried out unethically.
Therefore, the ideal is that the personal use of social media should be carried out only during free time if allowed, and always complying with the set of policies and procedures of each company.
Michael can produce the following combinations of x and Y: 10X and 10Y, 5X and 15Y, and OX and 20Y combinations of X and Y: 100X and 20Y, 50X and 30Y, or OX and Vernon can produce the following 40Y. It follows that:_______
a. Michael has the comparative advantage in producing X and Vernon has the comparative advantage in producing Y
b. Michael has the comparative advantage in producing Y and Vernon has the comparative advantage in producing X.
c. Neither Michael nor Vernon has a comparative advantage in producing X
d. Neither Michael nor Vernon has a comparative advantage in producing Y.
e. There is not enough information to answer the question.
Answer:
b. Michael has the comparative advantage in producing Y and Vernon has the comparative advantage in producing X.
Explanation:
Given that there are the following combinations that names x and y
As it can be seen from the above combinations that Michael has the comparative benefit over the Y that indicates the less opportunity cost while on the other hand side Vernon has the comparative benefit over the X that indicates the opportunity cost
hence, the correct option is B.
The implication of efficient capital markets and a lack of superior analysts have led to the introduction of
Answer: index funds
Explanation:
The implication of efficient capital markets and a lack of superior analysts have led to the introduction of index fund.
Capital market is a market whereby the buyers and sellers have to engage in the trading of financial securities such as stocks, bonds, etc.
An index fund is simply a form of mutual fund that has a portfolio that was constructed in order to track and also match components of the index of the financial market. An index fund provide low operating expenses, broad market exposure, and low portfolio turnover.
If the nominal interest rate per year is 10% and the inflation rate is 4%, the real rate of interest is closest to
Answer:
Real interest rate= 0.06 = 6%
Explanation:
Giving the following information:
Nominal interest rate= 10%
Inflation rate= 4%
The real interest rate is the result of deducting from the nominal interest rate the inflation rate. Inflation has the opposite effect than the interest rate on the value of money through time.
Real interest rate= nominal interest rate - inflation rate
Real interest rate= 0.10 - 0.04
Real interest rate= 0.06
Tim purchased a bounce house one year ago for $6,500. During the year it generated $4,000 in cash flow. If Time sells the bounce house today, he could receive $6,100 for it. What would be his rate of return under these conditions?
Answer:
Tim's rate of return under these conditions would be 55.38%.
Explanation:
Rate of return refers to the income realized or to be realized from an investment expressed as a proportion of the cost of that investment.
For Time, his rate of return can be calculated using the rate of return formula as follows:
Rate of return = Net return / Purchase price .................... (1)
Where;
Rate of return = ?
Net return = Total realizable amount - Purchase price .......... (2)
Purchase price = $6,500
Total realizable amount = Cash flow generated + Amount to realize if sold = $4,000 + $6,100 = $10,100
Substitute the relevant values into equation (2), we have:
Net return = $10,100 - $6,500 = $3,600
Substitute the relevant values into equation (1), we have:
Rate of return = $3,600 / $6,100 = 0.5538, or 55.38%
Therefore, his rate of return under these conditions would be 55.38%.
Answer:
55.38%
Explanation:
Tim purchased a bounce house one year ago for $6,500
During the year it generated a cash flow of $4,000
If Tim sell the bounce house today, he would receive $6,100 for it
Therefore the rate of return under this condition can be calculated as follows.
= $6,100-$6,500+$4000/$6,500
= $3,600/$6,500
= 0.5538×100
= 55.38%
Hence the rate of return under this condition is 55.38%
Which decision-making models best describe how decision-making takes place in the research and development laboratory of a major drug company?
Answer:
Garbage-can model
Explanation:
The decision-making models that best describe how decision-making takes place in the research and development laboratory of a major drug company is the Garbage-can model, this is because the research and development laboratory is a complex and unstable environment
decisions taken in a research laboratory are mainly unpredictable and uncertain as most solution are turned in problems first before another solution can be created
Hadley, a business researcher, believes that organizations will have to spend a lot of money on employee health care in the future. Her colleague Owen argues that organizations will not have to increase their spending on employee health care benefits. Which statement weakens Owen's argument
Answer: A. The fastest-growing share of the workforce is at least 55 years old.
Explanation:
The options to the question are:
A. The fastest-growing share of the workforce is at least 55 years old.
B. The fastest-growing age group is workers 16-25, who are prone to having accidents.
C. The largest proportion of the labor force is expected to be in the 16- to 25-year age group.
D. The total cost of labor in the United States will decrease considerably in the near future.
E. The labor force is expected to grow at a greater rate by 2026 than at any other time in U.S. history.
From the question, we are informed that Hadley, a business researcher, believes that organizations will have to spend a lot of money on employee health care in the future while Owen argues that organizations will not have to increase their spending on employee health care benefits.
The statement that weakens Owen's argument is that the fastest-growing share of the workforce is at least 55 years old. This simply means there are more old people incthe the workforce and that means there'll be more tendency for them to go to hospitals when ill compared to youths who'll be stronger.
g The following facts are known: • The total pounds needed for production are 2 times the units to be produced. • The desired ending direct materials inventory is 20% of the total pounds needed for production. • The beginning direct materials inventory is equal in number to 10% of the units to be produced. • Cost per pound is $5. • Total cost of the direct materials purchases is $1,035,000. Prepare a direct materials budget for the period.
Answer and Explanation:
The Preparation of direct material budget is shown below:-
Direct Material budget
Particulars Amount
Units to be produced $90,000 Y
Material per unit 2
Total pounds needed for
production M $180,000 2Y
Add: Desired ending Direct
Material Inventory 20% $36,000 (.2 × 2Y = .4Y)
Total Material requirement $216,000 (2.4Y )
Less: beginning Raw material
Inventory $9,000 (.1Y)
Material to be purchased
Account $207,000 (2.3Y)
Cost per pound C $5
Total cost of direct Material
Purchases A $1,035,000
2Y + .4Y - .1Y = $207,000
Y = $207,000 ÷ 2.3 $90,000
The Total cost of direct Material is $90,000.
"Direct Material budget"The Preparation of direct material budget is shown below:-
Production
Production= Units to be produce*Amount
Production=90000*2
Production=1,80,000
Direct Material
Inventory = Production* 20%
Inventory =180000*20%
Inventory =$36,000
Total Material requirement =$216,000
Less: beginning Raw material
Inventory $9,000
Material to be purchased =2,07,000
Total cost of direct Material
Total cost of direct Material=Material to be purchased*Cost per pound
Total cost of direct Material=$207,000*$5
Total cost of direct Material= $1,035,000
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Programs that award certificates that can have in securing jobs are called: A: high-school diploma programs B: secondary school programs C: vocational or technical education programs D: internships or on-the-job training
Answer:
C: vocational or technical education programs
Explanation:
A vocational/technical training program often results in certification useful for obtaining a job.
__
The other educational programs listed may be helpful, but typically don't offer skill certification.
Answer:
vocational or technical education programs
Explanation:
A corporation issued 7000 shares of its $10 par value common stock in exchange for land that has a market value of$82,000. The entry to record this transaction would include:_______
a) A credit to Land for $70,000.
b) A debit to Land for $7oooo.
c) A credit to common stock for $82,000.
d) A debit to Common Stock for $70,000.
e) A credit to Contributed Capital in Excess of Par value. Common Stock for $12,000.
Answer:
Option e is the correct answer.
Explanation:
The issuance of common stock in exchange of land would mean a debit to the asset account for land at the market value for the land which is $82000. The other side of the transaction would contain two accounts- a credit to the Common Stock account and a credit to the Paid in/Contributed Capital in excess of Par value, Common Stock.
The value of Common Stock will be = 7000 * 10 = 70000
The remaining of 82000 - 70000 = 12000 will be credited to the contributed capital in excess of par value account.
The entry to record this transaction will be,
Land 82000 Dr
Common Stock 70000 Cr
Contributed Capital in excess of par value-Common Stock 12000 Cr
The Soda Pop Shoppe has adopted a policy of increasing its annual dividend at a constant rate of 1.35 percent annually. The company just paid its annual dividend of $1.84. What will the dividend be nine years from now
Answer:
$2.08
Explanation:
Calculation for what will the dividend be nine years from now
Using this formula
Dt-1=Div1(1+g)^t
Where,
Dt-1=9years-1
Div1=$1.84
(1+g)=(1+0.0135
t= 9 years
Let plug in the formula
D9-1= $1.84(1+0.0135)^9
D8=$1.84(1.0135)^9
D8=$1.84(1.1282)
D8 = $2.08
Therefore what will the dividend be nine years from now will be $2.08
A food handler washes hands after using the restroom is an example of ?
If sales are $820,000, variable costs are 55% of sales, and operating income is $260,000, what is the contribution margin ratio?
Answer:
45%
Explanation:
Contribution margin ratio = Contribution margin / Sales
Where;
Contribution margin = Sales - Variable cost
= $820,000 - $451,000(55% of sales)
= $369,000
Contribution margin ratio = $369,000 / $820,000 × 100
= 45%
Circumstances) People, constraints, and consumption are some of the key factors that will impact on your critical thinking and shape your ambitions. True False
Answer:
True
Explanation:
Critical thinking is the thinking that deals in analyzing the facts so that the judgment could be created. It involves various things like rationality, non-biased, proof-based on facts provided, etc
Here the factors that directly impact the critical thinking are people, constraints and the consumption this results in shaping your goals and objectives you made
hence, the given statement is true
A 20-year maturity bond with par value of $1,000 makes semiannual coupon payments at a coupon rate of 8%. Find the bond equivalent and effective annual yield to maturity of the bondif the bond price is:a. $950b. $1,000c. $1,050
Answer:
a. $950
yield to maturity = YTM = {40 + [(1,000 - 950)/40]} / [(1,000 + 950)/2] = 41.25 / 975 = 4.23% x 2 = 8.46%
effective yield = [1 + (r/n)]ⁿ - 1 = [1 + (0.08/2)]² - 1 = 8.16%, measures the coupon yield
since the effective yield is lower than the YTM, the bond is sold at a discount
b. $1,000
YTM = 8%, since the bond is sold at par
effective yield = [1 + (r/n)]ⁿ - 1 = [1 + (0.08/2)]² - 1 = 8.16%, measures the coupon yield
since the bond yield semiannual coupons, the effective yield is slightly higher than the YTM
c. $1,050
yield to maturity = YTM = {40 + [(1,000 - 1,050)/40]} / [(1,000 + 1,050)/2] = 38.75 / 1,025 = 3.78% x 2 = 7.56%
effective yield = [1 + (r/n)]ⁿ - 1 = [1 + (0.08/2)]² - 1 = 8.16%, measures the coupon yield
since the effective yield is higher than the YTM, the bond is sold at a premium