At December 31, 2017, Gregson Inc. has these data on its security investments: Security Cost Fair Value 12/31/17 Trading $ 280,000 $344,000 250,000 Non-trading 274,000 If the non-trading securities are held as long-term investments, which of the following will be recorded to adjust the securities to fair value? O a. Fair Value Adjustment-Trading... 64,000 Unrealized Gain-Income. 64,000 Unrealized Gain or Loss-Equity.. 24,000 Fair Value Adjustment-Non-Trading. 24,000 24,000 Unrealized Gain-Income.. Ob. Unrealized Loss-Income. Securities. Oc. Securities d. Unrealized Gain-Income Unrealized Gain-Income.. ..40,000 40,000 4,000 ..28,000 64.000
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- 29. M Company began operations on January 1, 2013. The following information pertains to the portfolio of equity securities classified as held for trading on December 31, 2013: Aggregate cost Aggregate market value Aggregate lower of cost or market value applied to each security 360,000 320,000 300,000 What amount should be reported as unrealized loss in the income statement for 2013? a. 40,000 b. 60,000 c. 20,000 d. 0Fair value adjustment for available-for-sale investments M. Jones Inc. purchased the following available-for-sale securities during 20Y5, its first year of operations: Issuing Company Arden Enterprises Inc. French Broad Industries Inc. Pisgah Construction Inc. $150,000 66,000 104,000 $320,000 The fair value of the various available-for-sale securities on December 31, 20Y5, was as follows: Fair Value, Dec. 31, 20Y5 Issuing Company Arden Enterprises Inc. French Broad Industries Inc. Cost Pisgah Construction Inc. $168,000 72,000 97,000 $337,000Question (a) An investor purchased the share of Neptune Corp on 1 Jan 2017 and held the investment until 31 December 2021. Details of Neptune Corp's share price and dividend payout during the period of investment are as follows: Date Share Price 01 jan 2017 8.50 31 Dec 2017 8.80 31 Dec 2018 9.15 31 Dec 2019 9.22 31 Dec 2020 8.87 31 Dec 2021 9.12 Compute: (i) Arithmetic rate of return for 2017, 2018, 2019, 2020 and 2021 separately. (ii) Geometric average rate of return for the entire period of investment from 2017 until 2021. (iii) Logarithmic returns for the entire period of investment from 2017 until 2021. (b) Discuss four differences between investing in stocks and investing in bonds. Dividend 0.30 0.35 0.38 0.22 0.30
- usiness: BUQU 1130: Business Mathematics Page 137 6. [HW] A $25,000, 10% bond redeemable at par on Dec 1, 2028, is purchased on September 25, 2017, to yield 7.6^ compounded semi-annually. Bond interest is payable semi-annually. a) What is the cash price of the bond? b) What is the accrued interest? c) What is the purchase price?Ch 08: Assignment - Risk and Rates of Return Elle nolas a $5,000 portrollo that consists or rOur stocKs. Her investment in eacn stock, as well as each stock's beta, is listed in the following table: Standard Deviation Stock Investment Beta Perpetualcold Refrigeration Co. (PRC) $1,750 0.90 12.00% Zaxatti Enterprises (ZE) 1.70 $1,000 11.00% Western Gas & Electric Co. (WGC) $750 1.10 18.00% Makissi Corp. (MC) $1,500 0.40 25.50% Suppose all stocks in the portfolio were equally weighted Suppose all stocks in Elle's portfolio were equally weighted. Which of these stocks would contribute the Which of these stocks would have the least amount of least market risk to the portfolio? standalone risk? Makissi Corp. Perpetualcold Refrigeration Co. Makissi Corp. Western Gas & Electric Co. Zaxatti Enterprises Zaxatti Enterprises Western Gas & Electric Co O Perpetualcold Refrigeration Co. If the risk-free rate is 7% and the market risk premium is 9%, what is Elle's portfolio's beta and required return?…Question 5: Portfolio Performance Evaluation; International Diversification Your uncle invested $1,000,000 in a portfolio consisting of both equity shares and bonds at the end of 2013. He did not buy nor sell any securities thereafter. The following table provides end of the year market values of the portfolio together with the dividend income and coupon income generated by it for the five years ending in 2018: Year Market value of the I. 2013 2014 2015 2016 2017 2018 (i) (ii) (iii) portfolio $1,000,000 $1,200,000 $1,100,000 $1,350,000 $1,150,000 $1,200,000 Dividend income $110,000 $90,000 $120,000 $80,000 $90,000 Coupon income $50,000 $50,000 $50,000 $50,000 $50,000 Calculate the annual rates of return for the five years ending in 2018. Calculate the arithmetic average return and the geometric average return for the portfolio for the five-year period ending in 2018. Given your answer to (ii) above, which measure of average return is more useful in predicting the future performance of…
- Instructions Last Unguaranteed Financial Inc. purchased the following trading securities during Year 1, its first year of operations: Name Arden Enterprises Inc. French Broad Industries Inc. Pisgah Construction Inc. Total Arden Enterprises Inc. French Broad Industries Inc. Pisgah Construction Inc. Required: Number of Shares Cost 4,800 2,660 1,670 The market price per share for the trading security portfolio on December 31, Year 1, was as follows: Market Price per Share, Dec. 31, Year 1 $34 27 $134,400 60 58,520 106,880 $299,800Available-for-Sale Securities The following are four unrelated situations involving investments in available-for-sale securities: Situation I A portfolio of available-for-sale debt securities with an aggregate fair value in excess of amortized cost includes one particular security whose fair value has declined to less than one-half of its amortized cost. The decline in value is considered to be other than temporary. Situation II The portfolio of available-for-sale debt securities includes securities that have an amortized cost in excess of fair value of 500. The remainder of the portfolio has a net fair value in excess of amortized cost of 1,000. Situation III An available-for-sale debt security, whose fair value is currently less than its amortized cost, is reclassified as a trading security. Situation IV A companys portfolio of available-for-sale securities consists of the bonds of one company. At the end of the prior year, the fair value of the security was 95% of amortized cost, and the effect was properly reflected in an allowance account. However, at the end of the current year, the fair value of the debt security had appreciated to 102% of the amortized cost. Required: Explain the effect on classification, earning value, and earnings for each of the preceding situations.1. Information on the Black PLC fixed income investment portfolio is the following (in EUR): Company A Company B Company C Classification Available for sale Held to maturity Held to maturity Cost 35 000 40 000 53 000 Market value, 31 Dec 2013 39 000 38 000 52 000 Market value, 31 Dec 2014 38 000 37 000 55 000 What is the balance sheet carrying value of the Black PLC investment portfolio as 31.12.2014? The balance sheet carrying value of Black Inc.'s investment portfolio would be higher if which of the securities had been reclassified as held for trading security? Explain why. 2. Cellphone Inc. acquires 50% of Battery AG in 2014 and needs to record investment on its balance sheet. Year ending 2014 Cellphone Inc Battery AG Revenue 1700 1350 EBIT 153 135 Net Income 75 68 Total Assets 1421 1283 Shareholders' equity 735 706 Under which accounting method (full consolidation, proportionate consolidation, equity method) profit margin of Cellphone…
- Fair value of debt and equity securities portfolio of Band Co. is higher than its cost, inspite of the decrease in value of some securities. At year end, the financial vice presidentand the controller of wwww www the company are about to classify this securities portfolio for the first time. The vice president, who wants to increase net income for the year, proposes to classify the securities that have increased in value as trading. He also proposes to classify the equity securities that have decreased in value as available-for-sale and debt securities that have decreased in value as held-to-maturity. The controller, on the other hand, proposes to classify the securities that have decreased in value as trading . He further propeses to classify the equity securities that have increased in value as available-for-sale and the debt securities that have increased in value as held-to-maturity, Based on the fact that the company has been profitable this year, he states that recognizing losses…David Palmer purchased Bond C on January 1, 2014 when Bond C was priced to have a yield to maturity (EAR) of 10.3812891%. David subsequently sold Bond C on January 1, 2016 when it was priced to have a yield to maturity (EAR) of 12.550881%. Assume all interests received were reinvested to earn a rate of return of 3% per quarter (in another investment account). Calculate: i) the current yield, ii) the 2-year capital gains yield and iii) the 2-year total rate of return on investment for David. [Note that this question is NOT asking for average yearly (total) return. Hint: think of total accumulation as FV (Annuity)of coupons and selling priceQuestion 1: In the table below you are given the details of the put and call options on the shares of Fica Limited Expiration Date Exercise Price Call Price (Premium) Put Price (Premium) (Rand) (Rand) (Rand) September 2015 430 41.20 11.05 460 22.50 22.20 490 10.10 39.36 January 2016 430 65.98 27.20 Required 1. Determine the pay-off and profit/loss to an investor who; a) Purchases the September-expiration Fica Ltd.'s call options with an exercise price of R490 if the share pri b) Sells the September-expiration Fica Ltd.'s call options with an exercise price of R490 if the share price at expiration is R400? What if the stock price at expiration is R550? at expiration is R400? What if the share pric expiration is R550?