BU 423 Searchable PDF 1-200
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Wilfrid Laurier University *
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Course
423
Subject
Finance
Date
Jul 2, 2024
Type
Pages
200
Uploaded by BrigadierRiver14767
CH1
Study online at https://quizlet.com/_5bi54j
Aone-yearforwardcontractisanagree-
mentwhere
A. One side has the right to buy an asset for a certain price in one year's time.
B. One side has the obligation to buy an asset for a certain price in one year's time.
C. One side has the obligation to buy an asset for a certain price at some
time during the next year.
D. One side has the obligation to buy an asset for the maret price in one
year's time.
B. One side has the obligation to buy an asset for a certain price in one year's time.
Which of the following is true
A. $hen a CBO' call option onIBM is ex-
ercised" IBM issues more stoc
B. An American option can be exercised at any time during its life
C. An call option will always be exercised at maturity if the underlying
asset price is greater than the strie price
D. A put option will always be exercised at maturity if the strie price is
greater than the underlying asset price.
A. $hen a CBOE call option onIBM is exercised" IBM issues more stoc
1 / 1
CH2
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Which of the following is true
A. Both forward and futures contracts are traded on exchanges.
B. Forward contracts are traded on ex-
changes, but futures contracts are not.
C. Futures contracts are traded on ex-
changes, but forward contracts are not.
D. Neither futures contracts nor forward contracts are traded on
exchanges.
C. Futures contracts are traded on ex-
changes, but forward contracts are not.
Which of the following is NOT true
A. Futures contracts nearly always last longer than forward contracts
B. Futures contracts are standardized; forward contracts are not.
C. Delivery or final cash settlement usu-
ally takes place with forward
contracts; the same is not true of futures contracts.
D. Forward contracts usually have one specified delivery date; futures
contract often have a range of delivery dates.
A. Futures contracts nearly always last longer than forward contracts
In the corn futures contract a number of different types of corn can be delivered (with price adjustments specified by the exchange) and there are a number of different delivery locations. Which of the following is true
A. This flexibility tends increase the fu-
tures price.
B. This flexibility tends decrease the fu-
tures price.
C. This flexibility may increase and may decrease the futures price.
D. This flexibility has no effect on the futures price
B. This flexibility tends decrease the fu-
tures price.
The party with the short position choos-
es between the alternatives. The alterna-
tives therefore make the futures contract more attractive to the party with the short position. The lower the futures price the less attractive it is to the party with the short position. The benefit of the alter-
natives available to the party with the short position is therefore compensated for by the futures price being lower than it would otherwise be.
1 / 6
CH2
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A company enters into a short futures contract to sell 50,000 units of a com-
modity for 70 cents per unit. The initial margin is $4,000 and the maintenance margin is $3,000. What is the futures price per unit above which there will be a margin call?
A. 78 cents
B. 76 cents
C. 74 cents
D. 72 cents
D. 72 cents
There will be a margin call when more than $1000 has been lost from the mar-
gin account so that the balance in the account is below the maintenance mar-
gin level. Because the company is short, each one cent rise in the price leads to a loss or 0.01×50,000 or $500. A greater than 2 cent rise in the futures price will therefore lead to a margin call. The fu-
ture price is currently 70 cents. When the price rises above 72 cents there will be a margin call.
A company enters into a long futures contract to buy 1,000 units of a com-
modity for $60 per unit. The initial margin is $6,000 and the maintenance margin is $4,000. What futures price will allow $2,000 to be withdrawn from the margin account?
A. $58 B. $62 C. $64 D. $66
B. $62 Amounts in the margin account in excess of the initial margin can be withdrawn. Each $1 increase in the futures price leads to a gain of $1000. When the fu-
tures price increases by $2 the gain will be $2000 and this can be withdrawn. The futures price is currently $60. The answer is therefore $62.
One futures contract is traded where both the long and short parties are clos-
ing out existing positions. What is the resultant change in the open interest?
A. No change
B. Decrease by one
C. Decrease by two
D. Increase by one
B. Decrease by one
Who initiates delivery in a corn futures contract
A. The party with the long position
B. The party with the short position
C. Either party
D. The exchange
B. The party with the short position
2 / 6
CH2
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You sell one December futures contracts when the futures price is $1,010 per unit. Each contract is on 100 units and the initial margin per contract that you pro-
vide is $2,000. The maintenance margin per contract is $1,500. During the next day the futures price rises to $1,012 per unit. What is the balance of your margin account at the end of the day?
A. $1,800
B. $3,300
C. $2,200
D. $3,700
B. $3,300
The price has increased by $2. Because you have a short position you lose 2×100 or $200. The balance in the margin ac-
count therefore goes down from $3,500 to $3,300.
A hedger takes a long position in a fu-
tures contract on a commodity on No-
vember 1, 2012 to hedge an exposure on March 1, 2013. The initial futures price is $60. On December 31, 2012 the fu-
tures price is $61. On March 1, 2013 it is $64. The contract is closed out on March 1, 2013. What gain is recognized in the accounting year January 1 to December 31, 2013? Each contract is on 1000 units of the commodity.
A. $0
B. $1,000
C. $3,000
D. $4,000
D. $4,000
Hedge accounting is used. The whole of the gain or loss on the futures is therefore recognized in 2013. None is recognized in 2012. In this case the
gain is $4 per unit or $4,000 in total.
A speculator takes a long position in a futures contract on a commodity on No-
vember 1, 2012 to hedge an exposure on March 1, 2013. The initial futures price is $60. On December 31, 2012 the fu-
tures price is $61. On March 1, 2013 it is $64. The contract is closed out on March 1, 2013. What gain is recognized in the C. $3,000
In this case there is no hedge account-
3 / 6
CH2
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accounting year January 1 to December 31, 2013? Each contract is on 1000 units of the commodity.
A. $0
B. $1,000
C. $3,000
D. $4,000
ing. Gains or losses are accounted for as they are accrued. The price per unit increases by $3 in 2013. The total gain in 2013 is therefore $3,000.
.The frequency with which futures mar-
gin accounts are adjusted for gains and losses is
A. Daily
B. Weekly C. Monthly D. Quarterly
a
Margin accounts have the effect of
A. Reducing the risk of one party regret-
ting the deal and backing out B. Ensuring funds are available to pay traders when they make a profit C. Reducing systemic risk due to col-
lapse of futures markets
D. All of the above
D. All of the above
Initial margin requirements dramatically reduce the risk that a party will walk away from a futures contract. As a result they reduce the risk that the exchange clear-
ing house will not have enough funds to pays profits to traders. Furthermore, if traders are less likely to suffer losses because of counterparty defaults there is less systemic risk.
Which entity in the United States takes primary responsibility for regulating fu-
tures market?
A. Federal Reserve Board
B. Commodities Futures Trading Com-
mission (CFTC) C. Security and Exchange Commission (SEC)
D. US Treasury
B. Commodities Futures Trading Com-
mission (CFTC)
For a futures contract trading in April 2012, the open interest for a June 2012 contract, when compared to the open in-
4 / 6
CH2
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terest for Sept 2012 contracts, is usually
A. Higher
B. Lower
C. The same
D. Equally likely to be higher or lower
A. higher
The contracts which are close to maturity tend to have the highest open interest. However, during the maturity month itself the open interest declines.
Clearing houses are
A. Never used in futures markets and sometimes used in OTC markets
B. Used in OTC markets, but not in fu-
tures markets
C. Always used in futures markets and sometimes used in OTC
markets
D. Always used in both futures markets and OTC markets
C. Always used in futures markets and sometimes used in OTC
A haircut of 20% means that
A. A bond with a market value of $100 is considered to be worth $80 when used to satisfy a collateral request
B. A bond with a face value of $100 is considered to be worth $80 when used to satisfy a collateral request
C. A bond with a market value of $100 is considered to be worth $83.3
when used to satisfy a collateral request
D. A bond with a face value of $100 is considered to be worth $83.3
when used to satisfy a collateral request
A. A bond with a market value of $100 is considered to be worth $80 when used to satisfy a collateral request
A haircut is the amount the market price of asset is reduced by for the purposes of determining its value for collateral pur-
poses
With bilateral clearing, the number of agreements between four dealers, who trade with each other, is
A. 12 B. 1 C. 6 D. 2
C. 6
5 / 6
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Related Questions
Ma
ic Calendar My MCBS Library English (en) -
Assets acquired in a lump-sum purchase are valued based on:
a. Their assessed valuation.
b. Their relative fair values.
c. The present value of their future cash flows.
d. Their cost plus the difference between their cost and fair values.
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What is the answer to the question I uploaded
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Q.6
An asset will cost $20 000 when purchased this year. It is further expected to have a salvage value of $2 000 at the end
of its five year depreciable life. Determine:
The depreciation and the book value for period 2 (using Straight Line)
The depreciation and book value for period 4 (using the sinking fund method) with an interest rate of 10%,
compounded annually.
The depreciation and the book value for period 3 (using the declining balance method) by assuming 0.2 for (d).
The depreciation and book value for period 2 (using the sum-of-the-years-digits method).
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Check Progress
QUESTION
FINANCING AND SETTLEMENT » FINANCING LEGISLATION
32 c
When a buyer goes in to apply for a loan on a new first mortgage, what must the lender give to the buyer?
Glossary Terms
Mortgage,
ANSWERS
EXPLANATION
A > The broker's commission amount
B > An estimate of the buyer's closing costs
C> An estimate of the seller's closing costs
D> A three day right of rescission document on the buyer's loan
CONN ESTW ITL CI
SCEPTR
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The capitalized Čost A of an asset is given by
A= Ao t c(t) e-** dt
%3D
Where
A is He onginal investment
t is the time in years
r3 the anneal interest rate Gn decimal form) compounded Coine ously, and
A) is the annual
Cast of mantenance Cin dollacs)
a) Find the capitalized Cust of an asset for n=5 years when
A = $ 140,000
c(t) = $ 12,000 t ,
T:.04.
%3D
Cost
b) Find the capitalized cosp of an asset forever
cit)= $12,000 t,
r:.04.
Ao = $
140,000
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Saved
☆ 009
Help
Save & Exit Submit
To calculate a gain or loss on the sale of an asset, the proceeds from the sale are reduced by which of the following?
Multiple Choice
О
Tax basis of the property
Selling expenses
О
Amount realized
О
Tax basis of the property and selling expenses
All of these choices are correct.
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$100,000 × 4.79079** = $479,079 Lease Payments Right-of-Use Asset - Present value of an annuity due of $1:
n = 6,i = 10% How to use financial calculator to find the right of use asset?
C
$100,000 x 4.79079* =
Lease Payments
$479,079
Right-of-Use Asset
*Present value of an annuity due of $1: n=6, i=10%
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$100,000 × 4.79079** = $
479,079 Lease Payments Right
- of Use Asset - Present value
of an annuity due of $1:
6,i=10% How to use
financial calculator to find the
right of use asset?
$100,000 x 4.79079* =
Lease Payments
$479,079
Right-of-Use Asset
Present value of an annuity due of $1:n-6/-10%
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Subject:
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Please solve the present value of the lease alternative
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The fair value of an asset stood at OMR 300 and cost to sell these assets in the market is OMR 40, The preset value of future cash inflows from the
asset is OMR 270. What is the recoverable amount?
O a. OMR 300.
O b. OMR 40.
OC OMR 270.
O d. OMR 260.
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Question: 1533 Ontario St SE, Olympia, WA 98501 Purchase price = Today's Zillow Zestimate ...
1533 Ontario St SE, Olympia, WA 98501
Purchase price = Today's Zillow Zestimate 521500You will pay a down payment = 15% of purchase price 78225Mortgage payments = 30 year fixed loan at 3.8% interest (Loan = 85% of purchase price) 2077Fees to purchase the home = 5% of the purchase price 26075Property taxes are paid all 5 years at the 2019 property tax rate 17890Insurance for the home is $1,000/year 5000The selling price = purchase price * (1+ (% Value (price) estimate change of the last 5 years) (note: this is different process than what is outlined in the video)
Fees to sell the home = 5% of the selling price.
I need help finding the selling price of this home.
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Module4_Lease.pdf x
16 / 19
100%
Problem 14-19 (IFRS)
Liza Company is a car dealer. On January 1, 2020, the entity
entered into a finance lease with a customer under which
the customer would pay P200,000 on January 1 each year for
5 years, commencing in 2020.
The cost of the car is P600,000 and the cash selling price was
P750,000. The entity paid legal fees of P20,000 to a law firm
in connection with the arrangement of the lease.
What amount of gross profit on sale should be recognized
for the year ended December 31, 2020?
a. 150,000
b. 130,000
20,000
d.
c.
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Only typed answer
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Fair value measurement
Burnham Co. has an asset that is sold in two different active markets. Price
information from the two markets is as follows:
Market #1
Market #2
Market price
Transaction costs
Transport costs
270
265
6.
10
15
Requirements:
a. If Market #2 is the principal market for the asset, how much is the fair
value?
b. If neither market is the principal market for the asset, how much is the
fair value?
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The amount of money that you are willing to pay from the total price of the asset is called;
O a. Total of monthly payment
O b. Deferred payment
O c. Down payment
O d. Total of monthly payment plus down payment
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Subject-Acounting
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Answer all questions
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Asap
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N3
As a loan is paid down the homeowner aspires to having a market value which is more than the price that he paid for the property. What best describes the interest or value left after all liens and encumbrances have been paid?
Avulsion
Equity
Leverage
Tax shelter
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Given the following information from an amortization table, compute the interest expense, discount amortization, and the carrying value for the next line of the table, rounding your answer to the nearest dollar:
6% Cash
Interest
$42,000
7% Effective
Discount
Carrying
Value
Interest
$47,714
Amortization
$5,714
$687,344
A. Interest Expense $47,714; Discount Amortization $5,714; Carrying Value $687,344
B. Interest Expense $48,114; Discount Amortization $5,714; Carrying Value $681,630
○ C. Interest Expense $48,114; Discount Amortization $6,114; Carrying Value $693,458
OD. Interest Expense $47,714; Discount Amortization $5,714; Carrying Value $681,630
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A Moving to another question will save this response.
Question 3
Which the following is used to find MACRS depreciation?
O Depreciable base of the asset
O Each of the choices is correct
O The life of the asset as determined by tax code
O A percentage of the depreciable base as determined by tax code
AMoving to another question will save this response.
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tab
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caps lock
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What type of policy covers the cost of rebuilding or repairing property based on current construction costs?
O actual cash value
O depreciated asset value
O replacement cost
O net cash cost
QUESTION 9
What process do insurance companies use to decide whether to sell a plicy and at what rate?
O appraisal
O undervriting
O escrow
assessment
QUESTION 10
What service do insurance companies use to review the claim history for a property?
O RECS
O CHRS
O FACA
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B- An investor bought the land with price 4000000 $ and sell it after 6 years with
price 6500000 $,determine the internal rate of return of investment &it's
acceptable or not ?
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Which of the following statements is FALSE?
TO OXO OXO 0:00:00 T ODOXOOX
1600
Select one:
O a.
In a perfect market, the cost of leasing and then purchasing the asset is higher than the cost of borrowing to
purchase the asset.
O b.
Because we are getting the entire asset when we purchase it with the loan, the loan payments usually are
higher than the lease payments.
O c.
The amount of the lease payment will depend on the purchase price, the residual value, and the appropriate
discount rate for the cash flows.
O
d. With a standard loan we are financing the entire cost of the asset; with a lease we are financing only the cost
of the economic depreciation of the asset during its life.
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- Ma ic Calendar My MCBS Library English (en) - Assets acquired in a lump-sum purchase are valued based on: a. Their assessed valuation. b. Their relative fair values. c. The present value of their future cash flows. d. Their cost plus the difference between their cost and fair values.arrow_forwardWhat is the answer to the question I uploadedarrow_forwardPlease helparrow_forward
- Q.6 An asset will cost $20 000 when purchased this year. It is further expected to have a salvage value of $2 000 at the end of its five year depreciable life. Determine: The depreciation and the book value for period 2 (using Straight Line) The depreciation and book value for period 4 (using the sinking fund method) with an interest rate of 10%, compounded annually. The depreciation and the book value for period 3 (using the declining balance method) by assuming 0.2 for (d). The depreciation and book value for period 2 (using the sum-of-the-years-digits method).arrow_forwardCheck Progress QUESTION FINANCING AND SETTLEMENT » FINANCING LEGISLATION 32 c When a buyer goes in to apply for a loan on a new first mortgage, what must the lender give to the buyer? Glossary Terms Mortgage, ANSWERS EXPLANATION A > The broker's commission amount B > An estimate of the buyer's closing costs C> An estimate of the seller's closing costs D> A three day right of rescission document on the buyer's loan CONN ESTW ITL CI SCEPTRarrow_forwardHelp pleasearrow_forward
- The capitalized Čost A of an asset is given by A= Ao t c(t) e-** dt %3D Where A is He onginal investment t is the time in years r3 the anneal interest rate Gn decimal form) compounded Coine ously, and A) is the annual Cast of mantenance Cin dollacs) a) Find the capitalized Cust of an asset for n=5 years when A = $ 140,000 c(t) = $ 12,000 t , T:.04. %3D Cost b) Find the capitalized cosp of an asset forever cit)= $12,000 t, r:.04. Ao = $ 140,000arrow_forwardSaved ☆ 009 Help Save & Exit Submit To calculate a gain or loss on the sale of an asset, the proceeds from the sale are reduced by which of the following? Multiple Choice О Tax basis of the property Selling expenses О Amount realized О Tax basis of the property and selling expenses All of these choices are correct.arrow_forward$100,000 × 4.79079** = $479,079 Lease Payments Right-of-Use Asset - Present value of an annuity due of $1: n = 6,i = 10% How to use financial calculator to find the right of use asset? C $100,000 x 4.79079* = Lease Payments $479,079 Right-of-Use Asset *Present value of an annuity due of $1: n=6, i=10%arrow_forward
- $100,000 × 4.79079** = $ 479,079 Lease Payments Right - of Use Asset - Present value of an annuity due of $1: 6,i=10% How to use financial calculator to find the right of use asset? $100,000 x 4.79079* = Lease Payments $479,079 Right-of-Use Asset Present value of an annuity due of $1:n-6/-10%arrow_forwardSubject:arrow_forwardPlease solve the present value of the lease alternativearrow_forward
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