Answer:
The correct answer is the last option: Involving a third party.
Explanation:
To begin with, the major difference between the terms of negotiation and mediation is that in the last one there is a third party involved that seeks for the most quickly and benefitial deal for the both parties that are discussing, while in the negotiation there is not a third party and the two parties existing seeks for their own benefits, even if that means to harm the other person in the process of getting the best for one of them. That is why that the mediation needs to use a third party that has to be impartial to the situation and only wants the best for the parties in the conflict.
Tamarisk, Inc. had a beginning inventory on January 1 of 293 units of Product 4-18-15 at a cost of $21 per unit. During the year, the following purchases were made.
Mar. 15 780 units at $24 Sept. 4 683 units at $27
July 20 488 units at $25 Dec. 2 195 units at $30
1,950 units were sold. Tamarisk, Inc. uses a periodic inventory system.
Required:
Determine (1) the ending inventory, and (2) the cost of goods sold under each of the assumed cost flow methods (FIFO, LIFO, and average-cost).
Answer:
Tamarisk, Inc.
FIFO LIFO AVERAGE-COST
Ending inventory $13,788 $10,857 $12,303
Cost of goods sold $47,576 $50,507 $49,062
Explanation:
a) Data and Calculations:
Date Transaction Units Unit Cost Total
January 1 Beginning inventory 293 $21 $6,153
Mar. 15 Purchase 780 $24 18,720
July 20 Purchase 488 $25 12,200
Sept. 4 Purchase 683 $27 18,441
Dec. 2 Purchase 195 $30 5,850
Total Goods available 2,439 $61,364
Units sold 1,950
Ending inventory 489
FIFO:
Ending inventory
= 195 at $30 = $5,850
294 at $27 = $7,938
Total 489 = $13,788
Cost of goods sold = Cost of goods available for sale minus Cost of ending inventory = $61,364 - $13,788 = $47,576
LIFO:
Ending inventory:
293 at $21 = $6,153
196 at $24 = 4,704
Total 489 = $10,857
Cost of goods sold = $61,364 - $10,857 = $50,507
Weighted-Average Cost:
Weighted-average cost = Cost of goods available for sale/Units available for sale
= $61,364/2,439 = $25.16
Ending inventory = $12,303 (489 * $25.16)
Cost of goods sold = $49,062 (1,950 * $25.16)
b) The distinguishing factor among these inventory valuation methods is the assumption basis for their computations. FIFO assumes that goods that first come into store are the first to be sold or First-in, First-out. LIFO assumes that goods that are last in the store are the first to be sold, expressed as Last-in, First-out. Lastly, the weighted average method uses the weighted average costs of inventories purchased at different times and prices to compute the cost of each unit.
Granite Enterprises acquired a patent from Southern Research Corporation on January 1, 2021, for $4.1 million. The patent will be used for five years, even though its legal life is 20 years. Rocky Corporation has made a commitment to purchase the patent from Granite for $180,000 at the end of five years. Compute Granite's patent amortization for 2021, assuming the straight-line method is used.
Answer:
the patent amortization expense for the year 2021 is $231,000
Explanation:
The computation of the patent amortization is shown below:
= (Acquired value of the patent - ending value) ÷ legal life
= ($4,800,000 - $180,000) ÷ 20 years
= $231,000
We simply applied the above formula so that the correct value could come
Hence, the patent amortization expense for the year 2021 is $231,000
You have financial control responsibility for a start-up. Under the rules of accounting, assets must equal liabilities plus owner's equity. You have $4,500 in cash and $18,000 in inventory; both are assets. You have a bank loan of $3,200 (liability) and owner's equity of $18,100. How much money do you have that is unaccounted for?
Answer:
Should be 12,000
Reason being since you need to find assets to liabilities and owner's equity therefore you add 4,500 and 18,000 and subtract it to 3,200 and 18,100
Answer:
1200
Explanation: i took the quiz
The two most common types of accounts to manage your money are _________ and __________.
A. principal and savings accounts
B. online banking and checking accounts
C. checking and savings accounts
D. CD's and stocks
Answer:
c, checking and saving accounts
Choose all of the fluctuations in the business cycle that could experience a negative output gap.
A)
expansion
B)
peak
C)
prosperity
D)
recession
E)
trough
Answer :A, D, and E
Explanation:
The right answers on USATestPrep
Expansion, recession, and trough are the fluctuations in the business cycle that could experience a negative output gap. Therefore options A, D, and E are correct.
What is the output gap?The difference between real GDP or actual production and prospective GDP is known as the GDP gap or the output gap, and it is used to measure the present economic situation relative to the business cycle. The production gap is a key macroeconomic policy indicator (in particular in the context of EU fiscal rules compliance).
The GDP gap is a controversial idea, especially because the potential GDP is not an observable metric and is frequently computed from historical GDP statistics, which might result in systemic downward biases.
A chronic, wide production gap has detrimental effects on a nation's labor market, long-term economic potential, and public finances, among other things. First, since production gaps show that employees who would prefer to work are instead idle because the economy is not generating capacity, the labor market will underperform for a longer period of time. An unemployment rate of 7.3% in October 2013 shows the slack in the US job market, compared to an average yearly rate of 4.6% in 2007 when the worst of the crisis hit.
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A manufacturing company had a balance in Finished Goods inventory of $200,000 on 12/31/2011. During 2012, the company transferred $1,000,000 of costs from Work in Process to Finished Goods. A count of inventory at the end of the year revealed a balance in Finished Goods of $400,000 at 12/31/2012. What was Cost of Goods Sold during 2012
Answer:
the cost of goods sold during the year 2012 is $800,000
Explanation:
The computation of the cost of goods sold is shown below;
Costs of Goods Sold during 2012 is
= Transferred from Work in Process + Beginning Inventory - Ending Inventory
= $1,000,000 + $200,000 - $400,000
= $800,000
Hence, the cost of goods sold during the year 2012 is $800,000
Assume you are the CFO of a company that has accumulated a significant amount of cash, well beyond its foreseeable needs. The company’s CEO has asked your opinion about using the cash to repurchase company shares or using the cash to distribute an extraordinary dividend to your shareholders. In a brief memo, explain to the CEO what the pros and cons of each of these are. You may assume your company is a fictitious one and assign to it whatever circumstances you like or you may assume your company is an actual existing corporation. Your memo should include at least two references to published works like books, articles, etc.
Answer:
I believe that the best action is to repurchase stocks.
Paying a large and unexpected dividend will yield an immediate return, but it will also decrease the stock's price. On the other hand, repurchasing stocks will result in lower outstanding stocks and the same cash flows. This will result in higher stock prices. Supposedly, upper management has the duty to increase the wealth of stockholders and that is achieved through higher stock prices.
Explanation:
If an employee's family member is seriously ill, employers are required to allow the employee up to how many weeks off?
Question 2 options:
a) 1
b) 2
c) 8
d) 12
Answer: 12 weeks
Explanation:
If an employee's family member is seriously ill, the employers are required to allow the employee up to 12 weeks off.
According to the Family Medical Leave Act, it should be noted that the individuals who work for the employers who have 50 or more employees can be given about 12 weeks of unpaid leave in a year which they can use to take care of family members that are seriously sick or care for new children or seriously ill family members, or for themselves if they're seriously sick.
On January 2, 2021, Sanborn Tobacco Inc. bought 10% of Jackson Industry’s capital stock for $93 million. Jackson Industry’s net income for the year ended December 31, 2021, was $123 million. The fair value of the shares held by Sanborn was $104 million at December 31, 2021. During 2021, Jackson declared a dividend of $63 million. 2. Assume that Sanborn sold the stock on January 2, 2022 for $116 million. Prepare the journal entries Sanborn would use to record
Answer:
Sanborn Tobacco Inc.
Journal Entries:
1. January 2, 2021,
Debit Investment in Jackson Industry $93 million
Credit Cash $93 million
To record the purchase of 10% of Jackson Industry’s capital stock.
December 31, 2021,
Debit Investment in Jackson Industry $12.3 million
Credit Share from Net Income $12.3 million
To record the share from the net income of Jackson Industry.
December 31, 2021
Debit Investment in Jackson Industry $11 million
Credit Unrealized Gain from Investment $11 million
To record the unrealized gain on fair value of the investment.
2021,
Debit Dividends Receivable $6.3 million
Credit Investment in Jackson Industry $6.3 million
To record the dividends receivable and reverse the part of the income already recorded.
2. January 2, 2022
Debit Cash $116 million
Credit Investment in Jackson Industry $110 million
Credit Realized Gain from Investment $6
To record the gain from the sale of the investment.
Explanation:
a) Data and Analysis:
Transaction Date
January 2, 2021, Investment in Jackson Industry $93 million Cash $93 million 10% of Jackson Industry’s capital stock for .
December 31, 2021, Investment in Jackson Industry $12.3 million Share from Net Income $12.3 million
December 31, 2021 Investment in Jackson Industry $11 million Unrealized Gain from Investment $11 million
During 2021, Dividends Receivable $6.3 million Investment in Jackson Industry $6.3 million
2. January 2, 2022 Cash $116 million Investment in Jackson Industry $110 million Realized Gain from Investment $6
Use the following information to determine this company's cash flows from financing activities.
a. Net income was $465,000.
b. Issued common stock for $73,000 cash.
c. Paid cash dividend of $18,000.
d. Paid $130,000 cash to settle a note payable at its $130,000 maturity value.
e. Paid $118,000 cash to acquire its treasury stock.
f. Purchased equipment for $93,000 cash.
Answer: Net cash used/ spent was $193,000
Explanation:
Cash from Financing activities involves cash transactions in relation to Equity (including dividends paid) and long term debt as these are the chief providers of cash to finance the business.
Cash from financing activities is:
= Issuance of common stock - Dividend - Settlement of Note payable - Treasury stock purchase
= 73,000 - 18,000 - 130,000 - 118,000
= -$193,000
One of the major challenges facing companies today is to keep the customers they already have since there are fewer customers to go around. Changing demographics, sophisticated competitors, and overcapacity in many industries are some of the reasons for this. As a result:_________
a. the costs of maintaining existing customers are declining.
b. the costs of attracting new customers are declining.
c. the cost of giving incentives to existing customers all the time is low.
d. the costs of attracting new customers are rising.
Answer: d. the costs of attracting new customers are rising.
Explanation:
Due to the fact that companies always want to keep their old customers and ensure customer loyalty, they try as much as possible to satisfy them and meet their needs.
Due to this reason, the cost of attracting new customers are high. Companies go through a lot of processes to get new customers such as promotion, advertisement to attract new customers etc. The cost involved are typically high.
One of the aftereffects of keeping the customers which companies already have is:
D. The costs of attracting new customers are rising.According to the given question, we are asked to show the aftereffects of keeping the customers which companies already have and the effects of changing demographics, sophisticated competitors, and overcapacity.
As a result of this, we can see that these companies try their best to keep their customers and this would lead to more ads, promotion, marketing, branding, etc which would increase the costs of attracting new customers
Therefore, the correct answer is option D
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Which of these is a requirement under the No Child Left Behind Act?
A.
Specific targets must be set for special groups such as English language learners.
B.
All states must look to the federal government education bodies for curriculum materials.
C.
All schools (private, public, or charter) must follow the provisions of this law.
D.
Math and science must be emphasized when teaching lower grade students.
Answer: i think its c
Explanation: reading threw articals it seems to be the best choice
A requirement under the No Child Left Behind Act is: "Specific targets must be set for special groups such as English language learners." The correct option is A.
Why was the No Child Left Behind Act created?By requiring schools to raise student performance through required standardized examinations and minimum performance targets, NCLB was created to address the fear that the American educational system was falling behind its foreign rivals.
The No Child Left Behind Act (NCLB) was a federal law enacted in 2001 that aimed to improve academic outcomes for all students, especially those who are disadvantaged or at risk of falling behind. One of the key provisions of the law was the requirement for schools to set specific achievement targets for all students, including special groups such as English language learners, students with disabilities, and economically disadvantaged students.
The law mandated that schools must make "adequate yearly progress" (AYP) towards these targets or face consequences such as loss of funding or restructuring. This requirement was intended to ensure that all students receive the support they need to succeed academically, regardless of their background or circumstances.
Thus, the ideal selection is option A.
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Your company, ABC Reading, writes unique Open- GLbased reading software for children in grade school. ABC employs about 30 sales representatives who interact with school districts around the nation to sell and support your software. ABC has given each sales representative a powerful laptop on which to demonstrate your 3D software to principals and district representatives. Because of the nature of their jobs, sales reps are constantly connecting their laptops to school and hotel networks during the day and to your corporate network via VPN. You are worried about viruses and worms entering your corporate network through one of their laptops. What protections and preventions would you take to guard against this?
Answer: See explanation
Explanation:
To guard against viruses and worms from entering the corporate network through one of their laptops, it is important that anti-virus software should be installed into the system and the software should be updated regularly.
Furthermore, firewall can help in the prevention of unauthorized access to the system. Data encryption can also be done in order to prevent day piracy.
Lastly, strong passwords and security protocols can be utilized as well.
If contracting parties attach materially different meanings to a contract word or term subject to more than one reasonable interpretation, the contract is void. a. True b. False
Answer:
True
Explanation:
A contract is a professional document with the set of guidelines and regulations for a business when there is a partnership between two or more people, and that should be a parameter instrument for the effectiveness of a business and compliance with the current legislation.
Every contract must be drafted in a clear and objective manner, with equal rights and obligations for all members and in such a way as not to give scope for different interpretations or clauses that benefit someone. Therefore, it is correct to state that if the contracting parties assign different meanings to words or a contractual term that gives rise to more than one interpretation, the contract will be void.
A not-for-profit firm uses a small convenience sample to gather data on customer reactions. It invites a small group of customers for lunch and asks them to share what they think about the products they have purchased from the firm. This is an example of ___
Answer:
informal surveys
Explanation:
From the question we are informed about A not-for-profit firm which uses a small convenience sample to gather data on customer reactions. It invites a small group of customers for lunch and asks them to share what they think about the products they have purchased from the firm. In this case, this is an example of informal surveys.
Informal surveys can be regarded as type of survey whereby there is conduction of interviews as well as making of field observations by researchers themselves, instead of
enumerators as regards formal survey.
distinguishing characteristics of formal survey is that direct nteraction will exist in between the farmer as well as the
interdisciplinary team of researchers.
Leah, Inc., is proposing a rights offering. Presently there are 1,000,000 shares outstanding at $78 each. There will be 100,000 new shares offered at $70 each. a. What is the new market value of the company
Answer:
the new market value of the company is $85,000,000
Explanation:
The computation of the new market value of the company is shown below:
= Number of shares × price per share + new shares × price per share
= 1,000,000 × $78 + $70 × 100,000
= $85,000,000
Hence, the new market value of the company is $85,000,000
We simply applied the above formula so that the correct value could come
A company borrowed cash from the bank by signing a 6-year, 6% installment note. The present value of an annulty factor at 6% for 6 years is 4.9173. The present value of a single sum at 6% for 6 years is 7050. Each annual payment equals $75,200. The present value of the note is: M
a. $369,780.96.
b. $15,292.95.
c. $451,200.00
d. $45,878.84.
e. $106,666.67
Answer:
A
Explanation:
Present value is the sum of discounted cash flows
Present value can be calculated using a financial calculator
Cash flow each year from year 1 to 6 = $75,200
I = 6%
PV = $369,780.96.
To find the PV using a financial calculator:
1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.
2. after inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.
3. Press compute
Converse Company reported net income of $200,000 in 2020. Depreciation expense was $15,000 and amortization expense on patents was $2,500 in 2020. In addition, the balance sheet reported the following balance changes during 2020.
Decrease in accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5,000
Increase in debt investments classified as available-for-sale securities. . . . .4,500
Decrease in prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000
Decrease in accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,000
Increase in accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,500
Decrease in short-term nontrade notes payable . . . . . . . . . . . . . . . . . . . . . . .8,000
Net Cash provided by operating activities was:______.
Answer:
net cash flow from operating activities $221,000
Explanation:
The computation of the Net Cash provided by operating activities are as follows;
Cash flows from operating activities
Net income $200,000
Add: depreciation expense $15,000
Add: amortization expense is $2,500
Add: decrease in account receivable $5,000
Add decrease in prepaid expense $2,000
Less decrease in account payable -$8,000
Add increase in accrued expense $4,500
net cash flow from operating activities $221,000
Bau Long-Haul, Inc., is considering the purchase of a tractor-trailer that would cost $432,605, would have a useful life of 7 years, and would have no salvage value. The tractor-trailer would be used in the company's hauling business, resulting in additional net cash inflows of $77,500 per year. The internal rate of return on the investment in the tractor-trailer is closest to (Ignore income taxes.):____.
a. 15%.
b. 54%.
c. 17%.
d. 12%.
Answer:
6%
Explanation:
The computation of the internal rate of return is shown below:
We know that
Initial investment = Annual cash inflows × PVIFA factor (rate,nper)
$432,605 = $77,500 × PVIFA(rate,7)
PVIFA(rate,7) = $432,605 ÷ $77,500
PVIFA (rate,7) = 5.582
Now we use the PVIFA table
So here the rate that should be considered is 6%
What is the relationship between an emergency fund and credit/loans
Answer:
Explanation:
Assets in an emergency fund tend to be cash or other highly liquid assets. This reduces the need to either draw from high-interest debt options, such as credit cards or unsecured loans, or undermine your future security by tapping into retirement funds.
An emergency fund is where you save money for unexpected expenses. Using credit/loans is when you borrow money for stuff, but you have to pay back monthly payments.
Which of the following is an appropriate way to prepare for a meeting?
Read the agenda.
Talk to friends.
Think of questions without writing them down.
Bring a cell phone.
Answer:
Think of questions without writing them down
Bramble, Inc. buys 1,000 computer game CDs from a distributor who is discontinuing those games. The purchase price for the lot is $11,500. Bramble will group the CDs into three price categories for resale, as indicated below.
Group No. of CDs Price per CD
1 100 $5
2 800 10
3 100 15
Determine the cost per CD for each group, using the relative sales value method.
Answer:
determine the cost per CD for each group using tsv method
Austin Corporation, a U.S. corporation, received the following investment income during the current year: $50,000 of dividend income from ownership of stock in a French corporation, $20,000 interest on a loan to its Dutch subsidiary, $40,000 royalty from its 50 percent owned Irish venture, and $30,000 capital gain from sale of its stock in a Brazilian corporation. How much of Austin's income is treated as foreign source
Answer:
Austin's income is treated as a foreign source $110,000
Explanation:
The computation of the amount of income treated as the foreign source is given below;
Dividend income arise from the ownership of stock in a French corporation $50,000
Add: Interest on a loan to its Dutch subsidiary $20,000
Add: Royalty from its 50 percent owned Irish venture $40,000
Austin's income is treated as a foreign source $110,000
Oscarson Midwifery's cost formula for its wages and salaries is $1,580 per month plus $315 per birth. For the month of September, the company planned for activity of 133 births, but the actual level of activity was 127 births. The actual wages and salaries for the month was $41,085. The wages and salaries in the planning budget for September would be closest to:
Answer:
$43,475
Explanation:
Planned wages and salaries = $1,580 + $315 x 133 births
= $43,475
The wages and salaries in the planning budget for September would be closest to: $43,475
Terps Corp.'s balance sheet accounts as of December 31, 2021 and 2020 and information relating to 2021 activities are presented below. December 31, 2021 2020 Assets Cash $ 440,000 $ 200,000 Short-term investments 600,000 — Accounts receivable (net) 1,020,000 1,020,000 Inventory 1,380,000 1,200,000 Long-term investments 400,000 600,000 Plant assets 3,400,000 2,000,000 Accumulated depreciation (900,000) (900,000) Patent 180,000 200,000 Total assets $6,520,000 $4,320,000 Liabilities and Stockholders' Equity Accounts payable and accrued liabilities $1,660,000 $1,440,000 Notes payable (nontrade) 580,000 — Common stock, $10 par 1,600,000 1,400,000 Additional paid-in capital 800,000 500,000 Retained earnings 1,880,000 980,000 Total liabilities and stockholders' equity $6,520,000 $4,320,000 Information relating to 2021 activities: Net income for 2021 was $1,500,000. Cash dividends of $600,000 were declared and paid in 2021. Equipment costing $1,000,000 and having a carrying amount of $320,000 was sold in 2021 for $360,000. A long-term investment was sold in 2021 for $320,000. There were no other transactions affecting long-term investments in 2021. 20,000 shares of common stock were issued in 2021 for $25 a share. Short-term investments consist of treasury bills maturing on 6/30/22. Net cash provided by 2021 financing activities was
Answer:
$480,000
Explanation:
Cash-flow from Financing Activities
Particulars Amount
Due to change in notes payable $580,000
Due to change in common stock $500,000 (20000*$25)
Payment of common dividends ($600,000)
Net cash provided by financing activities $480,000
Whitney Company had no units in process at the beginning of the month. During the month 8,000 new units were started, 6,000 of these were completed but 2,000 were still in process at the end of the month. The units still in process were 100% complete as to materials but only 30% complete as to conversion costs. The cost of materials used in production during the month was $20,800 and the costs of labor and overhead were $30,360. If Whitney Company uses process costing, the total cost of making a unit of product during this month rounded to the nearest cent is:
Answer:
$7.20
Explanation:
Units % Mat. EUP- Mat. % Conv. EUP- Conv.
Units completed & 6000 100% 6000 100% 6000
transferred out
Units in ending inventory 2000 100% 2000 30% 600
Equivalent units of production 8000 6600
Cost per Equivalent Unit of Production
Materials Conversion Total
Beginning costs - - -
During the month costs $20,800 $30,360
Total cost $20,800 $30,360
÷ Equivalent units of production 8.000 6,600
Cost per equivalent unit $2.60 $4.60 $7.20
of production
Patrick offered to sell his house to Jarrod for $50,000. Jarrod was interested but did notwish to decide immediately so he asked Patrick if he would hold the offer open for thirty daysin exchange for fifty dollars. Patrick agreed.
Three days later Jarrod called Patrick and told him he doubted he would purchase the property because his family was not enthusiastic about moving, but he was still trying toconvince them to relocate. The next week, Patrick sold the house to Nick.
a. Jarrod may no longer accept the offer because Patrick changed his position.
b. Jarrod still may accept the offer because Patrick’s offer was irrevocable for 30 days.
c. Jarrod still may accept the offer because his telephone conversation did not constitutea rejection and the option period has not expired.
d. Jarrod still may accept the offer because a rejection never terminates the power of acceptance in an option contract.
Answer:
a. Jarrod may no longer accept the offer because Patrick changed his position.
Explanation:
A contract is formed when there is an offer by the offerer and an acceptance by the recipient. However the offered has the right to revoke the offer at any time during the offer period, then the recipient will not be able to accept it.
In the given scenario Patrick offered to sell his house to Jarrod for $50,000. Jarrod was interested but did not wish to decide immediately so he asked Patrick if he would hold the offer open for thirty days.
So Jarrod had not accepted to offer.
Patrick has the right to revoke the offer and sell to someone else.
However Jarrod will be entitled to his 50 dollars back.
Under its executive stock option plan, N Corporation granted options on January 1, 2021, that permit executives to purchase 11.0 million of the company's $1 par common shares within the next eight years, but not before December 31, 2023 (the vesting date). The exercise price is the market price of the shares on the date of grant, $16 per share. The fair value of the options, estimated by an appropriate option pricing model, is $4 per option. No forfeitures are anticipated. Ignoring taxes, what is the effect on earnings in the year after the options are granted to executives? (Round your answer to 1 decimal place.)
Answer:
N. Corporation
There is no effect on earnings in the year after the options are granted.
Explanation:
a) Data and Calculations:
Number of stock options granted to executives = 11.0 million
Par value of common stock = $1
Period before the vesting of interest = 8 years
Grant date = January 1, 2021
Vesting date = December 31, 2023
Exercise price on the date of grant = $16
Fair value of the options = $4 per option
Total compensation expense for the stock option = $44 million ($4 * 11 million)
b) The compensation expense is accrued starting from the vesting date and not before. Therefore, there is no effect on the earnings in the year after the options are granted to the executives.
The best definition of a financial restatement is:________.
a. A company, either voluntarily or under prompting by its auditors or regulators, revises its public financial information that was previously reported
b. An adjustment of financial information due to an error correction
c. A company, either voluntarily or under prompting by its auditors or regulators, revises its public financial information for the current period
d. All are part of the definition
A bank has the following balance sheet: SETS RETURN % MILLION $ LIABILITIES COST % MILLION $ Cash 0.00 35 Fixed-rate Deposits 3.5 290 Securities 4.00 300 Variable-rate Deposits 2.00 260 Short-term loans 6.00 225 Fed funds 2.50 75 Long-term fixed rate Loans 6.75 250 Long-term Debt fixed rate 5.50 150 EQUITY 35 Total 810 Total 810 If the spread effect is zero and all interest rates increase 60 basis points, the bank's NII will change by ________over the year. Group of answer choices $700,000 -$1,140,000 $1,140,000 $0 -$700,000
Answer:
$1,140,000
Explanation:
Calculation to determine what the bank's NII will change by
First step is to calculate the bank's one-year repricing gap
Using this formula
Repricing gap=RSAs - RSLs
Where,
RSAs =Securities+Short-term loans
RSLs =Variable-rate Deposits+Fed funds
Let plug in the formula
($ Million)
Repricing gap=[$300 + $225] - [$260 + $75]
Repricing gap=$190
Now let calculate what the bank's NII will change by
Using this formula
Change in bank's NII=Repricing gap*Interest rates
Let plug in the formula
Change in bank's NII=$190,000,000*0.0060
Change in bank's NII =$1,140,000
Therefore If the spread effect is zero and all interest rates increase 60 basis points, the bank's NII will change by $1,140,000