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Madison Inc. has bought 51 000 USD worth of calculators (inventory) on account for resale in the local market. Freight expenses were 2 000 USD. Payment terms was 4/10 n/40. The company had 3 000 USD allowances because some calculators were broken while shipping to the company. The company paid for the inventory on the 5th day of the contract (within the discount period). Considering this information alone calculate the balance in the inventory account for this transaction and show your work.
Marcus has a pension plan with an annuity that is guaranteed to earn 13% interest compounded semi-annually. He plans to work for 10 years before retiring and would then like to be able to draw an income of $110,000.00 per annum for 18 years. How much should he deposit annually into his retirement fund to accomplish this?
What are the ten sources of banking law in Zambia? 7marks
What is the role of the financial intelligence center? How Is it effective? Are they in conflict with the drug Enforcement commission?
Explain the role of asymmetric information in financial markets.
A stockbroker gathers the following data. Stock FB splits two-for-one during the
period.
Beginning of Period End of period
Stock Price ($) Shares Price ($) Shares
TA 31 6,000 29 6,000
FB 92 300 54 600
ZM 42 2,200 43 2,200
a. Calculate the returns on both the price-weighted index and the market value-
weighted index of three stocks over the period.
b. Explain the difference in returns between the two indexes.
The following table shows a partial listing of T-bills from the Wall Street Journal
Outline. Rather than providing prices of each bill, the financial press reports yields using the bank-discount method. The face value of T-bill is $10,000.
Treasury Bills
August 6, 2021
Maturity Bid (%) Asked (%)
9/2/2021 0.040 0.030
9/9/2021 0.045 0.035
9/16/2021 0.043 0.033
9/23/2021 0.048 0.038
Consider the bill maturing on September 23.
a. What is the price at which the dealer is willing to buy assuming days to
maturity are 48 days?
b. What is the bond equivalent yield if you purchase the bill?
You are bearish on TSM and decide to sell short 2,000 shares at the current market price of $68 per share. TSM pays no dividends.
a. How much in cash or securities must you put into your brokerage account if the initial margin requirement is 60%?
b. If you earn no interest on the funds in your margin account, what will be your rate of return after a week if TSM is selling at $56 per share? c. How high can the price of the stock go before you get a margin call if the maintenance margin is 40%?
You are bullish on RVH stock. The current market price is $50 per share, and you have $600,000 of your own to invest. You borrow an additional $400,000 from your broker at an interest rate of 3% per week and invest $1,000,000 in the stock. RVH pays no dividends.
a. Suppose the price of RVH stock falls immediately after your purchase. The maintenance margin is 30%. How low can the price of RVH stock fall before you receive a margin call?
b. Suppose a week has passed. What is your rate of return if the price of RVH stock has gone up by 20%?
With the continuous advancements taking place in the information technology (IT) sector, could
these advancements cause financial intermediation to become extinct? Discuss.
