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1) A stock is bought for $50 and sold for $53 1 year later, immediately after it has paid a dividend of $2
1) A stock is bought for $50 and sold for $53 1 year later, immediately after it has paid a dividend of $2. What is the capital gain rate for this transaction?
2)
A 6.5 percent coupon rate bond with semi-annual coupon payments has a face value of $1,000 and a current yield of 3.25 percent. What is the current market price?
A) $1000.00
B) $2000.00
C) $20.00
D) $10.00
E) Cannot be determined because the maturity of the bond is not known.
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3)
If materials are added continuously throughout the production process, then the equivalent units for materials will always equal the equivalent units for the conversion costs.
True/ False
Expert Solution
1)
Computation of Capital Gain Rate:
Capital Gain Rate = (Current Price - Previous Price)/Previous Price
= ($53 - $50)/$50
= $3/$50
Capital Gain Rate = 6%
2)
Computation of Current Market Price:
Current Yield = Annual Coupon Payment / Current Market Price
3.25% = ($1,000*6.5%)/Current Market Price
Current Market Price = $65/3.25% = $2,000
So, the correct option is B "$2,000".
3)
If the material are added continuously, new material is introduced when the previous material is converted. So, the equivalent units for conversion cost and material cost will be equal.
The given statement is true.
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