The available options are:
A. I and III
B. I and IV
C. II and III
D. II and IV
Answer:
C. II and III
Explanation:
IO tranche which is an acronym for Interest Only tranche is defined as a form of tranche which earns interest only from a secured loan which is derived from Principal Only tranche.
However, Interest Only tranche is quite different from a typical bond, simply because when market interest rate increases the rate of prepayment decreases, which in turn makes the rate of maturity to be longer. Thereby when interest rates increase, prices increase, and vice versa.
Hence the true statements are:
II When interest rates rise, the price of the tranche rises
III When interest rates fall, the price of the tranche falls
Answer:
$16,393.44
Explanation:
Calculation for what would be your gain
Gain=$1,000,000/($0.61 per AUD)*$0.62 per AUD - $1,000,000
Gain=1,639,344*$0.62 per AUD - $1,000,000
Gain=$16,393.44
Therefore what would be your gain if you use $1,000,000 and execute locational arbitrage will be $16,393.44
Answer:
(B) Increase both assets and equity by $180
Explanation:
The transaction analysis model tells us that:
Assets = Liabilities + Owner's Equity
Owner's equity = Contributed Capital + Retained Earnings
Retained Earnings = Net Income − Dividends
and
Net Income = Income − Expenses
The expanded accounting equation is obtain if all substitutions are made:
Asset = Liabilities + Contributed Capital + Income – Expenses − Dividends
In the Global Cleaning Service`s case:
Assets are increased either because the service is collected or is an account receivable. As the service provided is a revenue (income) is part of the Owner's Equity that also increase. Both, Asset and Owner's Equity, increase in 180.
Answer:
Interest= $90
Explanation:
Giving the following information:
Initial investment= $3,000
i= 3%
Number of periods= 1
<u>First, we need to calculate the future value, using the following formula:</u>
FV= PV*(1+i)^n
FV= 3,000*1.03= $3,090
<u>Now, the interest earned:</u>
Interest= 3,090 - 3,000
Interest= $90