Account Balance Accounts payable $50,000 Account Balance Accounts receivable $80,000 Accrued taxes $20,000 Buildings (net value) $205,000 Cash $40,000 Dividends payable Equipment (net value) $180,000 $20,000 Account Balance Finished goods $30,000 Land value $115,000 Long-term mortgages $390,000 Notes payable $60,000 Raw material inventory $40,000 Stockholder's equity $150,000

Account Balance Accounts payable $50,000 Account Balance Accounts receivable $80,000 Accrued taxes $20,000 Buildings (net value) $205,000 Cash $40,000 Dividends payable Equipment (net value) $180,000 $20,000 Account Balance Finished goods $30,000 Land value $115,000 Long-term mortgages $390,000 Notes payable $60,000 Raw material inventory $40,000 Stockholder's equity $150,000

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Bank of Charub ($ million)Assets: Liabilities and Net Worth:270 day US Treasury bills $500m 1 year Certificates of Deposit $550m2 year consumer loans Demand Deposits $750mFixed rate, 12% p.a. annually $275m 2 year Bonds $175m7 year commercial loans $350m Fixed rate, 7.5% p.a. annuallyFixed rate, 9% p.a. annually Overnight Fed Funds $350m10 year fixed rate mortgages $675mFixed rate, 6.5% p.a. monthly10 year floating rate mortgages $125m Equity $100mLIBOR+50bp, monthly roll dateNotes: The 1 year Certificates of Deposit pay 1.95% p.a. annually. The demand depositsare non-interest bearing and have a duration of zero. The 7 year commercial loans have aduration of 4.75 years. The fixed rate mortgages have a duration of 8.3 years. All valuesare market values. 2. What is the duration of the 2 year bonds they are selling at par at 7.5% p.a.interest, compounded annually?a. 1.93 yearsb. 1 yearc. 2 yearsd. 1.5 yearse. 3.86 years