Reference no: EM132460264

Questions -

Q1. In general, how can an employer choose an appropriate discount rate for its pension plan? What information could an employer use in choosing a discount rate?

Q2. Government accounting has some special rules, but assuming they were following the same rules as a public company, would they be able to determine their discount rate? Will discount rates vary based upon the expected retirement dates?

Q3. For the following investments can be classified into one of the following:

1. Trading debt securities.

2. Available-for-sale debt securities.

3. Held-to-maturity debt securities.

4. None of the above.

Each case is independent from each other

(a) A bond that will mature in 4 years was bought 1 month ago when the price dropped. As soon as the value increases, which is expected next month, it will be sold.

(b) 10% of the outstanding stock of Farm-Co was purchased. The company is planning on eventually getting a total of 30% of its outstanding stock.

(c) Bonds were purchased in December of this year. The bonds are expected to be sold in January of next year.

(d) Bonds that will mature in 5 years are purchased. The company would like to hold them until they mature, but money has been tight recently and they may need to be sold.

(e) Preferred stock was purchased for its constant dividend. The company is planning to hold the preferred stock for a long time.

(f) A bond that matures in 10 years was purchased. The company is investing money set aside for an expansion project planned 10 years from now.