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Jan sold her house on December 31 and took a $10,000 mortgage as part of the payment. The 10-year mortgage has a 10% nominal interest rate, but it calls for semiannual payments beginning next June 30. Next year Jan must report on Schedule B of her IRS form 1040 the amount of interest that was included in the two payments she received during the year.
a. What is the dollar amount of each payment Jan receive?
b. How much interest was included in the first payment? How much repayment of principal was included? How do these values change for the second payment?
c. How much interest must Jan report on Schedule B for the first year? Will her interest income be the same next year?
d. If the payments are constant, why does the amount of interest income change over time?
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Byrd Corp. 10-year bonds are selling at a quote of 98 on the NASDAQ and you just recieved your first interest check for $55.55. What is the stated rate on this bond?
Penny just won the state lottery that offers a choice of payment. She may opt for either receiving $1,000,000 today or $2,000,000 at the end of ten years. If she can invest her funds at 5% annually, which is better choice?
Buddy owns 100 of the outstanding shares of Binder Corporation stock. Buddy's basis in his Binder Corporation stock is $100,000. Binder Corporation is merged with Clipper Corporation in a tax-free reorganization. Buddy and Bruce each own 25% of Clip..
ABC Enterprise is considering the purchase of a new assembly line, costing $300,000. The new assembly line has a 5-year tax life and will be depreciated under straight-line. The firm estimates that in 4 years the assembly line can be salvaged for $40..
Using the Gordon growth model, explain why the 2001 terrorist attacks and the Enron financial scandal caused stock prices to decline
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