Question

1. A firm paid out $3000 common dividend during 2019, and it ended the year with $160 000 of retainers earnings. the prior years retained were $157000. What was the firm 2019 net income?

a. 30000

b. 31000

c. 32000

d. 33000

2. Interest Rates on long term Treasury bonds are lower than those on corporate bonds.the difference in interest rate between them is caused primarily by:

a. tax effects

b. default risk differences

c. maturity risk differencens

d. inflation rates

d

Answer 1

Question1:

Net income = Retained earnings this year - Retained earnings last year + dividend payments

= 160000 - 157000 + 3000

= 6000$

Please check question. If dividends paid are actually $30000 then retained earnings are 33000. Option D.

Question 2.

The difference between corporate bond rates and treasury bond rates are due to the fact that we have confidence in the capability of the government to pay back, where as it is more risky at the corporate level. Thus, answer is b default risk differences.