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Peninsula products has just applied for a loan at your bank. when reviewing peninsula's books for the year that just ended, you notice that the firm uses the fair value option for its bonds payable. you also see that the firm recorded a $55,000 debit in its bonds payable account and a $55,000 credit in its unrealized holding gain or loss"income account. over that same period, interest rates decreased by about 0.5 percent. how should this information affect the bank's decision as to whether to grant peninsula a loan? a : the bank should strongly consider giving a loan to peninsula because the changes in firm's bonds payable and unrealized holding gain or loss"income accounts suggest that peninsula has seen an increase in its credit rating over the past year. b : the bank should put little emphasis on the changes in peninsula's bonds payable and unrealized holding gain or loss"income accounts because these changes are likely the result of the rise in interest rates. c : the bank should hesitate before giving a loan to peninsula because the changes in firm's bonds payable and unrealized holding gain or loss"income accounts suggest that peninsula has seen a decline in its credit rating over the past year. d : the bank should put little emphasis on the changes in peninsula's bonds payable and unrealized holding gain or loss"income accounts because these changes are likely unrelated to either interest rates or the firm's credit rating.

wilson's has 10,000 shares of common stock outstanding at a market price of $35 a share. the firm also has a bond issue outstanding with a total face value of $250,000 which is selling for 102 percent of face value. the cost of equity is 11 percent while the preminustax cost of debt is 8 percent. the firm has a beta of 1.1 and a tax rate of 34 percent. what is wilson's weighted average cost of capital?

Mae jong corp. issues $1,000,000 of 10% bonds payable which may be converted into 10,000 shares of $2 par value ordinary shares. the market rate of interest on similar bonds is 12%. interest is payable annually on december 31, and the bonds were issued for total proceeds of $1,000,000. in accounting for these bonds, mae jong corp. will: (a) first assign a value to the equity component, then determine the liability component. (b) assign no value to the equity component since the conversion privilege is not separable from the bond.(c) first assign a value to the liability component based on the face amount of the bond.(d) use the “with-and-without” method to value the compound instrument.