Laura,the Controlling Shareholder and an Employee of Southwest Corporation,receives an Annual

question 122

Multiple Choice

Laura,the controlling shareholder and an employee of Southwest Corporation,receives an annual salary of $750,000.Based on several factors including the size of the corporation's operations and a comparison of salary received by officers of comparably-sized corporations,the IRS contends that Laura's salary should be no higher than $600,000.The Court upheld the IRS's position.As a result,which of the following is true?

• A)$600,000 is deductible by the corporation; $600,000 is taxable to Laura.
• B)$600,000 is deductible by the corporation; $750,000 is taxable to Laura.
• C)$750,000 is deductible by the corporation; $750,000 is taxable to Laura.
• D)$750,000 is deductible by the corporation; $600,000 is taxable to Laura.

Identify and describe the graphical representation of interest rates over different terms.

Explain the process and significance of stripping coupon paying treasuries.

Calculate the yield to maturity (YTM) for bonds using forward rates.

Recognize the characteristics and formation of different types of yield curves.

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Definitions:

Brokerage Fees

Charges paid to a broker for executing transactions or providing specialized services.

New York Stock Exchange

A leading global securities exchange where stocks and other securities are bought and sold.

Readily Marketable

Describes assets that can easily and quickly be converted into cash without significantly affecting their price.

Interest Receivable

The amount of interest income that has been earned but not yet received in cash.