The Yield on a Discount Basis

question 18

Multiple Choice

The yield on a discount basis:

• A)Is the same as the yield to maturity
• B)Is computed as if the year is 360 days long
• C)Uses the difference in face value and purchase price over purchase price to determine the return
• D)Uses the coupon payments to determine the return

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Definitions:

Retail Inventory Method

An accounting process used by retailers to estimate inventory value by converting the retail value of inventory to a cost basis, based on the relationship between cost and retail price.

Ending Inventory

The value of goods available for sale at the end of an accounting period.

Gross Profit Method

A method of estimating the amount of ending inventory by applying the gross profit percentage to sales.

Inventory Shortage

The situation where the actual inventory on hand is less than what is recorded in the accounting records.