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17 download_doc-5.php - A311 (2/3/2009) Historical Exchange...

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A311 (2/3/2009) Historical Exchange Price and PV -------------------- ...... For financial contracts to receive or pay cash. Receivable contracts: FMV (financial contract) = FMV (consideration given) Note Receivable Product Sale Payable contracts: FMV (consideration received) = FMV (financial contract) Equipment Debt contract HEP is clearer of LHS or RHS of equations At the exchange date, the relationship between HEP and payments required under a financial contract can be written as… HEP t=0 (p 1 + i 1 )•R* -1 + (p 2 + i 2 ) )•R* -2 + … + (p T + i T ) )•R* -T FMV FMV of financial contract at inception Notice : this is an identity that defines… r* = R* - 1 So, R* = 1 + r* is the solution to the identity. The rate (r*) is alternatively called: Implicit Rate….A311 Imputed Rate…. .FAS #13, Accounting for Leases Effective Rate…. Yield-to-Maturity Corporate Internal Rate of Return Finance APB #21 requires interest revenue and expense on financial contracts to be determined
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This note was uploaded on 04/18/2011 for the course BUS 311 taught by Professor Palmer during the Winter '11 term at Indiana.

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17 download_doc-5.php - A311 (2/3/2009) Historical Exchange...

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