Jon wishes to invest $10,000 in U.S. Treasury securities for 10 years. He is considering the following investment strategies: (1) Buy a 10-year T-Note and hold it to maturity; (2) Buy a 5-year T-Note and upon maturity roll-over the principal and interest in a second 5-year T-Note; (3) Buy a Treasury with one year to maturity, and continuously roll-over the investment in one-year Treasury for 10 years. The current yields are: 2 percent on the 1-year Treasury; 4.25 percent on the 5-year T-Note; and 4.5 percent on the 10-year T-Note. Jon’s financial analysis indicates that market expectations are for the 1-year Treasury yield to rise by 50 basis points every year for the first 5 years, and then remain unchanged for the next 5 years, and for the 5-year T-Note to be the same in 5 years as it is today. Using a spreadsheet, display the total return (including the initial investment) that Jon would have FROM his investment in each of the 10 years under each of the three investment strategies. (Hint: Let column one display the value of the investment (1) after one year in the first row, after 2 years in the second row, etc., then, repeat for investment (2) in column 2, and for investment (3) in column 3. Use additional columns for questions d, e, and f.)d. Suppose that the actual short rate remained unchanged during the entire 10 years, how would that affect the 10-year rate of return on investment (3)?e. What would happen to the investment’s 10-year rate of return if the one-year rate continued to rise at 50 basis points per year for years 5 through 10?f. If the 5-year T-Note yield fell 50 basis points after five years, how much would this reduce the 10-year rate of return on investment (2)?

 

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Jon Williams, CPA, is in the middle of a quandary related to his audit and tax client Oneway Corporation. The three directors of Oneway are the officers and the only three stockholders, each owning exactly one-third of the shares.

• President Raul Jack founded the company and is now nearing retirement. As an individual, he is also Williams’ tax client.
• Vice President Sandra Smith manages the day-to-day operations. She has been instrumental in increasing the business and its profits. Her individual tax work is done by a third party CPA.
• Treasurer Chris Barnes has been a long-term, loyal employee responsible for many innovative financial transactions and reports of great benefit to the business. He is Williams’s close personal friend and an individual tax client.

At his annual tax planning meeting with Williams, Raul Jack discussed the tax consequences of selling his one-third interest in Oneway Corporation to Sandra Smith. Raul believes that Sandra’s business development efforts have contributed significantly to the growth of the business, so he would like to reward her with a majority ownership upon his retirement. He realizes this may be a challenge with Chris Barnes, so he wants to think more about possible incentives for Chris if this plan occurs.

Around the same timeframe, over an afternoon golf game with Chris Barnes, Barnes confides in Williams that he fears that Raul Jack and Sandra Smith will make a deal, put him in a minority position, and try to force him out of the company. Barnes says, “Jon, we’ve been friends a long time. Please keep me informed about Raul’s plans. My interest in Oneway Corporation represents my life savings and I have a lot invested personally and professionally in the company.”

Jon was clearly unsure of what to do given his roles in both relationships. He acknowledged to himself that he does not have a strong relationship with Sandra at this time, and she uses another CPA for her tax return. As such, he may lose the Oneway engagement if Sandra acquires Raul’s shares and controls the corporation. On the other hand, Chris will probably suffer a great deal financially from the ownership change transaction if he does not know about Raul’s plans, and Jon’s unwillingness/inability to keep him informed will probably ruin their close friendship.

Jon ponders the problem.

Give Williams advice about alternative actions, considering the constraints of the AICPA Code of Professional Conduct.

 

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Jon Starrett, a senior executive working in his company’s office in Brussels, wanted to make a good impression on his Belgium staff. In order to facilitate good relations with his staff, Ralph decided to do several things. First, he arrived at the office early in the morning so he could visit with his subordinates over coffee. Second, he initiated an “open-door” policy so that everyone would feel free to stop by and chat. However, in spite of his best efforts, Jon ended up alienating his subordinates. What did he do wrong?

 

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Jolly Blue Giant Health Insurance (JBGHI) is concerned about rising lab test costs and would like to know what proportion of the positive lab tests for prostate cancer are actually proven correct through subsequent biopsy. JBGHI demands a sample large enough to ensure an error of ± 2% with 90% confidence. What is the necessary sample size?

 

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1.Joints are classified based on the degree of movement they permit or on the connecting tissues that hold them together. A joint in which the two bony surfaces are united by a ligament or membrane is called

SyndesmosisGomphosis Articulation Symphysis

 

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