EPS = earnings available to common shareholders divided by the weighted average number of common shares outstanding. With no preferred shareholders, all of net income is available to the common shareholders. The weighted average number of shares outstanding equals the original 2 million shares plus 4/12 of the additional 600,000 shares. The 4/12 weight is used because the new shares were only outstanding 4 months of the year. Thus, EPS = $8.8 million / [2 million + (4/12)(600,000)] = 8.8 /2.2 =
$ 4.00.

The value of a call is directly related to the underlying common stock. As the price of the stock goes up the call gains value and as the stock declines the call loses value. The call owner benefits when the price of the stock rises.

When interest rates rise, all bond prices will fall. However, some bonds will fall in price at a lower rate. For instance, if a bond is paying higher coupons, these coupons may be reinvested at the new prevailing higher interest rates. This is a plus. Therefore, this beneficial feature helps to reduce the rate at which the bond price is falling.

The Retained Earnings balance of Period B will be correct. The Period A error caused the net income of Period A to be overstated, therefore, the income of Period B to be understated by that same amount. The Retained Earnings balance will be correct at the end of period B