Question
In: Economics
A company offers bonds at a discount price of $800 for a 4% $1,000 bond that...
A company offers bonds at a discount price of $800 for a 4% $1,000 bond that matures in 20 years with a dividend payable semiannually. What is the closest effective interest rate per year, compounded semiannually is ?
Solutions
Rahul Sunny answered 2 years agoRelated Solutions
WR offers a 9% coupon bond with semiannual payments. Discount rate is 11.94%. The bonds mature...
WR offers a 9% coupon bond with semiannual payments. Discount
rate is 11.94%. The bonds mature in 14 years. What is the market
price per bond if the face value is $1,000?
(Bonds) A bond with a $1,000 par, 4 years to maturity, a coupon rate of 5%,...
(Bonds) A bond with a $1,000 par, 4 years to maturity, a coupon
rate of 5%, and annual payments has a yield to maturity of 4.2%.
What will be the percentage change in the bond price if the yield
changes instantaneously to 4.6%? (If your answer is, e.g., -1.123%,
enter it as -1.123. If the sign of the price change is incorrect,
no credit will be given.)
Exercise 10-14A Straight-line amortization of a bond discount LO 10-4 Diaz Company issued bonds with a...
Exercise 10-14A Straight-line amortization of a bond discount LO
10-4
Diaz Company issued bonds with a $146,000 face value on January
1, Year 1. The bonds had a 7 percent stated rate of interest and a
10-year term. Interest is paid in cash annually, beginning December
31, Year 1. The bonds were issued at 98. The straight-line method
is used for amortization.
Required
a. Use a financial statements model like the one
shown next to demonstrate how (1) the January...
Jerry just purchased a bond paying semiannual interest for a price of $1,000. Yields on bonds...
Jerry just purchased a bond paying semiannual interest for a
price of $1,000. Yields on bonds of similar risk are 11%. The bond
has a face value of $1,000. Based not this information, the coupon
rate of the bond is:
Bond Discount, Entries for Bonds Payable Transactions, Interest Method of Amortizing Bond Discount On July 1,...
Bond Discount, Entries for Bonds Payable Transactions, Interest
Method of Amortizing Bond Discount
On July 1, 20Y1, Livingston Corporation, a wholesaler of
manufacturing equipment, issued $30,000,000 of 20-year, 11% bonds
at a market (effective) interest rate of 14%, receiving cash of
$24,001,800. Interest on the bonds is payable semiannually on
December 31 and June 30. The fiscal year of the company is the
calendar year.
Required:
For all journal entries, if an amount box does not require an
entry, leave...
Bond Discount, Entries for Bonds Payable Transactions, Interest Method of Amortizing Bond Discount On July 1,...
Bond Discount, Entries for Bonds Payable Transactions, Interest
Method of Amortizing Bond Discount On July 1, 20Y1, Livingston
Corporation, a wholesaler of manufacturing equipment, issued
$37,000,000 of 20-year, 11% bonds at a market (effective) interest
rate of 14%, receiving cash of $29,602,220. Interest on the bonds
is payable semiannually on December 31 and June 30. The fiscal year
of the company is the calendar year. Required: For all journal
entries, if an amount box does not require an entry, leave...
A discount bond with a $8,505 face value. If the current price of the bond is...
A discount bond with a $8,505 face value. If the current price
of the bond is $8,100, then the yield to maturity equals:
4.7% or 4.7% or 4.9% or 5.0%
Coronavirus (COVID-19) may shift the bond demand to the
right.
True or False
Given a 15%-Coupon-Rate Bond Maturing in Four Years (Face Value
= $3,000). If the yield to maturity is 15%, then the bond price is
$3,000.
True or False
4. Income Effect shows that a higher level of...
A bond had an issue price of $1,000, a redemption price of $1,000, a coupon rate...
A bond had an issue price of $1,000, a redemption price
of $1,000, a coupon rate of 8%, and pays semiannual interest on Feb
1 and Aug 1. On Oct 1, 2017, an investor buys the bond for $1,040.
The investor sells the bond on May 1, 2019 for $1,050.
a. What is the investor’s basis in the
bond?
b. If the investor is a cash basis taxpayer how much
interest income must the investor include in income in 2017,...
At maturity, each of the following zero coupon bonds (pure discount bonds) will be worth $1,000....
At maturity, each of the following zero coupon bonds (pure
discount bonds) will be worth $1,000. For each bond, fill in the
missing quantity in the following table. Assume semi-annual
compounding. (Round present value factor calculations
to 5 decimal places, e.g. 1.25124 and final answers to 2 decimal
places, e.g. 15.25 or 15.25%.)
Price
Maturity (years)
Yield to maturity
A
$445
8
???
%
B
$405
???
7
%
C
???
15
11
%
4. Heather Smith is considering a bond investment in Locklear Airlines. The $1,000 par value bonds...
4. Heather Smith is considering a bond investment in Locklear
Airlines. The $1,000 par value bonds have a quoted annual interest
rate of 11 percent and the interest is paid semiannually. The yield
to maturity on the bonds is 14 percent annual interest. There are
10 years to maturity.
Compute the price of the bonds based on semiannual analysis. Use
Appendix B and Appendix D for an approximate answer but calculate
your final answer using the formula and financial...
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