Last year Darlington Equipment Company issues a 10-year, 12% coupon bond at its par value of $1000. Interest is paid quarterly. Currently the bond sells for $1,200.
a. What is the bonds yield to maturity?
b. If the bond can be called in 5 years for a redemption price of $1,165, what is the bond's yield to call?
Please show your inputs using a financial calculator
In: Finance
One year ago, Alpha Supply issued 5-year bonds at par. The bonds have a coupon rate of 6 percent and pay interest semi-annually. Today, the market rate of interest on these bonds is 6.5 percent.
What is the price of these bonds today? $
Compared to the issue price, by what percentage has the price of these bonds changed? %
(Use a negative to denote a decrease and a positive value to denote an increase)
In: Finance
On January 1, Year 1, Stratton Company borrowed $140,000 on a 10-year, 6% installment note payable. The terms of the note require Stratton to pay 10 equal payments of $19,022 each December 31 for 10 years. The required general journal entry to record the payment on the note on December 31, Year 2 is:
Multiple Choice
Debit Interest Expense $8,400; debit Notes Payable $10,622; credit Cash $19,022.
Debit Notes Payable $140,000; debit Interest Expense $5,022; credit Cash $19,022.
Debit Notes Payable $8,400; debit Interest Expense $10,622; credit Cash $19,022.
Debit Interest Expense $7,763; debit Notes Payable $11,259; credit Cash $19,022.
Debit Notes Payable $19,022; credit Cash $19,022.
In: Accounting
On January 1, Year 1, Eureka Company issued $120,000 of 6-year, 4% bonds at face value. The annual cash payment for interest is due on January 1 of each year beginning January 1, Year 2. Based on this information, what is the total amount of liabilities related to these bonds that will be reported on the balance sheet at December 31, Year 1? (Hint: Consider the interest that might be owed to bondholders at December 31, Year 1.)
In: Accounting
A life insurance company sells a $250,000 1-year term life insurance policy to a 20-year old male for $350. The probability this person survives the year is 0.98734. Compute the expected value of this policy to the insurance company to the nearest 0.01.
In: Statistics and Probability
An insurance company sells a two-year term life insurance policy to
an 80-year-old woman. The woman pays a premium of $1,000 per year.
If she dies within one of the insured years, the insurance company
will pay $20,000 to her beneficiary. According to the US Centers
for Disease Control and Prevention, the probability that an
80-year-old woman will be alive one year later is 0.9516 and the
probability that an 80-year-old woman will be alive two years later
is 0.9512 Find the expected value for the insurance company for
that two year term policy.
In: Statistics and Probability
In a single (unvaccinated) family one winter, the 12-year-old and 4-year-old came down with chickenpox. The mother and father had experienced the disease as children and were unaffected this time. The 3-month-old baby did not become ill, either. However, 4 months later the baby exhibited a shingles outbreak. Using immunological phenomena, explain what was likely going on with the baby.
In: Biology
5. Consider a 4-year zero-coupon bond priced such that its YTM is 7% per year. Assume the face value is $1000.
a. Determine the dollar price of the bond. (Enter the dollar price of the bond, such as 876.25 (without the dollar sign)). Do not enter the 32nd conventional equivalent price.
b. Now assume that one year later
interest rates have fallen and now the bond has a YTM of 5% (down
from 7% one year earlier). What is the dollar price of the bond
now?
HINT: The price is not equal to $822.70.
c. If you purchased the bond for price computed in Part A and
sold it one year later for the price computed in Part B, then what
is the holding period yield? i.e. what is the holding
period yield from t = 0 to t = 1?
Enter your answer as a decimal, not as a
percent.
d. With only one year remaining on the bond (i.e. at t = 3), the YTM on the bond is 10%. Compute the annualized effective holding period yield assuming you hold the bond from t = 1 (when it was, as described in Part B) to t = 3. Notice that this rate spans the two-year period from t = 1 to t = 3 but should be expressed as an effective annual value (in decimal form).
Enter the effective annualized holding period yield as a decimal, not as a percent, with at least 4 digits of precision.
In: Finance
A 30-year variable-rate mortgage offers a first-year teaser rate of 2%. After that, the rate starts at 4.5%, adjusted based on actual interest rates. The maximum rate over the life of the loan is 10.5%, and the rate can increase by no more than 200 basis points a year. If the mortgage is for $250,000, what is the monthly payment during the first year? Second year? What is the maximum payment during the fourth year? What is the maximum payment ever?
In: Accounting
On January 1, Year 2017, Kennard Co. issued $2,000,000, 5%, 10-year bonds, with interest payable on June 30 and December 31 when the market rate of interest for similar bonds was 6%. Use the following format and round figures to nearest dollar.
1. Actual proceeds received from the issuance of the bonds
2. Prepare an amortization schedule for Year 1 and Year 2 using the effective interest rate method.
Date Cash Paid Interest Expense Amortization Bond Carry Value
3. Show how this bond would be reported on the balance sheet at December 31, Year 2.
In: Accounting