3 a) A company has decided to use bonds to finance a liability of $20,000 that must be re-paid usingtwo payments. The first payment of $5000 must be made at the end of 6.75 years and the secondpayment of $15,000 must be made at the end of 8 years. There are currently three bonds in themarket that are suitable to immunize these payments, Bond 1 which is a five-year pure discountbond with a face value of $1000, Bond 2 which is an eleven-year pure discount bond issued one yearago with a face value of $1500 and Bond 3 which is a seven-year pure discount bond issued threemonths ago with a present value of $594.83. Given that the yield to maturity in the bond market is8%, determine:(i)two separate portfolio strategies that will allow the company to immunize each liabilitypayment.for each of the portfolio strategies computed in Part 3(a)(i) above, the number of units thecompany should buy in each bond(ii)

Bonds are a type of debt that you grant to the issuer in exchange for interest. Your money,…

Answered: 3 a) A company has decided to use bonds…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Accounting 7) On January 1, 2016, Giant Company issued an 8% callable bond which has a par value of $200,000 for $180,000. The bond is callable at 106 any time after January 1, 2020. One-half of the bond was called back on January 1, 2021 when the unamortized discount had a balance of $4,000. Compute the amount of the gain or loss when the bond was retired on January 1, 2021.
Requirement 1. Determine the present value of 10-year bonds payable with face value of $93,000 and stated interest rate of 12%, paid semiannually. The market rate of interest is 12% at issuance. (Round intermediary calculations and final answer to the nearest whole dollar.) 1. Determine the present value of 10-year bonds payable with face value of $93,000 and stated interest rate of 12%,paid semiannually. The market rate of interest is 12%at issuance. 2. Same bonds payable as in Requirement 1, but the market interest rate is 16%. 3. Same bonds payable as in Requirement 1, but the market interest rate is 8%.
24. Subject : - Finance Please answer all parts.
(Bond relationship) Mason, Inc. has two bond issues outstanding, called Series A and Series B, both paying the same annual interest of $80. Series A has a maturity of 12 years, whereas Series B has a maturity of 1 year. a. What would be the value of each of these bonds when the going interest rate is (1) 6 percent, (2) 11 percent, and (3) 14 percent? Assume that there is only one more interest payment to be made on the Series B bonds. b. Why does the longer-term (12-year) bond fluctuate more when interest rates chavoe than does the shorter-term (1-vear) hond?
Sunland Ltd. has issued bonds that never require the principal amount to be repaid to investors. Correspondingly, Sunland must make interest payments into the infinite future. If the bondholders receive annual payments of $94 and the current price of the bonds is $1,000.00. Your Answer Correct Answer What is the pre-tax cost of this debt? (Round answer to 2 decimal places, e.g. 15.25%.) Pre-tax cost of debt eTextbook and Media Your Answer Correct Answer do % What is the after-tax cost of this debt for Sunland if the firm is in the 40 percent marginal tax rate? (Round intermediate calculations to 4 decimal places, e.g. 1.2514 and final answer to 2 decimal places, e.g. 15.25%.)
1. Which of the following modification of terms will not qualify for derecognition of financial liability? * a. A P1,000,000 bonds payable was due for payment on September 01, 2019. The maturity date has been extended up to September 01, 2020 with the face amount still the same. b. The market rate of interest associated with 2,500 bonds was 10% when these bonds were sold. Present value of the bonds was computed based on this percentage. Months later, prices in the market significantly changed making a shift from 10% to 11.5% effective rate. c. P375,000 of interest that accrued from the last date of interest payment up to the present time has been condoned or forgiven. The face amount though of P5,000,000 is unchanged and would be paid at the original date stated on the bond indentures. d. A previous P2,000,000 bonds was replaced by another bond payable of the same amount but with a different nominal rate of 9% instead of the old 11% rate.
The Acme Insurance Company purchased a 5-year bond whose interestrate floats with LIBOR. Specifically, the interest rate in a given year isequal to LIBOR plus 200 basis points. At the same time the insurancecompany purchases this bond, it enters into a floor agreement with theBear Stearns in which the notional amount is Ҏ35 million with a strikeprice of 6%. The premium Acme Insurance Company agrees to pay BearStearns each year is Ҏ300,000. a) Suppose at the time that it is necessary to determinewhether a payment must be made by Bear Stearns, LIBORis 9%. How much must Bear Stearns pay to Acme InsuranceCompany?b) Suppose at the time that it is necessary to determinewhether a payment must be made by Bear Stearns, LIBORis 3%. How much Bear Stearns pay to Acme InsuranceCompany?
8. A corporation issues for cash $1,000,000 of 8%, 20-year bonds, interest payable annually, at a time when the market rate of interest is 7%. The straight-line method is adopted for the amortization of bond discount or premium. Which of the following statements is true? A. The carrying amount increases from its amount at issuance date to $1,000,000 at maturity. B. The carrying amount decreases from its amount at issuance date to $1,000,000 at maturity. C. The amount of annual interest paid to bondholders increases over the 20-year life of the bonds. D. The amount of annual interest expense decreases as the bonds approach maturity.
5
QUESTION Part A) On January 1, 2023 its issue date, Diogenes Inc. purchased a 9%, $200,000, 10-year bond. Interest is paid annually on December 31. Diogenes uses the amortized cost model and the effective interest method for amortizing premium or discount. The current market rate was 10% and as a result Diogenes paid $187,711 for the bonds. On December 31, 2023, the bonds have a market value of $185,000. Diogenes applies IFRS. Instructions Record the receipt of interest for 2023. Part B) Zeus Corporation is considering making a significant long-term investment in Ares Ltd., a young and very promising company. Zeus decides to make a smaller investment first, and if Ares turns out to be successful, Zeus intends to make an additional investment to reach significant influence. Ares has 110,000 shares outstanding. On January 1, 2023, Ares issues Zeus 10,000 shares for $400,000 in cash (so now there are 120,000 shares outstanding). Additional information: 1. On November 1, 2023, Ares…
1. On January 1, 20X2, Tanangonan Company acquired all the assets and assumed all the liabilities of Ong Company. In exchange for the net assets of Ong, Tanangonan gave its bond payable with a maturity value of P600,000 with a stated rate of 10% interest payable semiannually on June 30 and December 31. The said bond will mature after 10 years and has a yield rate of 12%. The Statement of Financial Position (SFP) of both companies as of January 1, 20X2 were as follows: Tanangonan Book Value Ong Book Value Fair Value P250,000 352,700 Cash P114,000 150,000 232,000 100,000 410,000 (170,500) 136,450 (90,450) P881,500 P114,000 135,000 310,000 315,000 54,900 Receivables Inventories 848,300 700,000 950,000 (325,000) 262,750 (70,050) P2,968,700 Land Buildings Accumulated Depreciation – Buildings Equipment Accumulated Depreciation – Equipment Total Assets 39,450 P968,350 Current Liabilities Bond Payable Common Stock, P15 par value Common Stock, P5 par value Other Contributed Capital Retained…
I need part B done please and thank you.

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