6.) The discounted cashflows of a bond is equal to Dirty Price (Value) Accrued Interest Clean Price (Value)
Q: Ques 6) What are the two methods of calculating the percentage annual return earned by the owner of…
A: Discount yield is the expected annual percentage rate of return of return earned on a bond when it…
Q: Premium on Bonds Payable has a debit balance. O is a contra account. is deducted from bonds payable…
A: is considered to be a reduction in the cost of borrowing.Explanation:Premium on Bonds Payable refers…
Q: (a) What are long-term liabilities? Give three examples. (b) What is a bond?
A: Liability seems to be a debt owing by one firm to an individual or company who is not the owner of…
Q: 2. Term structure premium, an inflation of bond and bond default premium are included in A. risk…
A: A bond includes various risks like(i) Term structure risk or maturity risk(ii) Inflation risk(iii)…
Q: How does the payment of a bank loan’s principal and a bond’s par value differ?
A: A bank loan is a common method and process for a business to acquire money and capital for various…
Q: If the acquisition cost of investment in bonds is less than face amount, there is discount…
A: Bonds are a less risky investment when compared to investments in equity stocks. The bonds are fixed…
Q: Bonds are issued at face value when: Effective rate is higher than stated rate Effective rate…
A: Bonds payable is one of the form of liability being presented in the balance sheet. There can be…
Q: Question 6 In bond financing, if the interest on bonds (contract rate) higher than the market…
A: Bonds Bonds are those fixed-income instruments that are used by states, companies, municipalities,…
Q: The return payable on Bond is called Select one: a. Commission b. Discount c. None of the options d.…
A: Value of a bond: Value of a bond is the present value of the future cash flows discounted at a…
Q: A bond trades at a discount if interest rates are high.
A: Bond: A bond is a debt instrument which means it is a method of raising money for a company but the…
Q: Interest expense on the income statement: A) B) C) D) is net of any bond premium amortization will…
A: Interest expense on the income statement:Answer: (A) is net of any bond premium amortization
Q: A premium occurs when the issue price of a bond is above its face amount. True or False True False
A: Bonds are normally issued at a specified interest rate and a period of time either at face value, at…
Q: 3. Using supply and demand analysis, demonstrate how the business cycle affects bond prices and…
A: These all scenarios affect the prices of the bonds- First, take the booming market.1. Position of…
Q: None
A: Step 1: Introduction to Issuance of BondsBonds are issued when the issuer needs more funds or…
Q: 4. When the market rate of interest is greater than the contract rate of interest, the bonds should…
A: Bonds are a form of debt or loan taken by the company, on which company has to make regular interest…
Q: bond call price
A: “Since you have asked multiple questions, we will solve the first question for you. If you want any…
Q: if the market rate of interest is lower than the stated rate, bonds will sell at an amount ?
A: Solution: if the market rate of interest is lower than the stated rate, then bond will sell at an…
Q: hen the effective cost of d
A: Cost of debts is the effective rate which is given by a company for paying on its debt.
Q: 4. What best describes the discount on bonds payable account? a.An asset b.A liability c.An expense…
A: Discount on bonds payable account is used when a bond is issued at discount.
Q: bond issuance costs are incurred
A: First option is wrong because one among the options is correct. Second option is wrong because…
Q: nd 2 are identical, except that Bond 2 has credit enhancement. Issuer of E 1. Which of the following…
A: Credit risk is issuer's inability or failure to repay the debt obligations.
Q: effective interest technique
A: Bonds are the financial securities used to raise debt fund from public. They carry fixed interest…
Q: Bonds Payable is a type of current liabilities. True False
A: Bonds payable is a liability for the business, it means amount of bonds that the company has to…
Q: its) Which of the following pieces of information is NOT necessary to compute the present value of a…
A: The equation required to calculate the present value of bond is given belowPresent value of…
Q: 5. What is the difference between a general obligation bond and a revenue bond and what the…
A: General obligation bonds are municipal bonds that are backed by the state or local government. These…
Q: 6. This is a financial security that evidences your right to be paid with interest and principal…
A: A financial security is a tradable financial asset. Bonds, preference and common shares, derivatives…
Q: When selling bonds at a premium, the premium received effectively a.does not affect the cost of…
A: Premium means selling of bond at price higher than face value.
Q: With respect to bonds, when interest rates increase typically...
A: Bonds are inversely related to the interest rate. Since bond price is calculated based on interest.…
Q: the carrying amount of bonds redeemed is more than the redemption price, the difference is recorded…
A: Bonds are financial instruments or debt securities that are issued by corporations, governments, and…
Q: Bond price and interest rates are INVERSELY related. Select one: True False
A: The corporation and government can raise finance by issuing bonds. The borrower i.e bond issuer is…
Q: 3. (T/F) If interest rates rise, prices of short-term bonds will decline less than long-term bonds
A: If interest rates rise, prices of short-term bonds will decline less than long-term bonds because…
Q: The carrying value of Bonds Payable equalsa. Bonds Payable plus Discount on Bonds Payable.b. Bonds…
A: Answer: Option b
Q: Which of the following statement is false about premium on bonds payable? It decreases the…
A: Premium on bonds payable is the amount in excess of face value of the bonds payable. In simple, when…
Q: None
A: STRIPS are Treasury securities formed by separating the interest and principal components of…
Q: Amortization of bond premium decreases interest expense, while amortization of discount increases…
A: The bonds are the financial instruments for the business which are issued by business to raise the…
Q: Will the amortization of Discount on Bonds Payable result in a higher or lower Bond Interest…
A: Introduction: The amortization of discounts on bonds payable will increase interest costs. When…
Q: What are the two ways that discount and premium on bonds due are amortized? Each one should be…
A: Solution Two ways that discount and premiums on bond are amortized are as flows Straight line method…
Q: Amortizing the discount and premium on bonds is done in two ways. Describe each one.
A: Amortization means the reduction in the amount of liability due to write offs over a regular period.
Q: The effective interest technique is used to charge a discount on a bond that is due to be paid to…
A: The most effective approach to generating interest is... To amortize a bond over some time, the…
Q: The carrying value on bonds equals Bonds Payablea. minus Premium on Bonds Payable.b. plus Discount…
A: Answer: d. minus Discount on Bonds Payable.
Q: Amortizing the discount on bonds payablea. increases the recorded amount of interest expense.b.…
A:
Q: Which of the follwing statement is correct. As the credit risk of a bond increases: The YTM falls…
A: Relationship between the bond price and YTM is inverse. If YTM is increased bond price will be…
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- Explain FOUR (4) reasons that influence the changes which make debt security yields vary. Please giveexplanation in details with example.12. The rate of interest actually earned by bondholders is called the a. stated rate. b. coupon rate. c. bond rate. d. effective rate.The contract interest rate for bonds:A. must equal the effective interest rate.B. is greater than the effective interest rate when bonds are issued at a discount.C. has no relation to the cash flow associated with a particular bond.D. will fluctuate over the life of a bond.E. None of these.
- All else the same, a will decrease the required return on a bond. Select one: O a. sinking fund O b. increase in the size of a bond issuance O c. lower bond rating O d. call provision O e. increase in inflation1. When the effective cost of debt is greater its the nominal cost,a. the initial net measurement of the bond is more than the face value.b. The net proceeds is more than the face value.c. The entity records a discount on the bond payable.d. The interest expense is less than the interest payments.2. Which of these statement are true? [S1] The dividend decision generally involves the same factors as the earnings retention decision. [S2] Under the Dividend Relevance Theory, dividends are valued more than capital gains.3. The cost of retained earnings is less than the cost of ordinary shares because ofa. the issuance cost.b. the trust fund doctrine.c. agency costs of free cash flow.d. the taxation on earnings.4. GHI Corp., a new and relatively unknown entity, has issued 5-year bonds with an interest rate of 30%. These may also be traded in by the holder for 5 ordinary shares for every P1,000 face value of the bond. GHI added this feature so that once it has better profits, it can entice…Identify each statement as true or false. If false, indicate how to correct the statement. (And you have forgotten to answer the right ans of false in the previous question)
- 18. Which of the following statements are true?Statement I. An interest rate reflects the rate of return that a creditor receives when lending money, or the rate that a borrower pays when borrowing money. Interest rates change over time, so does the rate earned by creditors who provide loans or the rate paid by borrowers who obtain loans. Statement II. Interest rate movements have a direct influence on the market values of debt securities, such as money market securities, bonds, and mortgages. Statement III. Interest rate movements have an indirect influence on equity security values because they can affect the return by investors who invest in equity securities. Statement IV. Since interest rates have an influence on securities, participants in financial markets attempt to anticipate interest rate movements when restructuring their investment or loan positions. a. I,II,III b. I,II,IV c. I,III,IV d. I,II,III,IVBond prices are inversely related to market interest rates. TRUE FALSE.3- Our company, which prepares its financial statements on a monthly basis, has leased its workplace on 01.08.2020 from 3.000 TL per month for 1 year. One-year rental fee and 18% VAT have been deposited into the bank account of the enterprise. How many TL is the total amount deposited into our business's bank account? a) 18,000 TL B) 21.000 TL NS) 42,480 TL D) 36.000 TL TO) 3,000 TL
- 6. When is interest expense more than interest paid? a. when bonds are sold at a premiumb. when bonds are sold at parc. when bonds are sold at a discountd. when bonds are sold at a yielddons premium or discount refer to the interest rate, higher of lower than what? or does it refer to the value of the bondA synthetic Collateralized Debt Obligation uses credit default swaps to increase the credit risk of its assets. O True O False