8. a. What is the annual interest amount for a $2,000 bond that pays 7.5 percent interests? b. Assume you purchased a corporate bond at its current market price of $850 on January 1, 2005. It pays 8,5 percent interest, and it will mature on December 31, 2014, at which time the corporation will pay you the face value of $1,000. i. Determine the current yield on your bond investment at the time of purchase. ii. Determine the expected yield to maturity on your bond investment at time of purchase.
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- Assume you purchased a high-yield corporate bond with a face value of $1,000 at its current market price of $856. It pays 5.06 percent interest and will mature in eight years. a. Determine the current yield on your bond investment at the time of purchase. Note: Enter your answer as a percent rounded to 2 decimal places. b. Determine the yield to maturity on your bond investment at the time of purchase. Note: Enter your answer as a percent rounded to 2 decimal places.A4) Finance On August 16, 2012, a bond had a market price of $8,240.66 and accrued interest of $157.95 when the market rate was 8%What is the bond's face value if it matures on May 15, 2033?A) You invest OMR 900 in a bond which gives 9% interest over a period of 2 years, the compounding is done quarterly. How much will be the value of the investment? Select one: a. 1053.24 b. 1254.74 c. 1075.34 d. 753.24 B) Which of the statements are not correct Select one: a. Profits refers to earnings before Interest and Taxes b. Investment decisions relate to pattern of financing c. Dividend pay out ratio refers to what proportion is paid to shareholders d. Borrowed funds are relatively cheaper than shareholders’ funds
- 13. An investor purchases bonds with a face value of $100,000. Payment for thebonds includes (a) a premium (b) accrued interest rate and (c) brokeragefees. How would each of these charges be recorded and what dispositionwould ultimately be made of each of these charges??2. Determine the purchase price and the amount of premium/discount of the given bonds. Face Value Coupon Rate Yield Rate Redemption Date Purchase Date Purchase Price ? a. $1000.00 5.25% 5.25% January 01, 2024 January 01, 2019 b. $5000.00 4.75% 6.75% October 20, 2028 October 20, 2018 ? c. $10,000.00 7.85% 4.15% August 16, 2034 August 16, 2014 ? Amount of Premium/Discount ? ? ?Assume that a bond is issued with the following characteristics: Date of bonds: January 1, 2023; maturity date: Dec. 31, 2027; face value: $200,000; Coupon interest rate: 10 percent paid semiannually; market interest rate: 12 percent; issue price: $185,280; bond discount is amortized using the effective interest method of amortization. What is the amount of bond discount amortization for the June 30, 2023, adjusting entry? A) $559 B) $1,117 C) $10,000 D) $11,117
- f. Now assume the date is October 25, 2019. Assume further that a 12%,10-year bond was issued on July 1, 2019, pays interest semiannually (onJanuary 1 and July 1), and sells for $1,100. Use your spreadsheet to findthe bond’s yield.David Palmer purchased Bond C on January 1, 2014 when Bond C was priced to have a yield to maturity (EAR) of 10.3812891%. David subsequently sold Bond C on January 1, 2016 when it was priced to have a yield to maturity (EAR) of 12.550881%. Assume all interests received were reinvested to earn a rate of return of 3% per quarter (in another investment account). Calculate: i) the current yield, ii) the 2-year capital gains yield and iii) the 2-year total rate of return on investment for David. [Note that this question is NOT asking for average yearly (total) return. Hint: think of total accumulation as FV (Annuity)of coupons and selling priceAssume a firm issues a zero-coupon bond on 1/1/2021. The face value is $5,000,000, and the effective rate is 4.1%, compounded annually over the 20 years of the bond i. Make the amortization table ii. Make the journal entry to issue the bonds on 1/1/2021iii. Make the entry to record interest on 12/31/2021 and 12/31/2022 iv. Make the entry to retire the principle of the bonds on 12/31/2040v. For every entry, record the effects
- Assume that a $10,000.00 bond paying 8.5% interest is currently selling at 106. What is the current selling price of the bond? What is the current yield of this bond? a. b. (a. Assuming you purchased the bond for $350 what rate of return would you earn if you held the bond for 25 years until it matured with a value $1000? a. Rate of return____% b. Suppose under the terms of thebond you could redeem the bond in 2024. DMF agreed to pay an annual interest rate of 1.4 percent until the date. How much would the bond be worth at that time? b. Bond value_____ c. In 2024 instead of cashing in the bond for its then current value you decide to hold the bond until it mature in 2043. What annual rate of return will you earn over the last 19 years? c. Rate of return___%Question 4: Investments Please note that this question has two independent parts. Part 1: On January 1, 2020, Hamilton Financial (HF) purchased a six-year, $150,000 bond from Think Plane Company for $128,551. The bond offers a 4% coupon rate and pays coupons annually on December 31 of each year. At the time of the purchase of this bond, the market rate on comparable securities was 7%. HF will use the following amortization table for this bond (numbers have been rounded to the nearest decimal, small rounding differences of up to $1 might occur): Difference Beginning Ending (FV-BV) Date Balance Coupon Interest Balance Fair Value 1/1/2020 12/31/2020 12/31/2021 12/31/2022 12/31/2023 12/31/2024 12/31/2026 0.00 2700 -400 128,551 128,551 128,551 6,000 8,999 131,549 6,000 9,208 134,758 6,000 9,433 138,191 6,000 9,673 141,864 6,000 9,930 145,794 6,000 10,206 131,549 134,758 134,249 134,358 138,191 141,864 145,794 150,000 HF included this security in its portfolio of Available for Sale (AFS)…