4. Compute the annual cost for interest and redemption of these bonds A corporation sold an issue of 20-year bonds, having a total face value of P10M for P 9.5M. Thebonds bear interest at 16% payable semiannually. The company wishes to establish a sinkingfund for retiring the bond issue and will make semiannual deposits that will earn 12% compoundedsemiannually. Compute the annual cost for interest and redemption of these bonds

Data given: FV=P 10M r=16% (payable semiannually)=16%/2 =8% i=12% (compounded semiannually)=12%/2=6%…

Answered: A corporation sold an issue of 20-year…

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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Similar questions

What type of account is Discount on Bonds Payable? What is its normal balance? Is it added to or subtracted from the Bonds Payable account to determine the carrying amount?
Given the information below, which bond(s) will be issued at a discount? Stated Rate of Return Market Rate of Return. Bond 1. O Bond 2. Bond 4. O Bonds 1 and 2. Bond 1 5% 7% Bond 2 7% 8% Bond 3 12% 12% Bond 4 10% 9%
The effective interest method of amortizing bonds allocates the same amount of expense to each period true false
25) The coupon rate is identified on the bond indenture and determines the amount of cash payment for each period. TRUE FALSE
If the carrying amount of bonds redeemed is more than the redemption price, the difference is recorded as a a. discount. b. premium. c. gain. loss. O d.
The carrying value of Bonds Payable equalsa. Bonds Payable plus Discount on Bonds Payable.b. Bonds Payable minus Discount on Bonds Payable.c. Bonds Payable minus Premium on Bonds Payable.d. Bonds Payable plus Accrued Interest.
III. Discuss why the effective interest method to amortize bonds premiums or discounts is preferable to straight line method. Present your views in maximum 200 words. D Focus
23. The bond issue price is determined by calculating the a.future value of the stream of interest payments and the future value of the maturity amount. b.present value of the stream of interest payments and the present value of the maturity amount. c.future value of the stream of interest payments and the present value of the maturity amount. d.present value of the stream of interest payments and the future value of the maturity amount.
When determining the amount of interest to be paid on a bond, which of the following information is not necessary? a. The length of the interest period, annually or semiannually b. The face rate of interest on the bonds c. The face amount of the bonds d. The selling price of the bonds
Describe the accounting for bonds payable, including bonds issued at face amount, bonds issued at a discount , nd bonds issued at a premium ?
A $2,600 credit balance in the Premium on Bonds Payable account represents which of the following? Select one: a. An overpayment for a bond purchase b. An underpayment for a bond purchase c. The current amount of amortization expense d. The unamortized amount of premium earned on a bond issue
b. The interest payment on June 30, Year 2, and the amortization of the bond premium, using the straight-line method. Round to the nearest dollar. Bonds Payable Cash Discount on Bonds Payable Interest Expense Interest Receivable 3. Determine the total interest expense for Year 1. Round to the nearest dollar. 4. Will the bond proceeds always be greater than the face amount of the bonds when the contract rate is greater than the market rate of interest? 5. Compute the price of $23,854,460 received for the bonds by using Present value at compound interest, and Present value of an annuity. Round to the nearest dollar. Your total may vary slightly from the price given due to rounding differences. Present value of the face amount Present value of the semiannual interest payments Price received for the bonds

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