**Problem Statement:**Acme company must pay liabilities of 3000 and 4500 at the end of years 1 and 2, respectively. The only investments available to the company are the following two zero-coupon bonds:**Bond Details:**| Maturity (years) | Effective annual yield | Par ||------------------|------------------------|------|| 1 | 8% | 1000 || 2 | 8% | 1500 |**Task:**Determine the cost to the company today to match its liabilities exactly.

Given: Year 1 payment = $3,000 Year 2 payment = $4,500 Rate = 8%

Acme company must pay liabilities of 3000 and 4500 at the end of years 1 and 2, respectively. The only investments available to the company are the following two zero-coupon bonds Maturity (years) Effective annual yield Par 1 8% 1000 8% 1500 Determine the cost to the company today to match its liabilities exactly.

Acme company must pay liabilities of 3000 and 4500 at the end of years 1 and 2, respectively. The only investments available to the company are the following two zero-coupon bonds Maturity (years) Effective annual yield Par 1 8% 1000 8% 1500 Determine the cost to the company today to match its liabilities exactly.

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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A Corporation sold an issue of 15-year bonds, having a total face value of P12,000,000 for P11,000,000. The bonds bear interest at 15%, payable semiannually. The company wishes to establish a sinking fund for retiring the bond issue and will make semiannual deposit that will earn 12%, compounded semiannually. Show the cash flow diagram, and compute the annual cost for interest and redemption of these bonds.
Oberon, Incorporated has a $30 million (face value) 8-year bond issue selling for 97 percent of par that pays an annual coupon of 8.30 percent. What would be Oberon's before-tax component cost of debt? Note: Round your answer to 2 decimal places. Cost of debt Explanation Solve {$970=$83.00×[1-1/(1+iD)^8/]+iD$1,000(1+iD)8} for iD Yields iD=0.088388, or 8.84%. \table[[A,B,C,],[1,Maturity,8,],[2,Price,97%,$29,100,000.00
A zero coupon bond with a face value of $800,000 is issued on January 1, Year One. It will mature in eight years and was issued for $541,470 to earn an annual effective rate of 5 percent. If the straight-line method is used, what liability balance does the company report at the end of Year Two (rounded)? Responses $606,102 $601,350 $602,974 $604,755
9.27 Debt Valuation: Zero-Coupon Debentures. At the beginning of the year, Park Inc. issued $150 million (maturity value) of 10-year, zero-coupon debentures, at a time when the yield rate was four percent annually. The Park, Inc. bonds would be subject to semiannual compounding. Required1. Calculate the proceeds to be received by Park Inc. when the bonds are sold. 2. Calculate the cost to repurchase and retire the bonds after five years assuming that the market yield rate at that time is five percent annually. Is the early retirement of debt a good decision in this set of circumstances? What factors did you consider in reaching your decision? 3. Under what circumstances would a company consider issuing zero-coupon debentures instead of regular interest-bearing debentures?
InterTech Corporation needed financing to build a new manufacturing plant. On June 30 of this year, InterTech issued $3,480,000 of 8-year bonds with a 6% coupon rate (payments due on December 31st and June 30th). The effective interest rate was 8%. What amount in interest expense did InterTech record this year for the December 31 payment? Select one: a. $139,200 b. $156,685 c. $92,235 d. None of these are correct. e. $122,980
Subject : Accounting Six years ago, the Silver Spar Company sold $50,000 par value, noncallable bonds that now have 14 yearsyears to maturity. The bonds have a 4.40% annual coupon rate that is paid quarterly. The bonds currently sell for $48,980 and the company's tax rate is 38%. What is the component cost of debt for use in the WACC calculation? Do not round your intermediate calculations.
kk. Subject Accounting
Give me correct answer with explanation.j
Assume that Western Asset Management Company LLC (WAMC) has $10,000 par value zero-coupon bonds outstanding. WAMC bonds are currently trading at $5,500 with 8 years to maturity. WAMC tax bracket is 35%. Calculate the cost of debt for WAMC (System will not accept percentage (%) sign, therefore write your answer upto four decimals).
On January 1, 2021, Ithaca Corp. purchases Cortland Inc. bonds that have a face value of $210,000. The Cortland bonds have a stated interest rate of 10%. Interest is paid semiannually on June 30 and December 31, and the bonds mature in 10 years. For bonds of similar risk and maturity, the market yield on particular dates is as follows: (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.): January 1, 2021 11.0 % June 30, 2021 12.0 % Required:1. Calculate the price Ithaca would have paid for the Cortland bonds on January 1, 2021 (ignoring brokerage fees), and prepare a journal entry to record the purchase.2. Prepare all appropriate journal entries related to the bond investment during 2021, assuming Ithaca accounts for the bonds as a held-to-maturity investment. Ithaca calculates interest revenue at the effective interest rate as of the date it purchased the bonds.3. Prepare all appropriate…
Please answer all questions and show all calculations. Thank you.

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