Alton Corp. purchased five $1,000 5% bonds of Solar Corporation when the market rate of interest was 14%. Interest ispaid semiannually, and the bonds will mature in nine years.Using the PV function in Excel®, compute the price Alton paid (the present value) for the bond investment. (Assume thatall payments of interest and principal occur at the end of the period. Round your answer to the nearest cent.)Alton paidon the bond investment.

Price of the bond will be equal to the sum of present values of each future coupon payment and the…

Answered: Alton Corp. purchased five $1,000 5%…

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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Park Corporation is planning to issue bonds with a face value of $2,800,000 and a coupon rate of 7 percent. The bonds mature in 10 years and pay interest semiannually every June 30 and December 31. All of the bonds were sold on January 1 of this year. Park uses the effective - interest amortization method and also uses a premium account. Assume an annual market rate of interest of 6.0 percent. (FV of $1, PV of S1, FVA of $1, and PVA of $1) Note: Use appropriate factor(s) from the tables provided. Required: 1. and 2. Prepare the journal entry to record the issuance of the bonds and the interest payment on June 30 of this year 3. What bonds payable amount will Park report on its June 30 balance sheet?
Assume that three years ago, you purchased a corporate bond that pays 6.50 percent. The face value of the bond was $1,000. Also assume that three years after your bond investment, comparable bonds are paying 7.00 percent. (a) What is the annual dollar amount of interest that you receive from your bond investment? (Do not round intermediate calculations. Round your final answer to 2 decimal places.) Annual interest (b) Assuming that comparable bonds are paying 7.00 percent, what is the approximate dollar price for which you could sell your bond? (Do not round intermediate calculations. Round your final answer to 2 decimal places.) Approximate bond price
Garcia Company issues 10%, 15-year bonds with a par value of $310,000 and semiannual interest payments. On the issue date, the annual market rate for these bonds is 8%, which implies a selling price of 117 %. The effective interest method is used to allocate interest expense. 1. What are the issuer's cash proceeds from issuance of these bonds? 2. What total amount of bond interest expense will be recognized over the life of these bonds? 3. What amount of bond interest expense is recorded on the first interest payment date? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 What amount of bond interest expense is recorded on the first interest payment date? Bond interest expense
Bringham Company issues bonds with a par value of $660,000 on their stated issue date. The bonds mature in 10 years and pay 9% annual interest in semiannual payments. On the issue date, the annual market rate for the bonds is 12%. (Table B.1, Table B.2, Table B.3, and Table B.4) (Use appropriate factor(s) from the tables provided.) 1. What is the amount of each semiannual interest payment for these bonds?2. How many semiannual interest payments will be made on these bonds over their life?3. Use the interest rates given to select whether the bonds are issued at par, at a discount, or at a premium.4. Compute the price of the bonds as of their issue date.5. Prepare the journal entry to record the bonds’ issuance.
On January 1, 2024, Christmas Anytime issues $850,000 of 6% bonds, due in 10 years, with interest payable semiannually on June 30 and December 31 each year. Assume that the market interest rate is 7% and the bonds issue at a discount.2a. Calculate the issue price of a bond.2b. Complete the first three rows of an amortization schedule. (FV of $1, PV of $1, FVA of $1, and PVA of $1)
Issue Price of a BondAbbott, Inc., plans to issue $500,000 of ten percent bonds that will pay interest semiannually and mature in five years. Assume that the effective interest rate is 12 percent per year compounded semiannually. Calculate the selling price of the bonds. Round answers to the nearest whole number. What is the selling price of bonds?
Enviro Company issues 8%, 10-year bonds with a par value of $340,000 and semiannual interest payments. On the issue date, the annual market rate for these bonds is 10%, which implies a selling price of 87 1/2. The straight-line method is used to allocate interest expense. 1. What are the issuer's cash proceeds from issuance of these bonds? 2. What total amount of bond interest expense will be recognized over the life of these bonds? 3. What is the amount of bond interest expense recorded on the first interest payment date? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 What total amount of bond interest expense will be recognized over the life of these bonds? Note: Round final answers to the nearest whole dollar amount. Total Bond Interest Expense Over Life of Bonds: Amount repaid: 20 payments of Par value at maturity $ 13,600 $ Total repayments Less amount borrowed (cash proceeds from part 1) Total bond interest expense < $ Required…
On January 1 of this year, Ikuta Company issued a bond with a face value of $115,000 and a coupon rate of 4 percent. The bond matures in 3 years and pays interest every December 31. When the bond was issued, the annual market rate of interest was 5 percent. Ikuta uses the effective-interest amortization method. (FV of $1, PV of $1, FVA of $1, and PVA of $1) Note: Use appropriate factor(s) from the tables provided. Required: 1. Complete a bond amortization schedule for all three years of the bond's life. 2. What amounts will be reported on the income statement and balance sheet at the end of Year 1 and Year 2? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Complete a bond amortization schedule for all three years of the bond's life. Note: Round your intermediate calculations and final answers to whole dollars. Date January 01, Year 1 December 31, Year 1 December 31, Year 2 December 31, Year 3 Cash Interest Interest Expense Amortization Book…
What is the issue price of the bonds in the following situation. Classic Corporation issues $300,000 of 7% bonds, due in 15 years, with interest payable semi-annually. The market is paying 5%.
Serotta Corporation is planning to issue bonds with a face value of $440,000 and a coupon rate of 12 percent. The bonds mature in two years and pay interest quarterly every March 31, June 30, September 30, and December 31. All of the bonds were sold on January 1 of this year. Serotta uses the effective-interest amortization method and also uses a premium account. Assume an annual market rate of interest of 8 percent. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided.) 1. Provide the journal entry to record the issuance of the bonds January 1.
NoleCo issues bonds on January 1, 20X2. The bonds mature ten years from this date and pay interest semi-annually on June 30 and December 31 each year. The face value of the bonds is $500,000 and the coupon/stated rate is 8%. The market rate on the issue date is 7%. The bonds were issued for $535,531. Required: Complete the three parts below. Part A: The interest expense that NoleCo should recognize on June 30, 20X2 is: $20,000 $17,500 $18,744 $18,826 $21,421 Part B: The interest expense that NoleCo should recognize on December 31, 20X2 is: $18,686 $20,000 $18,788 $18,700 $17,500 Part C: The carrying value of these bonds on December 31, 20X2 (after the interest payment on that date) is: $533,248 $502,556 $500,000 $538,087 $532,975
Concord Inc. issues $ 2,300,000 of 7% bonds due in 12 years with interest payable at year-end. The current market rate of interest for bonds of similar risk is 10%. What amount will Concord receive when it issues the bonds? (For calculation purposes, use 5 decimal places as displayed in the factor table provided and final answer to 0 decimal places, e.g. 458,581.)

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