An index-linked bond of £28,000 nominal was issued on 1st Apr 2017 and it was repaid at 106% on 1st Apr 2018. Interest on the bond was payable quarter-yearly in arrears (i.e. in Jan, Apr, Jul, and Oct) at a rate of 4.5% per annum. An investor liable to income tax at a rate of 30% has purchased the bond at issue and held it to redemption. Interest and capital payments were indexed by reference to the value of an inflation index with a time lag of 6 months. The value of the inflation indexes at various dates during the term of the loan were as follows: Inflation indexes for 2016-2018 January April July October 2016 100 101.2 102.2 103.5 108.7 112.4 2017 105 2018 109.6 105.6 106.9 110.6 111.8 Calculate the price paid at issue for the bond, given that the investol has achieved an effective money yield of 5.4% per annum from this investment.

An index-linked bond of £28,000 nominal was issued on 1st Apr 2017 and it was repaid at 106% on 1st Apr 2018. Interest on the bond was payable quarter-yearly in arrears (i.e. in Jan, Apr, Jul, and Oct) at a rate of 4.5% per annum. An investor liable to income tax at a rate of 30% has purchased the bond at issue and held it to redemption. Interest and capital payments were indexed by reference to the value of an inflation index with a time lag of 6 months. The value of the inflation indexes at various dates during the term of the loan were as follows: Inflation indexes for 2016-2018 January April July October 2016 100 101.2 102.2 103.5 108.7 112.4 2017 105 2018 109.6 105.6 106.9 110.6 111.8 Calculate the price paid at issue for the bond, given that the investol has achieved an effective money yield of 5.4% per annum from this investment.

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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Tano issues bonds with a par value of $94,000 on January 1, 2017. The bonds' annual contract rate is 6%, and interest is paid semiannually on June 30 and December 31. The bonds mature in three years. The annual market rate at the date of issuance is 8% and the bonds are sold for $89,071. 1. What is the amount of the discount on these bonds at issuance? 2. How much total bond interest expense will be recognized over the life of these bonds? 3. Prepare an amortization table using the straight-line method to amortize the discount for these bonds. Complete this question by entering your answers in the tabs below. Required 3 Prepare an amortization table using the straight-line method to amortize the discount for these bonds. (Round your intermediate calculations to the nearest dollar amount.) Required 1 Required 2 Semiannual Period- Unamortized Discount End 01/01/2017 06/30/2017 12/31/2017 06/30/2018 12/31/2010 06/30/2019 12/31/2019 Carrying Value Required 2
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On January 1, 2024, Cullumber Co. issued eight-year bonds with a face value of $5920000 and a stated interest rate of 4%, payable semiannually on June 30 and December 31. The bonds were sold to yield 6%. Table values are: Present value of 1 for 8 periods at 4% Present value of 1 for 8 periods at 6% Present value of 1 for 16 periods at 2% Present value of 1 for 16 periods at 3% Present value of annuity for 8 periods at 4% Present value of annuity for 8 periods at 6% Present value of annuity for 16 periods at 2% Present value of annuity for 16 periods at 3% The present value of the principal is O $4312424. O $4325685. O $3714267. O $3689166. 0.73069 0.62741 0.72845 0.62317 6.73274 6.20979 13.57771 12.56110
On January 1, 2020, XYZ Co. issued a bond with a $400,000 par (face) value. The bond is a 5-year bond and will mature on December 31, 2025. The bond has a contract rate of interest of 5% and interest is paid semi-annually on June 30 and December 31 of each year. On January 1, 2020, the market rate of interest for bonds was 6%. The issue price of the bond was $382,942. The journal entry to record issuance of the bond would be: Debit Credit Cash $382,942 Discount on B/P 17,058 Bonds Payable $400,000 prepare the journal entry to record the first interest payment on XYZ Co.'s bond on June 30, 2020 using the straight-line method. (Show your work in each step using the recommended approach.)
2. A 15-year $12,000 bond at 5.2% compounded semi-annually was issued on May 15, 2015. The bond is purchased on February 26, 2018 to yield 4.1% compounded semi-annually. a. What is the purchase (flat) price of the bond? b. What is the accrued interest? c. What is the quoted price of the bond? d. What is the quoted price as a percentage of face value?
Debond Corp. issues £1,000,000 worth of fi ve-year bonds, dated 1 January 2010, whenthe market interest rate on bonds of comparable risk and terms is 6 percent. Th e bondspay 5 percent interest annually on 31 December. What are the sales proceeds of thebonds when issued, and how is the issuance refl ected in the fi nancial statements?
On 1 July 2023 Tamasek Ltd issues convertible notes with a face value of $10 million. The convertible notes have a 20-year term and mature on 30 June 2043. Interest is payable semi-annually in arrears, i.e. on 31 December and 30 June each year, and the coupon rate of interest is 7.5% p.a., At around the same point in time, companies with a similar credit rating issue debt securities without a conversion option with a coupon rate of 10% p.a., payable semi-annually. Required: Determine the debt and equity components of the convertible notes issued using the residual valuation method. Prepare the entries of Tamasek Ltd to account for the convertible notes over the period 1 July 2023 to 30 June 2025.
On April 1, 2016, Lerner Corporation issued $120,000 of five-year, 10% bonds at a market (effective) interestrate of 8%. Interest is payable semiannually on April 1 and October 1What is the amount of the semi-annual interest payment?Will the bonds be issued at a discount or premium?Present Value of the Semiannual Interest PaymentInterest RateNumber of PeriodsFactorPresent Value of the Interest PaymentsPresent Value of the Bond Face AmountInterest RateNumber of PeriodsFactorPresent Value of the FaceBonds ProceedsAmount of Discount or Premium
Iniki Bhd issues five year bonds with the following terms: Face value (RM 1,000 each) RM 10,000 Stated interest rate 8% Annual interest payment date January 1 Date of bonds January 1, 2018 Date of maturity December 31, 2022 The company's required rate of return is 6%. Required:- (i) Calculate the selling price of the bonds, rounded to the nearest Ringgit Malaysia. (ii) Prepare the journal entries to record the bond issuance. (iii)Prepare the amortization schedule, assuming the amortization is recorded on interest payment dates.
On December 31, 2016, Interlink Communications issued 6% stated rate bonds with a face amount of $100 million. The bonds mature on December 31, 2046. Interest is payable annually on each December 31, beginning in 2017. Determine the price of the bonds on December 31, 2016, assuming that the market rate of interest for similar bonds was 7%.
On January 1, 2017, Barclays bank issued 8 %, 5-year bonds with a face amount of K750,000 to Puma Zambia Interest is payable annually at the beginning of the year. The bond is issued for an effective interest rate of 10%. In addition to the purchase price Puma paid the broker K 30,000 to facilitate the purchase of this bond. Requireda) Calculate the value of the bond and prepare the entries to record the issuance of the bonds in the books of Barclays and Pumab) Prepare the entries to record the first annual interest accrual and the payment assuming that the company uses effective-interest amortization. In both Barclays and Puma c) At the end of year 3 Barclays decided to buy back this bond at a cost of K600, 000.Calculate the gain on loss on this transaction and show the double entry also advice if the bond should be bought back. In both Barclays and Puma
Terra Ccompany issued a $300,000, 7.50%, 10-year bond on June 1, 2015. Additional information on the bond follows: Bond Date: January 1, 2015 December 31, 2024 Maturity Date: Yield (Market) Rate: Interest Payment Date:: Terra's year end: Required: Round calculations to the nearest dollar a) Calculate the present value of the bond assuming that it had been issued on January 1, 2015. Show calculations/keystrokes. 8% Interest is paid annually on December 31 of each year September 30 b) Prepare a bond amortization table from January 1, 2015 until December 31, 2018. Show each annual interest payment. c) Calculate the total amount of cash received by Terra on June 1, 2015, reflecting the fact the bond was issued on June 1, 2015. Make the journal entry to record the bond issue on June 1, 2015.

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