On April 1, 2014, Fredriksen Corp. sold a $700 million bond issue to finance the purchase of a newdistribution facility. These bonds were issued in $1,000 denominations with a maturity date of April1, 2034. The bonds have a coupon rate of 8.00% with interest paid semiannually. Required: a)Determine the value today April 1, 2024 of one of these bonds to an investor who requires a 12percent return on these bonds. Why is the value today different from the par value? b) Assume thatthe bonds are selling for $925.00. Determine the current yield and the yield-to-maturity. Explainwhat these terms mean. c) Explain what layers or textures of risk play a role in the determination ofthe required rate of return on Fredriksen's bonds.

Solution to question Bwe need to use a financial calculator to find out the yield- to- maturityn is…

Answered: On April 1, 2014, Fredriksen Corp. sold…

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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Auerbach Inc. issued 8% bonds on October 1, 2021. The bonds have a maturity date of September 30, 2031 and a face value of $300 million. The bonds pay interest each March 31 and September 30, beginning March 31, 2022. The effective interest rate established by the market was 10%. How much cash interest does Auerbach pay on March 31, 2022? (Round your answer to 2 decimal places.) Top of Form Multiple Choice $24.00 million. $12.00 million. $30.00 million. $15.00 million.
On January 1, 2022, Fancy Co issued $100,000 in 10 year bonds. The bonds have a stated rate of 5% but are issued at a discount as the market rate is 7%. Because the market rate is higher, Fancy receives the present value which is $92,640. The coupon is paid annually on December 31st of each year. Provide the journal entries for Jan 1, 2022, and Dec 31st, 2022.
Exam Corp. is in need of cash. On 1/1/2023 Exam Corp. issues bonds with a $350,000 face value. The bonds have an 7.50% coupon rate. The market rate is 18%. The bonds have a life of 6 years, and are compounded semiannually. At the time of issuance, the price of the bonds is correctly calculated to be $218,420. All answers below can be rounded to the nearest dollar. What is the journal entry Exam Corp. will record on 6/30/23? Dr. Interest Revenue $19,658 Cr. Cash $13,125 Cr. Discount $6,533 Dr. Interest Expense $19,658 Cr. Discount $6,592 Cr. Cash $26,250 Dr. Interest Payable $19,658 Cr. Premium $6,592 Cr. Cash $26,250 Dr. Interest Expense $19,658 Cr. Cash $13,125 Cr. Premium $6,533 Dr. Interest Expense $19,658 Cr. Cash $13,125 Cr. Discount $6,533
as
Auerbach Incorporated issued 4% bonds on October 1, 2024. The bonds have a maturity date of September 30, 2034 and a face value of $300 million. The bonds pay interest each March 31 and September 30, beginning March 31, 2025. The effective interest rate established by the market was 6%. How much cash interest does Auerbach pay on March 31, 2025? Multiple Choice O $12.0 million $9.0 million $6.0 million $18.0 million
ABC Company wants to expand its furniture line.. The company issued $600,000, 10% bonds on March 1st, 2020. The bonds pay interest on September 1 and March 1. The due date of the bonds is September 1, 2023. The bonds yield 12%. The company closes its books on December 31. Calculate the proceeds from the sale of the bond, prepare a bond amortization schedule for the bond’s life, and prepare all the journal entries
On June 1, 2023, JetCom Inventors Inc. issued a $540,000, 12%, three-year bond. Interest is to be paid semiannually beginning December 1, 2023.Required:a. Calculate the issue price of the bond assuming a market interest rate of 13%. (Do not round intermediate calculations. Round the final answer to the nearest whole dollar.) - 32400 b. Using the effective interest method, prepare an amortization schedule. (Do not round intermediate calculations. Round the final answers to the nearest whole dollar. Enter all the amounts as positive values.) - ? Part 1Prepare journal entries to the following. (Do not round intermediate calculations. Round the final answers to the nearest whole dollar.)a. Issuance of the bonds on June 1, 2023b. Payment of interest on December 1, 2023c. Adjusting entry to accrue bond interest and discount amortization on January 31, 2024d. Payment of interest on June 1, 2024Assume JetCom Inventors Inc. has a January 31 year-end. Part 2Show how the bonds will appear on the…
ABC Inc. plans to issue $500,000 face value bonds with a stated interest rate of 12% and market interest rate of 10%. They will mature in 10 years. Interest will be paid semiannually. At the date of issuance, compute the present value (bond issue price) of the future cash flows. Following are appropriate factors from tables:
The balance sheet at December 31, 2024, for Nevada Harvester Corporation includes the liabilities listed below: a. 7% bonds with a face amount of $46 million were issued for $46 million on October 31, 2015. The bonds mature on October 31, 2035. Bondholders have the option of calling (demanding payment on) the bonds on October 31, 2025, at a redemption price of $46 million. Market conditions are such that the call is not expected to be exercised. b. Management intended to refinance $6.6 million of its 14% notes that mature in May 2025. In early March, prior to the actual issuance of the 2024 financial statements, Nevada Harvester negotiated a line of credit with a commercial bank for up to $4.6 million any time during 2025. Any borrowings will mature two years from the date of borrowing. c. Noncallable 6% bonds with a face amount of $14.5 million were issued for $14.5 million on September 30, 2005. The bonds mature on September 30, 2025. Sufficient cash is expected to be available to…
On January 1, 2024, ABC Corp. issued 54 million of 10 year bonds at an 8%stated interest rate to be paid annually. ABC Corp. issued the bonds for S3, 501, 514 since the market rate of interest was 10% . What is the carryingvalue of the bond that ABC Corp. would report on its December 31, 2024balance sheet? (round to the nearest dollar) S3,531,665S3, 500,000S3,526,438S3,564,832S4,000,000
On March 1, 2023, Quinto Mining Inc. issued a $600,000, 8%, three-year bond. Interest is payable semiannually beginning September 1, 2023. Please do this fasttt
Please help me. Thankyou.

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