On January 1, 2017. Alpha Inc. issued a 10-year bond. The bond featured an annual 8% coupon ($80 once a year) and a par value of $1.000. Within minutes of issuing the bond. Alpha announced financial problems, and the terms of the bond were renegotiated overnight. Going forward. Alpha will only pay a 6% coupon ($60 once a year) and $800 at maturity. The YTM rose to 21.00% on January 2, 2017. Being an astute hedge fund manager, you decide to buy the bond at its now depressed price, looking to earn a high (but risky) yield. Assuming Alpha can deliver on the new renegotiated cash flows. what is your expected capital gain yield for the first year? 4.89% 4.40% 4.09% 3.72% O 3.25%

On January 1, 2017. Alpha Inc. issued a 10-year bond. The bond featured an annual 8% coupon ($80 once a year) and a par value of $1.000. Within minutes of issuing the bond. Alpha announced financial problems, and the terms of the bond were renegotiated overnight. Going forward. Alpha will only pay a 6% coupon ($60 once a year) and $800 at maturity. The YTM rose to 21.00% on January 2, 2017. Being an astute hedge fund manager, you decide to buy the bond at its now depressed price, looking to earn a high (but risky) yield. Assuming Alpha can deliver on the new renegotiated cash flows. what is your expected capital gain yield for the first year? 4.89% 4.40% 4.09% 3.72% O 3.25%

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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DEF. The company issued a 5-year bond on January 2, 2020, with a par value of $700,000. This bond pays its investor every six months. The Coupon rate is 6% and the market rate is 7%. How much coupon cash interest payment (PMT) does DEF company party its investor every six months.
On January 1, 2017, Ellison Co. issued eight-year bonds with a fase value of S6,000,000 and a stated interest rate of6%, payable semlannually on June 30 and December 31. The bonds were sold to yield 8%. Table values are: Present value of 1 for 8 periods at 6% Present value of 1 for 8 periods at 8% Use the following to answer question 12: .627 .540 Present value of 1 for 16 periods at 3% Present value of 1 for 16 periods at 4% Present value of annuity for 8 periods at 6% Present value of annuity for 8 periods at 8% Present value of annuity for 16 periods at 3% Present value of annuity for 16 periods at 4% .623 .534 6.210 5.747 12.561 11.652 honds issued 12. The present value of the interest is A) $2,068,920. B) $2,097,360. C) $2,235,600. D) $2,260,980.
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.
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.
On January 1, 2015, Loop Raceway issued 600 bonds, each with a face value of $1,000, a statedinterest rate of 5% paid annually on December 31, and a maturity date of December 31, 2017. Onthe issue date, the market interest rate was 6 percent, so the total proceeds from the bond issuewere $583,950. Loop uses the straight-line bond amortization method and adjusts for any roundingerrors when recording interest in the final year.Required:1. Prepare a bond amortization schedule.2. Give the journal entry to record the bond issue.3. Give the journal entries to record the interest payments on December 31, 2015 and 2016.4. Give the journal entry to record the interest and face value payment on December 31, 2017.5. Assume the bonds are retired on January 1, 2017, at a price of 98. Give the journal entries torecord the bond retirement.
Hartford Research issues bonds dated January 1, 2015, that pay interest semiannually on June 30 and December 31. The bonds have a $40,000 par value and an annual coupon rate of 10%, and they mature in 10 years. Required For each of the following three separate situations, (a) determine the bonds’ issue price on January 1, 2015, and (b) prepare the journal entry to record their issuance. The market rate at the date of issuance is 8%. The market rate at the date of issuance is 10%. The market rate at the date of issuance is 12%.
Alyssa Company issued P 10,000,000 bonds on January 1, 2021. The bonds pay interest annually at 10% on the outstanding bond balance. The face value of the bonds is payable in installments of P 2,000,000 every December 31 starting December 31, 2021. The bonds were sold to yield 14%. What is the issue price of the bonds on January 1, 2021? Do not round off your present value factors but round off to two decimal places the final answer. How much cash was paid on December 31, 2025? Do not round off your present value factors but round off to two decimal places the final answer. How much cash was paid on December 31, 2024? Do not round off your present value factors but round off to two decimal places the final answer. What is the balance of the Discount on Bonds Payable on December 31, 2021 ? Do not round off your present value factors but round off to two decimal places the final answer. What is the interest expense on December 31, 2025? Do not round off your present value factors…
On February 9, 2015, Hunter-Gratzner, Inc. issued a 10 year bond (with a typical $1000 face value) that had an annual coupon value of $42. We will assume that the 2022 coupon has just been redeemed. Initially (in 2015), the bond was sold at the premium price of $1,037. On February 9, 2022, this bond was selling for $972. The market rate of interest for a riskless corporate bond, of this maturity (i.e., a U.S. Treasury security), was 1.75% on February 9, 2015, which reflected market expectations about future rates of inflation. The market rate of interest for a riskless corporate bond, of this maturity (i.e., a U.S. Treasury security), was 2.05% on February 9, 2022, which reflects market expectations about future rates of inflation. Question: What was the yield to maturity for this bond on February 9, 2015? [To 2 decimal places.]

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