Smile Corp. Issued 16% p.a., 10-year Debenture bond, P6,000 face value, interest due every four (4) months. On October 1, Hapi purchased 20 bonds at par. On May 31, she sold 8 bonds to Honey at 105-3/4. Again on September 30, Hapi sold another 6 bonds to Sweet at 96-1/2. Required: 1. Assuming when the bond is offered to Honey, it as a remaining life of 6 years. Honey wants a 15% p.a.rate of return on her bond investment: a. Compute for the value of each bond? How much is the total value of the bonds offered? b. Based on the offered price, what is the bond exact yield to maturity? c. Would you recommend to Honey to buy the bonds? Why?
Smile Corp. Issued 16% p.a., 10-year Debenture bond, P6,000 face value, interest due every four (4) months. On October 1, Hapi purchased 20 bonds at par. On May 31, she sold 8 bonds to Honey at 105-3/4. Again on September 30, Hapi sold another 6 bonds to Sweet at 96-1/2. Required: 1. Assuming when the bond is offered to Honey, it as a remaining life of 6 years. Honey wants a 15% p.a.rate of return on her bond investment: a. Compute for the value of each bond? How much is the total value of the bonds offered? b. Based on the offered price, what is the bond exact yield to maturity? c. Would you recommend to Honey to buy the bonds? Why?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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show all necessary computation
Transcribed Image Text:Smile Corp. Issued 16% p.a., 10-year Debenture bond, P6,000 face value,
interest due every four (4) months. On October 1, Hapi purchased 20 bonds at par.
On May 31, she sold 8 bonds to Honey at 105-3/4. Again on September 30, Hapi
sold another 6 bonds to Sweet at 96-1/2.
Required:
1. Assuming when the bond is offered to Honey, it as a remaining life of 6 years.
Honey wants a 15% p.a.rate of return on her bond investment:
a. Compute for the value of each bond? How much is the total value of the bonds
offered?
b. Based on the offered price, what is the bond exact
yield to maturity?
c. Would you recommend to Honey to buy the bonds? Why?
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