Problem #3: There is a bond on a company's books with an original term of 10 years that was purchased for a premium at itsissuance, just over 2 years ago. The bond pays semi-annual interest. With the receipt of the latest coupon, thecorresponding amount for amortization of the premium was $297.14. Exactly one year ago, the amount foramortization of the premium was $285.60. Based on the relation between subsequent amounts for amortization ofthe principal, what was the original value of the premium?Problem #3:Answer correct to 2 decimals.

In finance, the initial premium of a bond refers to the difference between the price paid for the…

Answered: There is a bond on a company's books…

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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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
The Exley Company bonds are currently selling for $1,041.30. This is a 50-year bond issued 17 years ago, which pays semi-annual interest. Other bonds in the market similar to Exley Company's bond pay a market interest rate of 7.75%. What is the coupon rate?
The following information applies to the questions displayed below.] Serotta Corporation is planning to issue bonds with a face value of $300,000 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 does not use 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) Note: Use appropriate factor(s) from the tables provided.
When the market rate of interest was 12%, Halprin Corporation issued $395,000, 11%, four-year bonds that pay interest annually. The selling price of this bond issue was _____. Use the following table, if needed. Present Value of $1 at Compound Interest Periods 5% 6% 7% 10% 12% 1 0.95238 0.94340 0.93458 0.90909 0.89286 2 0.90703 0.89000 0.87344 0.82645 0.79719 3 0.86384 0.83962 0.81630 0.75132 0.71178 4 0.82270 0.79209 0.76290 0.68301 0.63552 5 0.78353 0.74726 0.71299 0.62092 0.56743 6 0.74622 0.70496 0.66634 0.56447 0.50663 7 0.71068 0.66506 0.62275 0.51316 0.45235 8 0.67684 0.62741 0.58201 0.46651 0.40388 9 0.64461 0.59190 0.54393 0.42410 0.36061 10 0.61391 0.55840 0.50835 0.38554 0.32197 Present Value of an Annuity of $1 at Compound Interest Periods 5% 6% 7% 10% 12% 1 0.95238 0.94340 0.93458 0.90909 0.89286 2 1.85941 1.83339 1.80802 1.73554 1.69005 3 2.72325 2.67301 2.62432 2.48685 2.40183 4 3.54595 3.46511 3.38721 3.16987 3.03735 5 4.32948…
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…
Flint Company had bonds outstanding with a maturity value of $272,000. On April 30, 2025, when these bonds had an unamortized discount of $10,000, they were called in at 105. To pay for these bonds, Flint had issued other bonds a month earlier bearing a lower interest rate. The newly issued bonds had a life of 10 years. The new bonds were issued at 103 (face value $272,000). Ignoring interest, compute the gain or loss. Loss ✓on redemption $ Ignoring interest, prepare the two entries to record this refunding transaction. (If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually. List all debit entries before credit entries.) Account Titles and Explanation Bonds Payable Loss on Redemption of Bonds Discount on Bonds Payable Cash (To record redemption of bonds payable) Cash Premium on Bonds Payable 23600 Bonds Payable Debit 272000 23600 Credit 10000…
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.
Marigold Inc. issues $4,100,000 of 7% bonds due in 10 years with interest payable at year-end. The current market rate of interest for bonds of similar risk is 10%. Click here to view factor tables. What amount will Marigold receive when it issues the bonds? (For calculation purposes, use 5 decimal places as displayed in the factor table provided and final answer to O decimal places, e.g. 458,581.) Amount received by Marigold when bonds were issued $ 10822
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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