Today is 1 July, 2019. Hélène has a portfolio which consistsof two different types of financial instruments (henceforthreferred to as instrument A and instrument B). Hélènepurchased all instruments on 1 July 2012 to create thisportfolio, which is composed of 21 units of instrument Aand 45 units of instrument B.• Instrument A is a zero-coupon bond with a face valueof $100. This bond matures at par. Its maturity date is1 January 2029.• Instrument B is a Treasury bond with a coupon rate ofj2 = 2.02% p.a. and a face value of $100. This bondmatures at par. Its maturity date is 1 January 2022.Calculate the current price of instrument B per $100 facevalue. Round your answer to four decimal places. Assumethe yield rate is j₂ = 2.8% p.a. and Hélène has just receivedher coupon payment.a. $98.1293b. $99.1393c. $92.9465O d. $97.7705

Price of a bond is the present value of the coupon payment plus the present value of the par value…

Answered: Today is 1 July, 2019. Hélène has a…

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 January 1, 2024, Whispering Winds Company acquired all the assets and assumed all the liabilities of Carla Vista Company and merged Carla Vista into Whispering Winds. In exchange for the net assets of Carla Vista, Whispering Winds gave its bonds payable with a maturity value of $560,000, a stated interest rate of 10%, interest payable semiannually on June 30 and December 31, a maturity date of January 1, 2034, and a yield rate of 12%. Balance sheets for Whispering Winds and Carla Vista (as well as fair value data) on January 1, 2024, were as follows: Cash Receivables Inventories Land Buildings Accumulated depreciation-buildings Equipment Accumulated depreciation-equipment Total assets Current liabilities Bonds payable, 8% due 1/1/2034, Interest payable 6/30 and 12/31 Common stock, $15 par value Common stock, $5 par value Other contributed capital Retained earnings Total equities Whispering Winds Book Value $253,430 370,350 798,320 644,730 932,090 (321,220) 240,040 (76,870)…
ohn purchased a 150-day $500,000 bank bill (at a simple interest rate) on 15 July 2021. The purchase price was $490,550. He sold this bank bill on 13 August 2021. (b) Assume that John sold this bank bill at a simple interest rate of 3.17% p.a. up to the maturity date of the above bank bill. What is the annualised (simple interest) yield for this investment from 15 July 2021 to 13 August 2021? Round your answer to 3 decimal places in terms of percentage. a. 9.924% b. 10.905% c. 11.182% d. 10.647%
Tanner-UNF Corporation acquired as a long-term investment $1 million of 10-year bonds on July 1, 2023. The purchase price of the bonds was $922,054. After receiving the first interest payment on December 31, 2023, the carrying value of the bonds was $925,106. The market price of the bonds on December 31, 2023, was $927,000. Assuming that Tanner - UNF intends to sell the bonds as soon as possible, how much will be reported as investment in bonds on Tanner - unf's balance sheet on a December 31st 2023?And in which section of the balance sheet will the investment appear?
Goofy Inc. bought a sizeable amount of Crazy Co.'s bonds for $205,000 on May 5, 2020, and classified the investment as available-for-sale. The market value of the bonds declined to $129,000 by December 31, 2020. Goofy reclassified this investment as trading securities in December of 2021 when the market value had risen to $163,000. What effect on 2021 net income should be reported by Goofy for the Crazy Co. bonds? $34,000 net unrealized holding gain. $76,000 net unrealized holding loss. $0. $42,000 net unrealized holding loss.
On December 31, 2020, Phil purchased $20,000 of newly issued bonds of Texas Corporation for $16,568. The bonds are dated December 31, 2020. The bonds are 9%, 10-year bonds paying interest semiannually on June 30 and December 31. The bonds are priced to yield 12% compounded semiannually. Read the requirements. Requirement a. What is the amount of the original issue discount? Start by completing the bond amortization table for the first year. (Round all amounts to the nearest dollar.) Amortization of Original Issue Discount Taxpayers Basis for the Bond Year Interest Received Interest Income December 31, 2020 June 30, 2021 December 31, 2021 The amount of the original issue discount is Requirement b. For the first semiannual period, what is the amount of the original issue discount Phil must recognize as ordinary income? (Round the amount to the nearest dollar.) The amount of the original issue discount Phil must recognize as ordinary income for the first semiannual period is Requirement…
On January 1, 2020, MINA Company purchased, on cash basis, debt securities for P765,540. The securities have a face value of P600,000 and mature in 15 years. The securities carry fixed interest of 10% that is receivable semi-annually on June 30 and December 31. The prevailing market interest rate on these debt securities is 7% compounded semi-annually. MINA intends and has the financial resources to hold these securities to maturity. Required : Using the effective interest method, compute for the following a. carrying value of the debt securities on December 31, 2020 at amortized cost B. interest income to be reported for 2020
During 2023, Culver Inc. purchased 2200, $1000, 7% bonds. The bonds mature on March 1, 2028 and pay interest on March 1 and September 1. The carrying value of the bonds at December 31, 2023 was S 1967500. on September 1, 2024, after the semi-annual interest was received, Brandon sold half of these bonds for $1007000. Culver uses straight-line amortization and has accounted for the bonds under the amortized cost mode.The gain on the sale is $23250 $41850 $0 $4650
On April 30, 2020, ABC acquired an investment in bonds which has a face value of P5,000,000 and pays 9% interest due every April 30 and Oct. 30 until Oct. 30, 2024. It paid P4,822,305 inclusive of transaction fees of P11,804. The resulting effective interest rate on this transaction is 10%. It accounted the investment as a financial asset at amortized cost. If on Nov. 30, 2021, ABC sold the investment, what is the interest income for that year?
On May 1, 2020, Girl Co. purchased a short-term P2,000,000 face value, 9% debt instruments for P1,860,000 including the accrued interest and classified it as a trading security. The debt instruments mature on January 1, 2023, and pay interest semi-annually on January 1 and July 1. On December 31, 2020, the fair market value of the instruments is 98%. On March 2, 2021, Girl Co. sold the trading security for P1,980,000. How much will be recognized as income on the 2020 income statement? P100,000 P120,000 P160,000 P280,000 answer not given
On September 1, 2020, Elizabeth bought a $10,000 three-year bond that pays 9% interest per year, compounded yearly. No interest is received until the maturity date of the bond on August 31, 2023. Which one of the following statements is correct, assuming the figure is rounded to the nearest dollar? (Show Calculations) (a) In 2020, Elizabeth must report $300 of interest income. (b) In 2021, Elizabeth must report $927 of interest income. (c) In 2022, Elizabeth must report $981 of interest income. (d) In 2023, Elizabeth must report all interest earned on the bond.
In the current year, Dylan earned interest from the following investments. Investment nterest Income10-year municipal bond (issued in 2009) $1,300 10-year private activity bond (issued in 2010) 1,60010-year Treasury bond (issued in 2015) 2,00010-year private activity bond (issued in 2021) 900Savings account 1,100Dylan purchased all of the bonds on their issuance date. In addition, Dylan borrowed funds with which to purchase the 2010 private activity bond and incurred interest expense of $350 on that loan in the current year. a. How much interest income will Dylan recognize for regular tax purposes in the current year? b. What is her current year AMT preference or adjustment for interest?
At December 31, 2024, Hull-Meyers Corporation had the following Investments that were purchased during 2024, its first year of operations: Trading Securities: Security A Security B Totals Securities Available-for-Sale: Security C Security D Totals Securities to Be Held-to-Maturity: Security E Security F Totals Trading Securities Security A Security B Securities Available-for-Sale Security C Security D Securities to be Held-to-Maturity Security E Security F Required: Complete the following table. Note: Amounts to be deducted should be indicated with a minus sign. Totals Amortized cost Reported on Balance Sheet as: No Investments were sold during 2024. All securities except Security D and Security F are considered short-term Investments. None of the fair value changes is considered permanent. Current assets Noncurrent assets $ 0 $ $ 965,000 170,000 $ 1,135,000 $ 765,000 965,000 $ 1,730,000 0 $ 555,000 680,000 $ 1,235,000 Net Income $ Fair Value $ 979,500 164, 600 $ 1,144,100 0 $ 838,500…

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