Your investment department has researched possible investments in corporate debt securities. Among the available investments arethe following $100 million bond issues, each dated January 1, 2024. Prices were determined by underwriters at different times duringthe last few weeks.Company1.BB CorporationBond Price$ 109 millionStated Rate11%2.DD Corporation$ 100 million3. GG Corporation$ 91 million10%9%Each of the bond issues matures on December 31, 2043, and pays interest semiannually on June 30 and December 31. For bonds ofsimilar risk and maturity, the market yield at January 1, 2024, is 10%.Required:Other things being equal, which of the bond issues offers the most attractive investment opportunity if it can be purchased at theprices stated? The least attractive?Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)Most attractive investmentLeast attractive investment

To evaluate which corporate bond issue offers the most attractive investment opportunity, we will…

Answered: Your investment department has…

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter13: Long-term Liabilities

Section: Chapter Questions

Problem 4EB: Chung Inc. issued $50,000 of 3-year bonds on January 1, 2018, with a stated rate of 4% and a market...

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Chung Inc. issued $50,000 of 3-year bonds on January 1, 2018, with a stated rate of 4% and a market rate of 4%. The bonds paid interest semi-annually on June 30 and Dec. 31. How much money did the company receive when the bonds were issued? The bonds would be quoted at what rate?
Your investment department has researched possible investments in corporate debt securities. Among the available investments are the following $100 million bond issues, each dated January 1, 2024. Prices were determined by underwriters at different times during the last few weeks. Company 1. 2. BB Corporation Bond Price $ 109 million Stated Rate 11% DD Corporation $ 100 million 3. GG Corporation $ 91 million 10% 9% Each of the bond issues matures on December 31, 2043, and pays interest semiannually on June 30 and December 31. For bonds of similar risk and maturity, the market yield at January 1, 2024, is 10%. Required: Other things being equal, which of the bond issues offers the most attractive investment opportunity if it can be purchased at the prices stated? The least attractive? Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1. FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Most attractive investment Least attractive investment
Your investment department has researched possible investments in corporate debt securities. Among the available investments are the following $100 million bond issues, each dated January 1, 2018. Prices were determinedby underwriters at different times during the last few weeks.Company Bond Price Stated Rate1. BB Corp. $109 million 11%2. DD Corp. $100 million 10%3. GG Corp. $ 91 million 9%Each of the bond issues matures on December 31, 2037, and pays interest semiannually on June 30 and December31. For bonds of similar risk and maturity, the market yield at January 1, 2018, is 10%.Required:Other things being equal, which of the bond issues offers the most attractive investment opportunity if it can bepurchased at the prices stated? The least attractive? Why?
Your investment department has researched possible investments in corporate debt securities. Among the available investments are the following $100 the last few weeks. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) million bond issues, each dated January 1, 2018. Prices were determined by underwriters at different times during Company Bond Price Stated Rate 1-BB Corp. $107 million 15% 2.DD Corp. $100 million 14% 3. GG Corp. $ 93 million 13% Each of the bond issues matures on December 31, 2037, and pays interest semiannually on June 30 and December 31. For bonds of similar risk and maturity, the market yield at January 1, 2018, is 14%. Required: Other things being equal, which of the bond issues offers the most attractive investment opportunity if it can be purchased at the prices stated? The least attractive? Most attractive investment Least attractive investment
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Wildhorse Ltd. issued a $1,159,000, 10-year bond dated January 1, 2023. The bond was sold to yield 12% effective interest. The bond paid 10% interest on January 1 and July 1 each year. The company's year-end was December 31, and Wildhorse followed IFRS. Using 1. factor Tables 2. a financial calculator, or 3. Excel function PV, calculate the amount received for the bond, and any discount or premium on the bond. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ORDINARY ANNUITY OF 1. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and final answers to O decimal places e.g. 58,971.) Proceeds from sale of bond on bond Date $ $ Prepare the journal entries for above transactions. (Round answers to O decimal places, e.g. 5,275. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O…
A company has just issued (2024 1st Jan) a $100000 ten-year bond. The bonds pay 10% per annum. Coupons are paid every 31st December of each year. The yield to maturity at issue was 9%. The company uses the effective interest rate to amortize any discounts or premiums on bonds. Identify which accounts should reflect the events that take place this first year(2024) and the amounts for all 3 financial statements ( balance sheet, Income statement, statement of cashflows)
Metlock Ltd. issued a $791,000, 10-year bond dated January 1, 2023. The bond was sold to yield 12% effective interest. The bond paid 10% interest on January 1 and July 1 each year. The company's year-end was December 31, and Metlock followed IFRS. Using 1. factor Tables 2. a financial calculator, or 3. Excel function PV, calculate the amount received for the bond, and any discount or premium on the bond. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ORDINARY ANNUITY OF 1. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places e.g. 58,971.) Proceeds from sale of bond Discount on bond Prepare the journal entries for above transactions. (Round answers to 0 decimal places, e.g. 5,275. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the…
Kingbird Ltd. issued a $778,000, 10-year bond dated January 1, 2023. The bond was sold to yield 12% effective interest. The bond paid 10% interest on January 1 and July 1 each year. The company's year-end was December 31, and Kingbird followed IFRS. Using 1. factor Tables 2. a financial calculator, or 3. Excel function PV, calculate the amount received for the bond, and any discount or premium on the bond. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ORDINARY ANNUITY OF 1. (Round present value factor calculations to 5 decimal places, eg. 1.25124 and final answers to O decimal places eg. 58,971.) Proceeds from sale of bond on bond Date $ Prepare the journal entries for above transactions. (Round answers to 0 decimal places, e.g. 5,275. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the…
Kingbird Ltd. issued a $778,000, 10-year bond dated January 1, 2023. The bond was sold to yield 12% effective interest. The bond paid 10% interest on January 1 and July 1 each year. The company's year-end was December 31, and Kingbird followed IFRS. Using 1. factor Tables 2. a financial calculator, or 3. Excel function PV, calculate the amount received for the bond, and any discount or premium on the bond. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ORDINARY ANNUITY OF 1. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and final answers to O decimal places e.g. 58,971.) Proceeds from sale of bond on bond Prepare the journal entries for above transactions. (Round answers to O decimal places, e.g. 5,275. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the…
On the last day of its fiscal year ending December 31, 2024, the Safe & Reliable (S&R) Glass Company completed two financing arrangements. The funds provided by these initiatives will allow the company to expand its operations. 1. S&R issued 7% stated rate bonds with a face amount of $100 million. The bonds mature on December 31, 2044 (20 years). The market rate of interest for similar bond issues was 8% (4.0% semiannual rate). Interest is paid semiannually (3.5%) on June 30 and December 31, beginning on June 30, 2025. 2. The company leased two manufacturing facilities. Lease A requires 20 annual lease payments of $320,000 beginning on January 1, 2025. Lease B also is for 20 years, beginning January 1, 2025. Terms of the lease require 17 annual lease payments of $340,000 beginning on January 1, 2028. Generally accepted accounting principles require both leases to be recorded as liabilities for the present value of the scheduled payments. Assume that a 9% interest rate properly reflects…

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