Concept explainers
- a. Reset the Data Section to its initial values. The price of this bond is $1,407,831. What would it be if there were only 9 or 8 years to maturity? Use the worksheet to compute the bond issue prices and enter them in the spaces provided.
Bond issue price (9 years to maturity) $__________________
Bond issue price (8 years to maturity) $__________________
- b. Compare these prices to the bond-carrying values found in the effective interest amortization schedule you originally printed out in requirement 3. Explain the similarity.
- c. Click the Chart sheet tab. The chart presented shows the price behavior of this bond based on years to maturity. Explain what effect years to maturity has on
bond prices. Check your explanation by trying 8% as the effective rate (cell E10) and clicking the Chart sheet tab again. Also try 9%.
When the assignment is complete, close the file without saving it again.
Worksheet. Modify the BONDS3 worksheet to accommodate bonds with up to 20-year maturity. Use your new model to determine the issue price and amortization schedules of a $2,000,000, 18-year, 10% bond issued to yield 9%. Preview the printout to make sure that the worksheet will print neatly, and then print the worksheet. Save the completed file as BONDST.
Hint: Expand both amortization schedules to 20 years. Expand the scratch pad to 20 years. Modify FORMULA1 in cell F17 to include the new ranges.
Chart. Using the BONDS3 file, prepare a line chart that plots annual interest expense over the 10-year life of this bond under both the straight-line and effective interest methods. No Chart Data Table is needed. Put A23 to A32 in the Label format and then select A23 to A32, D23 to D32, and B40 to B49 as a collection. Enter all appropriate titles, legends, formats, and so forth. Enter your name somewhere on the chart. Save the file again as BONDS3. Print the chart.
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Chapter 11 Solutions
Excel Applications for Accounting Principles
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- Consider the following figure which shows the relationship between a three-year bond's price (vertical axis) and the passage of time (measured in years - horizontal axis). $106.000 $104.000 $102.000 $100.000 $98.000 $96.000 $94.000 594.846 0.00 S96.688 598.567 0.50 Bond Price as Time Passes $100.4 1 $102.433 $96.433 1.00 $98.307 $100.217 1.50 $102.13 58148 2.00 Which of the following statements are consistent with the figure above? $104.148 $100.055 $106.000 $101.99 250 $103.980 This pattern of prices is consistent with a bond whose yield to maturity is below the band's coupon rate. This bond pays a coupon of $8. This bond pays coupons on an annual basis. None of the other statements are correct. 100arrow_forwardThe bond shown in the following table attached pays interest annually. a. Calculate the yield to maturity (YTM)for the bond. b. What relationship exists between the coupon interest rate and yield to maturity and the par value and market value of a bond? Explain.arrow_forwardNeed the Answer please provide in text handwriting not allowedarrow_forward
- Excel Applications for Accounting PrinciplesAccountingISBN:9781111581565Author:Gaylord N. SmithPublisher:Cengage LearningEBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENTPfin (with Mindtap, 1 Term Printed Access Card) (...FinanceISBN:9780357033609Author:Randall Billingsley, Lawrence J. Gitman, Michael D. JoehnkPublisher:Cengage Learning