Chapter 14, Problem 20QS

To determine

Introduction:

Bond: A bond is defined as a security generally used for a debt investment under which an investor finances money to an entity for a definite period of time at a fixed interest rate. Ventures that demand huge amount of funds are usually financed from bond issuance. The total amount of interest payable on bond issuance during a given period of time is known as bond interest expense.

To calculate:

a. Revealing of the market price about interest rate changes since bond issuance, assuming that the 4.625% bonds were originally issued at Par Value.

b. Whether the change in market rate since the issuance of these bonds affect the amount of interest expenses reported on Vodafone’s income statement.

c. Payment made by Vodafone to repurchase the 4.625% bonds at the quarter market price of 111.67%

d. The market price at which the bonds will sell on the due date in 2018 assuming that the 4.625% remain outstanding until maturity