EBK CORPORATE FINANCE
4th Edition
ISBN: 8220103164535
Author: DeMarzo
Publisher: PEARSON
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Chapter 30, Problem 13P
a)
Summary Introduction
To determine: The value of assets and liabilities of C fund.
Introduction:
The duration of the securities are equal to the weighted average maturity of the cash flow.
Summary Introduction
To determine: The value of equity.
b)
Summary Introduction
To determine: The duration of C fund’s equity.
Introduction:
The duration of the securities are equal to the weighted average maturity of the cash flow.
c)
Summary Introduction
To determine: Number of dollars Person X requires to liquidate and reinvest which helps to minimize the interest rate sensitivity of funds.
d)
Summary Introduction
To determine: The notational amount of the swap.
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Consider the following hypothetical
investment for the fund. Issue a one-month
liability and purchase a $1,000, 15-year, 5%
coupon Treasury bond. Assume that the
one-month interest rate is currently 2% and
that the 15-year interest rate is currently 5%.
How much in liabilities would the fund have
to issue to finance the purchase of the
Treasury bond? At the end of one year the
fund has received the coupon-interest
payment on the bond and paid interest on
its short-term liabilities. What is the net
earnings for the fund for that year? What is
the value of the bond investment at the end
of the year (there are 14 years to maturity
remaining on the bond) assuming that the
long-term rate is still 5%? What is the net
asset value (market value of assets minus
liabilities) of the fund?
As of December 31, 2022, Sandy Beach had $9,800,000 in 6.5 percent serial bonds outstanding. Cash of $433,000 is the
debt service fund's only asset as of December 31, 2022, and there are no liabilities. The serial bonds pay interest
semiannually on January 1 and July 1, with $500,000 in bonds being retired on each Interest payment date. Resources for
payment of Interest are transferred from the General Fund, and the debt service fund levies property taxes in an amount
sufficient to cover principal payments.
Required
b. Prepare a statement of revenues, expenditures, and changes in fund balances for the debt service fund for the year ended
December 31, 2023.
SANDY BEACH
Debt Service Fund
Statement of Revenues, Expenditures and Changes in Fund Balance
For the Year Ended December 31, 2023
Revenues:
Appropriations
Expenditures:
Total Expenditures
Excess of Expenditures Over Revenues
Other Financing Sources (Uses):
Increase in Fund Balance
0
0
0
Fund Balance, January 1, 2023
Fund Balance,…
A government acquires as an investment a 30-year U.S. Treasury bond having a
face value of $10,000. At the end of year 20, with 10 years remaining until
maturity, the bond had a fair value of $10,200. Taking into account the
discount at which the government initially purchased the bond, its amortized
cost was $9,760. Assuming that it held the bond in a governmental fund, the
government should report the bond at a value of
$0.
$9.760.
$10.000
$10.200.
Chapter 30 Solutions
EBK CORPORATE FINANCE
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