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- On 1 july 2018 BMw ltd issues $2 million in 10 year debentures that pay interest each six months at a coupon rate of 10 percent. At the time of issuing the securities, the market requires a rate of return of 12 %. Interest expense is determined using the effective interest method. Formula for PV of $1 in n periods = [1/1-(1+k)n/ k Formula for present value of annuity of $1 per period for n periods =[ 1-1/(1+k)n] / k where k is the discount rate expressed in decimal Required 1. Determine the issue price of the debenture 2. Provide the journal entries at 1 July 2018 and 30 June 2019On 1 July 2018 BMW Ltd issues $2 million in 10-year debentures that pay interest each six months at a coupon rate of 10 per cent. At the time of issuing the securities, the market requires a rate of return of 12 per cent. Interest expense is determined using the effective-interest method. Formula for PV of $1 in n periods =1/(1+k)n Formula for present value of annuity of $1 per period for n periods = (1-1/ (1+k)n ) ÷ k where k is discount rate expressed in decimal Required: (i) Determine the issue price of the debenture. (ii) Provide the journal entries at 1 July 2018 and 30 June 2019.On October 20, 2010, the 8 year treasury note has a bid price of 99:18, and an ask price of 99:20. The treasury note has a face value of $10,000, and a coupon rate of 5% made semiannually. The treasury note matures on October 19, 2015. What is the ask yield-to-maturity?
- A bond that has a face value of $2,000 and coupon rate of 3.60% payable semi-annually was redeemable on July 1, 2021. Calculate the purchase price of the bond on February 10, 2015 when the yield was 4.10% compounded semi-annually. Round to the nearest centA saving bond earns a variable rate of interest that can change six months, with compounding done monthly. The initial rate was 6.8% in early 2015. If that rate continues unchanged for the 3 years of the bond's duration, what is the APY (annual percentage yield) on a $10,000 bond? (Please answer in term of percentage, e.g: 2.5%, and round to 2 decimal places)In February 2015 Treasury 3 5/8s of 2035 offered a semiannually compounded yield to maturity of 2.98%. Recognizing that coupons are paid semiannually, calculate the bond's price. Assume face value is $1,000.
- On 1 July 2023 Tamasek Ltd issues convertible notes with a face value of $10 million. The convertible notes have a 20-year term and mature on 30 June 2043. Interest is payable semi-annually in arrears, i.e. on 31 December and 30 June each year, and the coupon rate of interest is 7.5% p.a., At around the same point in time, companies with a similar credit rating issue debt securities without a conversion option with a coupon rate of 10% p.a., payable semi-annually. Required: Determine the debt and equity components of the convertible notes issued using the residual valuation method. Prepare the entries of Tamasek Ltd to account for the convertible notes over the period 1 July 2023 to 30 June 2025.A bond that has a face value of $3,000 and coupon rate of 3.40% payable semi-annually was redeemable on July 1, 2021. Calculate the purchase price of the bond on February 10, 2015 when the yield was 3.65% compounded semi-annually.A 2-year Treasury security currently earns 1.79 percent. Over the next two years, the real risk-free rate is expected to be 1.35 percent per year and the inflation premium is expected to be 0.35 percent per year. Calculate the maturity risk premium on the 2-year Treasury security. (Round your answer to 2 decimal places.) Maturity risk premium ____.__%
- The one-year forward rates at times 0 and 1 are 6.1%, 6.5% per annum effective, respectively. The 3-year bond which pays annual coupons in arrears of 6% and is redeemable at par is bought to yield 6.3% per annum effective. Under the no-arbitrage assumption, calculate the 3-year spot rate and the 1-year forward rate over the 3rd year.An investor has purchased a floating-rate security with a 5-year maturity. The coupon formula for the floater is 6-month LIBOR plus 170 basis points and the interest payments are made semi-annually. The floater is non-callable. At the time of purchase, 6-month LIBOR is 5.5%. The investor borrowed the funds to purchase the floater by issuing a 5-year note at par value with a fixed coupon rate of 6.8%. Suppose the 5-year swap rate is 5.3% and the frequency of the payments is semi-annual. 1) Ignoring credit risk, what is the risk that this investor faces? 2) Explain how the investor can enter into a 5-year interest rate swap (in which one party pays the swap rate in exchange for 6-month LIBOR) to offset this risk and show the annual income spread the investor can lock-in using the swap contract.Assume that it is February 15, 2012 and there are exactly 8 six-month time periods remaining until maturity for a 30-year US Treasury bond that was originally issued on February 15, 1986. This bond has a coupon rate of 9.25%. The coupons are paid semi-annually. The bond matures on February 15, 2016. The yield to maturity is 0.754%. The bond was sold in face value increments of $100. Using the PVA formula, what is the current price of the bond? Is this bond priced at a premium, at a discount, or at par? Why? Begin with the general formula. Show all your work. PV= $133.41