A $15,000 bond with a coupon rate of 4% compounded semi-annually is redeeemable on February 1, 2024. It was purchased on June 13, 2018 when the yield rate was 5% compounded semi-annually. What is the purchase price of the bond?

A $15,000 bond with a coupon rate of 4% compounded semi-annually is redeeemable on February 1, 2024. It was purchased on June 13, 2018 when the yield rate was 5% compounded semi-annually. What is the purchase price of the bond?

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter13: Long-term Liabilities

Section: Chapter Questions

Problem 3EB: Smashing Cantaloupes Inc. issued 5-year bonds with a par value of $35,000 and an 8% semiannual...

See similar textbooks

Related questions

Q: A man borrowed an amount of P150,600 to bank that offers an interest rate of 5.36% compounded…

A: Given, Loan borrowed is P150,600 Interest rate is 5.36% compounded annually

Q: Assume US dollars and Canadian dollars are at 1SUS = C$1.08. You have C$1,000,000 at your disposal.…

A: The equivalent Mexican Pesos for one million Canadian dollars is $ 483,000,000.

Q: Despite his extravagant clothing purchases, Mr Hypebeast was unable to impress his crush. Dejected…

A: Here, Note: In the second stage, as growth rate is given annually, Semi Annual dividends are…

Q: Common stockholders; a. have the first claim on the income and assets of the firm b. contribute…

A: Share capital is the important source of finance that is being used by the company to fulfill its…

Q: What is the annual operation and maintenance costs of owning this vehicle?

A: Time value of money (TVM) is used to measure the value of money at different point of time in the…

Q: Jack asked Jill to marry him, and she has accepted under one condition: Jack must buy her a new…

A: Price of new Rolls-Royce Phantom (FV) =$350,000 Amount available for investment (P) = $59,840 Annual…

Q: Piracy, however, is the direct copy of a company’s product and is unethical. Piracy is most…

A: American Marketing Association (AMA) in its code of conduct defines the standard of behavior that…

Q: You purchased a zero-coupon bond one year ago for $278.33. The market interest rate is now 8…

A: Data given:: Interest rate = 8% (compounding semiannually) Assumed Par value of bond = $1000…

Q: The present sum needed to provide for an annual withdrawal of $2,000 for 20 years beginning 5 years…

A: Annual withdrawal = $2000 Number of annual withdrawal = 20 Years First withdrawal = beginning of 5th…

Q: d) Suppose a person's expected lifetime is 5 years and they are expected to earn $1000 per year.…

Q: local Philippine equities have the same risk (standard deviation) and return expectations: 10 %…

A: Here, Here, Expected Return of Equities is 10% Standard Deviation of Equities is 20% Weight of each…

Q: QUESTION 2 What uniform series over periods (1,8) years is equivalent at 15 % compounded annually to…

A: The process of forecasting future cash inflows and outflows related to a project or investment is…

Q: A 5-year project will require an investment of $100 million. This comprises of plant and machinery…

A: Net present value is the difference between the present value of cash inflow and present value of…

Q: QUESTION 5 Because the maturity risk premium is normally positive, the yield curve must have an…

A: The Above Statement is 'False'.

Q: value of the above securities.

A: Bond refers to the type of investment securities in which an investor lends money to the government…

Q: You are an incoming college freshman taking-up a four-year course. Suppose that you want to purchase…

A: Amount required for car after 4 years (FV) = P 750,000 Interest rate (r) = 9% Number of annual…

Q: An Airline has been buying jet fuel. The company wishes to enter into futures market to buy jet…

A: Here, Correlation Coefficient between Kenya Shillings and USA Dollar is -0.32 Standard Deviation of…

Q: A mortgage of P 80 000 is to be paid by annual payment over a period of 10 years. If the interest…

A: Mortgage amount (MV) = P 80,000 Interest rate (r) = 15.8% Number of annual payments (n) = 10

Q: le the following: (i) expected value, (ii) standard deviation and (11) oefficient of variation for…

A: A risk-averse investor is the one who is more reluctant to the risk. This type of investor invests…

Q: A or B.

A: Net present value shows the difference between the discounted cash inflows and outflows in a…

Q: Bond or debt securities pay a stated rate of interest. This rate of interest is dependent on the…

A: A bond is a type of financial security in which the issuer owes the holder a debt and is obligated –…

Q: port is planning to construct a Tennis Sport Arena on which has 50 courts to be used at any point of…

A: Importance The importance of capital budgeting is that it promotes accountability and…

Q: Omani importer called foreign exchange dealer and asked the exchange rate OMR/QAR on the spot and 3…

A: Here, Spot Rate of OMR per QAR is OMR 0.105751/88 Exchange rate in 3 months is 4/6 Exchange Rate in…

Q: Scotia Bank has just issued some new preferred stock. The issue will pay a $16 annual dividend in…

A: Value of stock paying dividend upto perpetuity can be calculated as (on nth year): = Dividend in…

Q: Faisal deposits $1,139 in a fund paying 4% annual compound interest; after 5 years the fund…

A: The future value of the account at the end of 11 years can be calculated with the help of future…

Q: You have invested your annual bonus in a one year fixed deposit at Alpha Bank which offers a nominal…

A: The difference between simple interest and compound interest is simple interest only calculates…

Q: Use the following to answer questions 11 – 15 AL issues 4.0%, 20-year bonds with a face amount of…

A: As per Bartleby guidelines,If a question with multiple sub-parts are posted, first 3 sub-parts will…

Q: For the following alternatives compute the Delta B/C ratio of Alternative D minus Alternative A. Use…

A: Initial investment = C Salvage value = S Annual benefit = A Useful life = n MARR = r = 11%

Q: Jace is trying to determine how to invest $1,234.56 that he inherited from his cousin Elijah. He…

A: Note: All the Given Options are incorrect, so we are solving the correct one for you as per the…

Q: AJ is a 30% partner in the Trane partnership, a calendar year end entity. On January 1, AJ has an…

A: When two or more people come together to start a business it is known as a partnership. A…

Q: 1. If the bond rate is 2%, will the bond be sold at a premium or a discount? Explain your answer.

A: Bond valuation refers to a method which is used to compute the current value or present value (PV)…

Q: Suppose financial intermediaries did not exist and only direct finance was possible. How would this…

A: A financial intermediary is a company or people that acts as a go-between for various parties to…

Q: The balance in the supplies account on June 1 was $7,000, supplies purchased during June were…

A: Opening balance of supplies = $7000 Supplies purchased during the month = $2100 Closing balance of…

Q: How much should you pay now for (600)-4 dollars guaranteed per year for (9) years starting from next…

A: Standard Disclaimers“Since you have asked multiple question, we will solve the first question for…

Q: Consider a newly issued 6-year, 3.35% annual-pay bond selling for $975.79. Its modified duration is…

A: Given Fv= 975.79 r=3.35% n=6 Modified duration =[ 1*c/(1+r)^1 +2*c/(1+r)^2+...+6*c/(1+r)^6] /Fv

Q: Given the following information; Face Value = $50,000 Bond Rate = 4% Coupons per year = 2…

A: Since we only answer up to 3 sub-parts, we’ll answer the first 3. Please resubmit the question and…

Q: In a perfect world where asset return is normally distributed. We have risk and return…

A: Here, Assets ABC DEF Market portfolio Expected Return 10% 15% 5% Standard Deviation 20% 40%…

Q: The covariance of returns between MSFT and AAPL is 0.0044. The standard deviation of the return of…

Q: A project is not economically feasible if MARR is at least bigger than or equal to IRR. Select one:…

A: The Above Statement is 'True'

Q: Ruhy's Corporation is considering investing in Malaysian security market. The company need to choose…

A: Given: Probability(P) Security Q Security P 10% 15% 12% 40% 8% 10% 50% 6% 7%

Q: Susan is planning to construct a Football Sport Arena on which has 50 courts to be used at any point…

A: Given: Initial Cost for 50 courts = MYR 600000 Revenue per court for Year 1= MYR3000 it then…

Q: Dome Metals has credit sales of $450,000 yearly with credit terms of net 45 days, which is also the…

A: Decrease in accounts receivable = Average accounts receivable without discount- Average accounts…

Q: Issues that can be caused by the following risks: Execution risk Strategic risk Technology risk…

A: Operational risk management (ORM) is characterized as a continuous cyclic process that comprises…

Q: (8) Consider projects A and B with the following forecasted net present values sensitive to the…

A: Here, Scenario I (p=0.3) II (p=0.7) A (mil.Lei) 3 4 B (mil.Lei) 2 6

Q: what present amount at an interest rate of 12% compounded annually?

A: A stream of equal cash flows paid or received periodically is termed as annuity. Annuity is either…

Q: Kyle wants $20,000 in 4 years. He can invest in a fund that earns 6% and compounds quarterly. How…

A: N - Number of Compounding Periods = 4 Years * 4 quarters = 16 I% - Annual Interest (as a %) = 6%…

Q: A year-end bonus of $20,000 will generate how much money at the beginning of each month for the next…

A: Bonus amount (PV) = $20,000 Interest rate (r) = 6.21% Number of compounding per year (m) = 12 Number…

Q: Compounding Frequency Periodic Payment Interval Nominal Rate Term Payment $150 1 month 6.5 10%…

A: Future Value: The future value is the amount that will be received at the end of a certain period.…

Q: 1. On January 1, 2013, Y. Corp. issued 10% - 5 year bonds with a face of P100,000 at P97,500.…

A: Solved using Financial Calculator N = 3 PMT = 10,000 FV = 100,000 PV = +/- 97,500 CPT I/Y = 10.67%

Q: No money is added or removed from the savings account for 3 years. What is the total amount of money…

A: Simple Interest: It is the interest computed by the product of the daily rate of interest,…

Concept explainers

Debenture Valuation

A debenture is a private and long-term debt instrument issued by financial, non-financial institutions, governments, or corporations. A debenture is classified as a type of bond, where the instrument carries a fixed rate of interest, commonly known as the ‘coupon rate.’ Debentures are documented in an indenture, clearly specifying the type of debenture, the rate and method of interest computation, and maturity date.

Note Valuation

It is the process to determine the value or worth of an asset, liability, debt of the company. It can be determined by many processes or techniques. Many factors can impact the valuation of an asset, liability, or the company, like:

Question

A $15,000 bond with a coupon rate of 4% compounded semi-annually is
redeeemable on February 1, 2024. It was purchased on June 13, 2018 when the
yield rate was 5% compounded semi-annually. What is the purchase price of the
bond?

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Introduction:

VIEW

To determine the purchase price of the bond:

VIEW

Step by step

Solved in 2 steps with 2 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

Smashing Cantaloupes Inc. issued 5-year bonds with a par value of $35,000 and an 8% semiannual coupon (payable June 30 and December 31) on January 1, 2018, when the market rate of interest was 10%. Were the bonds issued at a discount or premium? Assuming the bonds sold at 92.288, what was the sales price of the bonds?
Krystian Inc. issued 10-year bonds with a face value of $100,000 and a stated rate of 4% when the market rate was 6%. Interest was paid semi-annually. Calculate and explain the timing of the cash flows the purchaser of the bonds (the investor) will receive throughout the bond term. Would an investor be willing to pay more or less than face value for this bond?
On January 1, 2018, Wawatosa Inc. issued 5-year bonds with a face value of $200,000 and a stated interest rate of 12% payable semi-annually on July 1 and January 1. The bonds were sold to yield 10%. Assuming the bonds were sold at 107.732, what is the selling price of the bonds? Were they issued at a discount or a premium?
Neubert Enterprises recently issued $1,000 par value 15-year bonds with a 5% coupon paid annually and warrants attached. These bonds are currently trading for $1,000. Neubert also has outstanding $1,000 par value 15-year straight debt with a 7% coupon paid annually, also trading for $1,000. What is the implied value of the warrants attached to each bond?
On July 1, a company sells 8-year $250,000 bonds with a stated interest rate of 6%. If interest payments are paid annually, each interest payment will be ________. A. $120,000 B. $60,000 C. $7,500 D. $15,000