An investor buys a bond for $10,000. The bond pays $200 interest every six months. After 18 months, the investor sells the bond for $9,500. Describe the types of income and/or loss the investor had.
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An investor buys a bond for $10,000. The bond pays $200 interest every six months. After 18 months, the investor sells the bond for $9,500. Describe the types of income and/or loss the investor had.
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- 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?Evie Inc. issued 50 bonds with a $1,000 face value, a five-year life, and a stated annual coupon of 6% for $980 each. What is the total amount of interest expense over the life of the bonds?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
- On Jan. 1, Year 1, Foxcroft Inc. issued 100 bonds with a face value of $1,000 for $104,000. The bonds had a stated rate of 6% and paid interest semi-annually. What is the journal entry to record the first payment to the bondholders?On January 1, a company issued a 5-year $100,000 bond at 6%. Interest payments on the bond of $6,000 are to be made annually. If the company received proceeds of $112,300, how would the bonds issuance be quoted? A. 1.123 B. 112.30 C. 0.890 D. 89.05On October 1 a company sells a 3-year, $2,500,000 bond with an 8% stated interest rate. Interest is paid quarterly and the bond is sold at 89.35. On October 1 the company would collect ________. A. $200,000 B. $558,438 C. $2,233,750 D. $6,701,250
- On July 1, Somerset Inc. issued $200,000 of 10%, 10-year bonds when the market rate was 12%. The bonds paid interest semi-annually. Assuming the bonds sold at 58.55, what was the selling price of the bonds? Explain why the cash received from selling this bond is different from the $200,000 face value of the bond.Irving Inc. sold bonds with a $50,000, 10% interest, and 10-year term at $52,000. What is the total amount of interest expense over the life of the bonds?An investor buys a $1,000, 20 year 6 percent (interest paid semiannually) bond at par. After five years have passed, interest rates are 11 percent. How much did the investor lose on the purchase of the bond?
- On September 6, Irene Westing purchased one bond of Mick Corporation at 96.00%. The bond pays 9.75% interest on June 1 and December 1. The stockbroker told Irene that she would have to pay the accrued interest and the market price of the bond and a $5 brokerage fee. What was the total purchase price for Irene? Assume a 360-day year (each month is 30 days) in calculating the accrued interest. (Hint: Final cost = Cost of bond + Accrued interest + Brokerage fee. Calculate time for accrued interest.) (Round your answer to the nearest cent.)An investor buys a $1,000, 20-year 7 percent (interest paid annually) bond at par. After five years have passed, interest rates are 10 percent. How much did the investor lose on the purchase of the bond?An investor purchases a bond 6 months after the issue. The bond will be redeemed at 105% eight years after issue and pays coupons of 4% per annum annually in arrears. The investor pays a tax of 25% on income and 15% on capital gains. a. Calculate the bond's purchase price per $100 nominal to provide the investor with a rate of return of 5% per annum effective. b. If the real rate of return expected by the investor from the bond is 2% per annum effective, then calculate the annual rate of inflation expected by the investor
