Data: Face amount of bond: 10 000$ Purchase date: 7/1/89 Maturity value: 11 000$ Maturity date: 12/31/94 Coupon rate: 6% per year, compounded semiannually Coupon dates: 6/30 and 12/31 Purchaser's yield to maturity: 8% per year, compounded semiannually Question: In what range is the purchase price of the bond? A. Less than 9 400 В. 9 400, but less than 9 800 С. 9 800, but less than 10 200 D. 10 200 but less than 10 600 Е. 10 600 or more

Data: Face amount of bond: 10 000$ Purchase date: 7/1/89 Maturity value: 11 000$ Maturity date: 12/31/94 Coupon rate: 6% per year, compounded semiannually Coupon dates: 6/30 and 12/31 Purchaser's yield to maturity: 8% per year, compounded semiannually Question: In what range is the purchase price of the bond? A. Less than 9 400 В. 9 400, but less than 9 800 С. 9 800, but less than 10 200 D. 10 200 but less than 10 600 Е. 10 600 or more

Financial Accounting Intro Concepts Meth/Uses

14th Edition

ISBN:9781285595047

Author:Weil

Publisher:Weil

Chapter11: Notes, Bonds, And Leases

Section: Chapter Questions

Problem 5Q

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a. Reset the Data Section to its initial values. The price of this bond is 1,407,831. What would it be if there were only 9 or 8 years to maturity? Use the worksheet to compute the bond issue prices and enter them in the spaces provided. Bond issue price (9 years to maturity) __________________ Bond issue price (8 years to maturity) __________________ b. Compare these prices to the bond-carrying values found in the effective interest amortization schedule you originally printed out in requirement 3. Explain the similarity. c. Click the Chart sheet tab. The chart presented shows the price behavior of this bond based on years to maturity. Explain what effect years to maturity has on bond prices. Check your explanation by trying 8% as the effective rate (cell E10) and clicking the Chart sheet tab again. Also try 9%. When the assignment is complete, close the file without saving it again. Worksheet. Modify the BONDS3 worksheet to accommodate bonds with up to 20-year maturity. Use your new model to determine the issue price and amortization schedules of a 2,000,000, 18-year, 10% bond issued to yield 9%. Preview the printout to make sure that the worksheet will print neatly, and then print the worksheet. Save the completed file as BONDST. Hint: Expand both amortization schedules to 20 years. Expand the scratch pad to 20 years. Modify FORMULA1 in cell F17 to include the new ranges. Chart. Using the BONDS3 file, prepare a line chart that plots annual interest expense over the 10-year life of this bond under both the straight-line and effective interest methods. No Chart Data Table is needed. Put A23 to A32 in the Label format and then select A23 to A32, D23 to D32, and B40 to B49 as a collection. Enter all appropriate titles, legends, formats, and so forth. Enter your name somewhere on the chart. Save the file again as BONDS3. Print the chart.
Brief Exercise (Appendix 9A) Bond Issue Price On January 1, 2020, Ruby Inc. issued 3,000 $1,000 par value bonds with a staled rate of6% and a 10-year maturity. Interest is payable semiannually on June 30 and December 31. Required: What is the issue price if the bonds are sold to yield 8%? {Note: Round to nearest dollar.)
Which of these two bonds offers the highest current yield? Which one has the highest yield to maturity? a. A 6.55 percent, 22-year bond quoted at 52.000 b. A 10.25 percent, 27-year bond quoted at 103.625
BOND VALUATION You are considering a 10-year, 1,000 par value bond. Its coupon rate is 8%, and interest is paid semiannually. If you require an effective annual interest rate (not a nominal rate) of 7.1225%, how much should you be willing to pay for the bond?
Bond Valuation and Interest Rate Risk The Garraty Company has two bond issues outstanding. Both bonds pay 100 annual interest plus 1,000 at maturity. Bond L has a maturity of 15 years, and Bond S has a maturity of 1 year. a. What will be the value of each of these bonds when the going rate of interest is (1) 5%, (2) 8%, and (3) 12%? Assume that there is only one more interest payment to be made on Bond S. b. Why does the longer-term (15-year) bond fluctuate more when interest rates change than does the shorter-term bond (1 year)?
Current Yield with Semiannual Payments A bond that matures in 7 years sells for $1,020. The bond has a face value of $1,000 and a yield to maturity of 10.5883%. The bond pays coupons semiannually. What is the bond’s current yield?
Issue Price The following terms relate to independent bond issues: 500 bonds; $1,000 face value; 8% stated rate; 5 years; annual interest payments 500 bonds; $1,000 face value; 8% stated rate; 5 years; semiannual interest payments 800 bonds; $1,000 face value; 8% stated rate; 10 years; semiannual interest payments 2,000 bonds; $500 face value; 12% stated rate; 15 years; semiannual interest payments Required Assuming the market rate of interest is 10%, calculate the selling price for each bond issue.