PK Ltd issues $8 million in 5-year debentures that pay interest every 6 months at a coupon rate of 12% per annum. The required market rate of return is 16% per annum. What is the issue price of the debentures (rounded to the nearest dollar)?
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PK Ltd issues $8 million in 5-year debentures that pay interest every 6 months at a coupon rate of 12% per annum. The required market
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- Jaison Ltd issues $10 million in 5-year debentures that pay interest every 6 months at a coupon rate of 10% per annum. The required market rate of return is 12% per annum. What is the issue price of the debentures (rounded to the nearest dollar)? Please provide all the calculations and do not just write the final answer. Also provide the journal entries for recording the debentures at the issue price.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 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 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 2019
- Edgar Ltd issues $7 million in 6-year, 10%, semi-annual coupon debentures. The rate of return required by the market is 8% per annum. What is the journal entry to record the first payment of interest assuming using the effective-interest method to amortise any discount or premium (rounded to the nearest dollar)?Thatcher Corporation’s bonds will mature in 10 years. The bonds have a face value of $1,000 and an 8 percent coupon rate, paid semiannually. The price of the bond is $1,100. What is the firm’s cost (percentage rate) of borrowing money under these market conditions?ABC Corporation will be investing in JKL corporate bonds with face value of $1,600,000, coupon rate of 8%, interests payable quarterly, and remaining term of three years. ABC requires a minimum return from this investment at 8.5%. How much should ABC be willing to pay as maximum price for this investment?
- On 1 July 2018 Bombo Ltd issues $2 million in six-year debentures that pay interest each six months at a coupon rate of 8 per cent. At the time of issuing the securities, the market requires a rate of return of 6 per cent. Interest expense is determined using the effective-interest method.Required: Determine the issue price of the debenture.Intal Corporation bonds have a coupon of 14%, pay interest semiannually, and mature in 7 years. Your required rate of return for such an investment is 10% annually. How much should you pay for a PhP1,000 Intal Corporation bond? *XYZ Company currently has bonds outstanding with a face value of $1,000 that mature in 18 years. The annual coupon rate of these bonds is 7% and interest is payable semi- annually. If the market price of these bonds is $915 each, what is the annual effective rate of return required by investors on these bonds?
- Macy’s is planning a store expansion by issuing 10-year coupon bond that makes semi-annual coupon payments at a rate of 5.875% with a face value of $1,000. Assuming semi-annual compounding, what will be the price of these bonds, if the appropriate yield to maturity (discount rate) is 14%?Tree Row Bank has assets of $150 million, liabilities of $135 million, and equity of $15 million. The asset duration is six years and the duration of the liabilities is four years. Market interest rates are 10 percent. Tree Row Bank wishes to hedge the balance sheet with Treasury bond futures contracts, which currently have a price quote of $95 per $100 face value for the benchmark 20-year, 8 percent coupon bond underlying the contract, a market yield of 8.5295 percent, and a duration of 10.3725 years. (LG 24-2, LG 24-3) d. If the bank had hedged with Treasury bill futures contracts that had a market value of $98 per $100 of face value and a duration of 0.25 year, how many futures contracts would have been necessary to fully hedge the balance sheet? e. What additional issues should be considered by the bank in choosing between T-bond or T-bill futures contracts?Tree Row Bank has assets of $150 million, liabilities of $135 million, and equity of $15 million. The asset duration is six years and the duration of the liabilities is four years. Market interest rates are 10 percent. Tree Row Bank wishes to hedge the balance sheet with Treasury bond futures contracts, which currently have a price quote of $95 per $100 face value for the benchmark 20-year, 8 percent coupon bond underlying the contract, a market yield of 8.5295 percent, and a duration of 10.3725 years. (LG 24-2, LG 24-3) a. Should the bank go short or long on the futures contracts to establish the correct macrohedge? b. How many contracts are necessary to fully hedge the bank? c. Verify that the change in the futures position will offset the change in the cash balance sheet position for a change in market interest rates of plus 100 basis points and minus 50 basis points.