Two years ago, Alwin Industries issued a 20-year bond with a coupon rate of 6% (with semiannual coupon payments)and a face value of $1,000. When issued, these bonds received a rating of BBB from Standard and Poor's. However,due to recent financial improvements, the bonds have been upgraded to AA. Yields on AA-rated long-term bonds arecurrently 7.4% and yields on BBB - bonds are 8.2 % (with semiannual compounding on each). Find the current price ofthe upgraded bond?

The price of a bond can be determined by adding the present value of the bond's future cash flows…

Answered: Two years ago, Alwin Industries issued…

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...

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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.
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?
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?
Waylan Sisters Inc. issued 3-year bonds with a par value of $100,000 and a 6% annual coupon when the market rate of interest was 5%. If the bonds sold at 102.438, how much cash did Williams Sisters Inc. receive from issuing 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?
Gingko Inc. issued bonds with a face value of $100,000, a rate of 7%, and a 10-yearterm for $103,000. From this information, we know that the market rate of interest was ________. A. more than 7% B. less than 7% C. equal to 7% D. equal to 1.3%
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?
OShea Inc. issued bonds at a face value of $100,000, a rate of 6%, and a 5-year term for $98,000. From this information, we know that the market rate of interest was ________. A. more than 6% B. less than 6% C. equal to 6% D. cannot be determined from the information given.
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?
One year ago, Berardi corporation issued a series of 13% semiannual coupon callable bonds with par value of $1,000 and maturity of ten years with the provision that the bond to be called in 6 years. The call price of the bonds is $1,065 per bond and currently the bonds are traded at $1,270 per bond in the bond market. What is the Berardi corporation bonds’ nominal yield to maturity? What is the Berardi corporation bond's nominal yield to call?
Four years ago, Augie's Apple Farm, Inc. issued new 20 year bonds with a 4.2% coupon rate, compounded semi-annually. The bonds have a par value of $1,000. The market's required rate of retum on similar securities at the time of issuance was 3.8%, compounded semi-annually. The bond indenture indicates that the call price is $1,090. Today, the yield to maturity on 16 year bonds is 2.6%, compounded semi-annually. You purchased the bond 4 years ago when it was issued. Today, Augie's issued a statement declaring that the bond has been called. a. Calculate the price you paid for the bond when you purchased it four years ago. b. Calculate the rate of return you eamed while holding the bond over the 4 year period given that it has been called. c. Calculate the rate of retum you would have earned over the 4 year period if the bond had NOT been callable and you sold it at today's market price.
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