Which of the following statements regarding forward rate agreements (FRAS) is false? O An agreement to receive at the FRA rate locks in a forward deposit rate O The value of a FRA is the same whether it is settled in advance or in arrears O FRA is equivalent to a forward contract on a future interest rate O The payoff on a FRA is known at the time the contract is initiated

Which of the following statements regarding forward rate agreements (FRAS) is false? O An agreement to receive at the FRA rate locks in a forward deposit rate O The value of a FRA is the same whether it is settled in advance or in arrears O FRA is equivalent to a forward contract on a future interest rate O The payoff on a FRA is known at the time the contract is initiated

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter13: Investments And Long-term Receivables

Section: Chapter Questions

Problem 27E: (Appendix 13.1) Derivatives Anglar Company has a 3 million, 7% bank loan from Castle Rock Bank. On...

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24.When is it considered that the interest rate stated on the note is unrealistic?I. The note bears an interest rate that is significantly different from prevailing interest rate for similar notes.II. The face value of the note is significantly different from the market value of the consideration given up in exchange for the note. a. I only b. II only c. Either I or II d. Neither I nor II
A6) Finance What is a forward exchange rate? When does deliv- ery occur on a 90-day forward contract?
12.4 Which of the following is not a characteristic of a short-term note payable?A. Payment is due in less than a year.B. It bears interest.C. It can result from an accounts payable conversion.D. It is reported on the balance sheet under noncurrent liabilities.
17.Which of the following statements is/are true?Statement I. Generally, the tenor of the investment also defines the riskiness of the repayment of debt.Statement II. The longer the life of the debt, the riskier the repayment. Hence, the interest rate is lower.Statement III. The term tenor describes the length of time remaining in the life of a financial contract. a. II only b. III only c. I and III d. II and III
(Appendix 13.1) Derivatives Danburg. Company has a 5 million, 9% bank loan outstanding with its local bank. On January 1, 2019, when the loan has 4 years remaining, Danburg contracts with Bradford Investment Bank to enter into a 4-year interest-rate swap with a 5 million notional amount. Danburg agrees to receive from Bradford a fixed interest rate of 9% and to pay Bradford an interest amount each year that is variable based on the LIBOR interest rate at the beginning of the year. The interest payments are made at year-end. The applicable interest rate on the swap is reset each year after the annual interest payment is made. The LIBOR interest rate is 8.6% and 9.5% at the beginning of 2019 and 2020, respectively. The 3-year fixed interest rate is 10% at December 31, 2019, and the 2 year rate is 8% at December 31, 2020. Required: 1. Prepare the journal entries of Danburg for the bank loan and derivative for 2019 and 2020. Round calculations to the nearest dollar. 2. Prepare the appropriate disclosures in Danburgs financial statements for 2019 and 2020.
(Appendix 13.1) Derivatives Anglar Company has a 3 million, 7% bank loan from Castle Rock Bank. On January 1, 2019, when the 3 million loan has 3 years remaining, Anglar contracts with Susan Investment Bank to enter into a 3-year interest rate swap with a 3 million notional amount. Anglar agrees to receive from Susan a fixed interest rate of 7% and to pay Susan an interest amount each year that is variable based on the LIBOR interest rate at the beginning of the year. The interest payments are made at year-end. The applicable interest rate on the swap is reset each year after the annual interest payment is made. The LIBOR interest rate is 6.6% at the beginning of 2019. The 3-year fixed interest rate is 8% at December 31, 2019. Required: 1. Prepare the journal entries of Anglar for the bank loan and derivative for 2019. Round answers to the nearest dollar. 2. Prepare the appropriate disclosures in Anglars financial statements for 2019.
4. Assume that Crimbring opted to carry this note at its fair value. What should be the value of the note on Crimbring’s December 31, 20X1, balance sheet if the market interest rate is then 12%? Assume that the December 31, 20X1, payment has been made. 5. Prepare the entry that Crimbring would make on December 31, 20X1, to record the note at its fair value.
#51 When an investor's accounting period ends on a date that does not coincide with an interest receipt date for bonds held as an investment, the investor must Question 51 options: a make an adjusting entry to debit Interest Receivable and to credit Interest Revenue for the amount of interest accrued since the last interest receipt date. b make an adjusting entry to debit Interest Receivable and to credit Interest Revenue for the total amount of interest to be received at the next interest receipt date. c notify the issuer and request that a special payment be made for the appropriate portion of the interest period. d do nothing special and ignore the fact that the accounting period does not coincide with the bond's interest period.
9) Exercise A-5 (Static) Derivatives; interest rate swap; fixed rate debt; extended method [LOA–6] On January 1, 2021, LLB Industries borrowed $200,000 from Trust Bank by issuing a two-year, 10% note, with interest payable quarterly. LLB entered into a two-year interest rate swap agreement on January 1, 2021, and designated the swap as a fair value hedge. Its intent was to hedge the risk that general interest rates will decline, causing the fair value of its debt to increase. The agreement called for the company to receive payment based on a 10% fixed interest rate on a notional amount of $200,000 and to pay interest based on a floating interest rate. The contract called for cash settlement of the net interest amount quarterly. Floating (LIBOR) settlement rates were 10% at January 1, 8% at March 31, and 6% at June 30, 2021. The fair values of the swap are quotes obtained from a derivatives dealer. Those quotes and the fair values of the note are as follows: January 1 March 31…
Question 3 Company X has issued fixed-rate debt and wishes to "unlock" its interest rate exposure as it believes variable rates may decline. The company enters into an interest rate swap whereby it agrees to receive a fixed rate of interest, and pay a variable rate referenced to LIBOR and based on a notional amount that corresponds to the principal amount of the debt. Which of the folllowing statement is false.? the company may be impacting by reference rate reform and therefore should consider the implications of ASC 848 the transaction the company is contemplating may qualify as a fair value hedge in order to achieve hedge accounting, the company will need to address a number of hedge accounting requirements, including documenting its objectives, the method of testing effectiveness among other matters. interest rate risk is not an eligible risk for hedge accounting purposes since it is clearly and closely related to the economic…
QUESTION 7 Which type of short-term loan is secured with Treasury bills as collateral? A. Federal funds B. Repurchase agreements C. Commercial paper D. Certificates of deposit
17. Which of the following statements is true? Select one: a. Simple interest relates to future value whereas compound interest relates to present value b. Simple interest pays interest only on a fixed principal amount whereas compound interest also pays interest on interest c. Simple interest relates to present value whereas compound interest relates to future value d. Simple interest applies when an investor receives payments and compound interest applies when an investor makes payments