Your investment department has researched possible investments in corporate debt securities. Among the available investments arethe following $100the last few weeks. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tablesprovided.)million bond issues, each dated January 1, 2018. Prices were determined by underwriters at different times duringCompany Bond Price Stated Rate1-BB Corp. $107 million 15%2.DD Corp. $100 million 14%3. GG Corp. $ 93 million 13%Each of the bond issues matures on December 31, 2037, and pays interest semiannually on June 30 and December 31. For bonds ofsimilar risk and maturity, the market yield at January 1, 2018, is 14%.Required:Other things being equal, which of the bond issues offers the most attractive investment opportunity if it can be purchased at theprices stated? The least attractive?Most attractive investmentLeast attractive investment

Calculate price of the bonds for Corporation BB:

Answered: Your investment department has…

Financial Accounting

14th Edition

ISBN:9781305088436

Author:Carl Warren, Jim Reeve, Jonathan Duchac

Publisher:Carl Warren, Jim Reeve, Jonathan Duchac

Chapter15: Investments And Fair Value Accounting

Section: Chapter Questions

Problem 4E

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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?
Chung Inc. issued $50,000 of 3-year bonds on January 1, 2018, with a stated rate of 4% and a market rate of 4%. The bonds paid interest semi-annually on June 30 and Dec. 31. How much money did the company receive when the bonds were issued? The bonds would be quoted at what rate?
The University Club recently issued 1,500,000 of 10-year, 9% bonds at an effective interest rate of 10%. Bond interest is payable annually. You have been asked to calculate the issuance price of the bonds and prepare amortization schedules for any discount or premium. The worksheet BONDS has been provided to assist you. Note that the worksheet contains a scratch pad at the bottom that has been preprogrammed to automatically compute and display the relevant cash flows needed for bond pricing.
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.
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?
Your investment department has researched possible investments in corporate debt securities. Among the available investments are the following $100 million bond issues, each dated January 1, 2018. Prices were determinedby underwriters at different times during the last few weeks.Company Bond Price Stated Rate1. BB Corp. $109 million 11%2. DD Corp. $100 million 10%3. GG Corp. $ 91 million 9%Each of the bond issues matures on December 31, 2037, and pays interest semiannually on June 30 and December31. For bonds of similar risk and maturity, the market yield at January 1, 2018, is 10%.Required:Other things being equal, which of the bond issues offers the most attractive investment opportunity if it can bepurchased at the prices stated? The least attractive? Why?
FF&T Corporation is a confectionery wholesaler that frequently buys and sells securities to meet various investment objectives. The following selected transactions relate to FF&T’s investment activities during the last twomonths of 2018. At November 1, FF&T held $48 million of 20-year, 10% bonds of Convenience, Inc., purchasedMay 1, 2018, at face value. Management has the positive intent and ability to hold the bonds until maturity.FF&T’s fiscal year ends on December 31.Nov. 1 Received semiannual interest of $2.4 million from the Convenience, Inc., bonds.Dec. 1 Purchased 12% bonds of Facsimile Enterprises at their $30 million face value, to be held untilthey mature in 2024. Semiannual interest is payable May 31 and November 30.31 Purchased U.S. Treasury bills to be held until they mature in two months for $8.9 million.31 Recorded any necessary adjusting entry(s) relating to the investments.The fair values of the investments at December 31 were:Convenience bonds $44.7…
The following table lists several corporate bonds issued during a particular quarter. Company AT&T Bank ofAmerica GeneralElectric GoldmanSachs Verizon WellsFargo Time toMaturity(years) 10 10 2 3 8 7 AnnualRate (%) 4.40 3.00 4.25 7.15 4.15 3.50 If the General Electric bonds you purchased had paid you a total of $8,680 at maturity, how much did you originally invest? (Round your answer to the nearest dollar.)
The following table lists several corporate bonds issued during a particular quarter. Company AT&T Bank ofAmerica GeneralElectric GoldmanSachs Verizon WellsFargo Time toMaturity(years) 10 10 2 3 8 7 AnnualRate (%) 2.40 3.00 4.25 7.15 6.15 2.50 If the General Electric bonds you purchased had paid you a total of $8,680 at maturity, how much did you originally invest? (Round your answer to the nearest dollar.) $ The following table lists several corporate bonds issued during a particular quarter. Company AT&T Bank ofAmerica GeneralElectric GoldmanSachs Verizon WellsFargo Time toMaturity(years) 10 10 2 3 8 7 AnnualRate (%) 3.40 4.00 4.25 6.15 6.15 3.50 Would Bank of America or Verizon pay the most total interest on a $5,000 bond at maturity? How much interest would that be? Bank of America would pay $ in interest on a $5,000 bond at maturity. Verizon would pay $ in interest on a $5,000 bond at maturity. So, we see would pay the most interest on…
Use the financial statement effects template to record the accounts and amounts for the following four transactions involving investments in marketable debt securities classified as available-for-sale securities. Assume that these transactions occur in 2016 (before the new rules for securities went into effect).a. Loudder Inc. purchases 5,000 bonds with a face value of $1,000 per bond. The bonds are purchased at par for cash and pay interest at a semi-annual rate of 4%.b. Loudder receives semi-annual cash interest of $200,000.c. Year-end fair value of the bonds is $978 per bond.d. Shortly after year-end, Loudder sells all 5,000 bonds for $970 per bond.Use negative signs with answers, if appropriate.
The following table lists several corporate bonds issued during a particular quarter. Company AT&T Bank ofAmerica GeneralElectric GoldmanSachs Verizon WellsFargo Time to Maturity (years) 10 10 2 3 8 7 Annual Rate (%) 3.40 4.00 4.25 6.15 5.15 4.50 If the General Electric bonds you purchased had paid you a total of $8,680 at maturity, how much did you originally invest? (Round your answer to the nearest dollar.) $
Agee Technology, Inc., issued 9% bonds, dated January 1, with a face amount of $400 million on July 1, 2018, at a price of $380 million. For bonds of similar risk and maturity, the market yield is 10%. Interest is paid semiannually on June 30 and December 31.What would be the amount(s) related to the bonds that Agee would report in its statement of cash flows for the year ended December 31, 2018, if it uses the indirect method?

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