GB 112/212 MANAGERIAL ACC. W/ACCESS >C<
17th Edition
ISBN: 9781260218831
Author: Libby
Publisher: MCG CUSTOM
expand_more
expand_more
format_list_bulleted
Videos
Question
Chapter 10, Problem 10.2E
To determine
Identify the bond which is less likely to be called if interest rates fall over the next few years.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Suppose a Google.com bond will pay $4,000 ten years from now. If the going interest rate on safe 9-year bonds is 4.20%, how much is the bond worth today?
Group of answer choices
$3,066.38
$2,613.77
$2,887.56
$2,762.17
$2,660.65
Analysis and Application of Knowledge
Rossiana Marie, Inc. lists a bond as Ross 9s34, and shows the price as
selling for 88.875% of its face value. If your required return rate is 10%.
would you buy one of these bonds in 2021? *
5 points
Your answer
Upload Solution: Rossiana Marie, Inc. lists a bond as Ross 9534, and shows 15 points
the price as selling for 88.875% of its face value. If your required return
rate is 10%, would you buy one of these bonds in 2021?
1 Add file
Intal Corporation bonds have a coupon of 14%. pay interest semiannually. Spoints
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?
Your answer
Upload Solution: Intal Corporation bonds have a coupon of 14%. pay
10 points
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?*
1 Add file
BOND PRICING #2 for Borrowing Money Inc
Borrowing Money Inc (BMI) issues a bond on January 1, 2021 with a face value of $400,00O.
The bond has an 7 year maturity date and requires SEMI ANNUAL interest payments. The bond's
stated interest rate is 3% and the current market interest rate is 2%.
Hint : remember to set your expectations
PV tables will be needed. Do not round your PVIF, but you may round answers to whole dollars.
Required :
Prepare the journal entry (in proper form) at issuance of this bond for BMI. Include your journal for
grading on your PDF upload.
To get a preliminary idea of how you did you may enter your calculated amount for cash received at
issuance
Bond Pricing #2, cotinued
Regarding the bond issued by BMI above
Prepare (in good form) the Semi Annual journal entry needed to be recorded by BMI for the cash
payment required.
Upload your journal and calculations on your PDF.
What is the ANNUAL interest expense related to this bond?
Chapter 10 Solutions
GB 112/212 MANAGERIAL ACC. W/ACCESS >C<
Ch. 10 - From the perspective of the issuer, what are some...Ch. 10 - What are the primary characteristics of a bond?...Ch. 10 - Prob. 3QCh. 10 - Differentiate between a bond indenture and a bond...Ch. 10 - Prob. 5QCh. 10 - Prob. 6QCh. 10 - Prob. 7QCh. 10 - Prob. 8QCh. 10 - What is the book value of a bond?Ch. 10 - Prob. 10Q
Ch. 10 - Prob. 11QCh. 10 - Prob. 12QCh. 10 - Prob. 1MCQCh. 10 - Prob. 2MCQCh. 10 - Prob. 3MCQCh. 10 - Prob. 4MCQCh. 10 - Prob. 5MCQCh. 10 - Prob. 6MCQCh. 10 - Prob. 7MCQCh. 10 - Prob. 8MCQCh. 10 - Prob. 9MCQCh. 10 - Prob. 10MCQCh. 10 - Prob. 10.1MECh. 10 - Computing the Price of a Bond Issued at Par LO10-2...Ch. 10 - Understanding Financial Ratios 0-3, 10-6 The...Ch. 10 - Computing the Times Interest Earned Ratio LO10-3...Ch. 10 - Computing the Price of a Bond Issued at a Discount...Ch. 10 - Recording the Issuance and Interest Payments of a...Ch. 10 - Prob. 10.7MECh. 10 - Prob. 10.8MECh. 10 - Prob. 10.9MECh. 10 - Prob. 10.10MECh. 10 - Prob. 10.11MECh. 10 - Prob. 10.12MECh. 10 - Prob. 10.13MECh. 10 - Prob. 10.14MECh. 10 - Prob. 10.1ECh. 10 - Prob. 10.2ECh. 10 - Prob. 10.3ECh. 10 - Computing Issue Prices of Bonds Sold at Par, at a...Ch. 10 - Prob. 10.5ECh. 10 - Prob. 10.6ECh. 10 - Prob. 10.7ECh. 10 - Prob. 10.8ECh. 10 - (Chapter Supplement) Recording and Reporting a...Ch. 10 - Prob. 10.10ECh. 10 - Prob. 10.11ECh. 10 - Explaining Why Debt Is Issued at a Price Other...Ch. 10 - Prob. 10.13ECh. 10 - Prob. 10.14ECh. 10 - Prob. 10.15ECh. 10 - Prob. 10.16ECh. 10 - Prob. 10.17ECh. 10 - Prob. 10.18ECh. 10 - Prob. 10.19ECh. 10 - Prob. 10.20ECh. 10 - Prob. 10.21ECh. 10 - Prob. 10.22ECh. 10 - Prob. 10.23ECh. 10 - Prob. 10.24ECh. 10 - Prob. 10.1PCh. 10 - Prob. 10.2PCh. 10 - Comparing Bonds Issued at Par, at a Discount, and...Ch. 10 - Prob. 10.4PCh. 10 - Prob. 10.5PCh. 10 - Recording and Reporting Bonds Issued at a Discount...Ch. 10 - Recording and Reporting a Bond Issued at a...Ch. 10 - Prob. 10.8PCh. 10 - Prob. 10.9PCh. 10 - Prob. 10.10PCh. 10 - Prob. 10.11PCh. 10 - Prob. 10.12PCh. 10 - Prob. 10.13PCh. 10 - Prob. 10.14PCh. 10 - Prob. 10.15PCh. 10 - Prob. 10.16PCh. 10 - Prob. 10.1APCh. 10 - Prob. 10.2APCh. 10 - Prob. 10.3APCh. 10 - Prob. 10.4APCh. 10 - Prob. 10.5APCh. 10 - Prob. 10.6APCh. 10 - Recording and Reporting a Bond Issued at a Premium...Ch. 10 - Prob. 10.8APCh. 10 - Prob. 10.1CONCh. 10 - Prob. 10.1CPCh. 10 - Prob. 10.2CPCh. 10 - Prob. 10.3CPCh. 10 - Prob. 10.4CPCh. 10 - Prob. 10.5CPCh. 10 - Evaluating an Ethical Dilemma LO 10-1 Assume that...
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- You are considering buying a 30 year bond issued by Microsoft for $95.00. The bond has a par value of $100 and pays a coupon of 7.5% annually. How much interest on interest are you likely to earn on the bond? $225.00 $615.33 $840.33arrow_forwardBOND PRICING #1 for Debt Financing Company Debt Financing Company (DFC) issues a bond on January 1, 2021 with a face value of $2,000,000. The bond has a 15 year maturity date and requires SEMIANNUAL interest payments. The bond's stated interest rate is 3% and the current market interest rate is 4%. Hìnt : remember to set your expectations PV tables will be needed. Do not round your PVIF, but round answers to whole dollars. Required : Prepare the journal entry (in proper form) at issuance of this bond for DFC. Include your journal for grading on your PDF upload. Your multiple step calculations must also be shown .... No work = No Credit To get a preliminary idea of how you did you may enter your calculated amount for cash received at issuancearrow_forwardStart with the partial model in the file Ch04 P24 Build a Model.xlsx onthe textbook’s Web site. A 20-year, 8% semiannual coupon bond with a parvalue of $1,000 may be called in 5 years at a call price of $1,040. The bondsells for $1,100. (Assume that the bond has just been issued.)a. What is the bond’s yield to maturity?arrow_forward
- Question 7 You are interested in buying one corporate bond and your broker has offered two corporate bonds for you to consider: 1. Bond A: paying quarterly coupons, with a maturity date of 1 January 2025, an annual coupon rate of 12% and a bond flat price of $90.0 2. Bond B: paying quarterly coupons, with a maturity date of 1 January 2035, an annual coupon rate of 15% and a bond flat price of $100.0 If the settlement date of both bonds is 1 January 2022, which of these two bonds represents the best investment opportunity? O Bond A O Bond B because its redemption value is higher than Bond A O Bond B O Both Bond A and Bond B as they are identicalarrow_forward1 InJanuary 2021 you purchased a $20,000 bond from Comcast with a 5.5% coupon rate and a 10-year maturity. In July of 2021, you decided you need to sell this bond in the secondary market, and you learned that the rate offered for $20,000 bonds with a 10-year maturity was now 5.2%. How much were you be able to sell your bond for in July 2021?arrow_forwardD ook You find the following corporate bond quotes. To calculate the number of years until maturity, assume that it is currently January 15, 2022. The bonds have a par value of $2,000 and semiannual coupons. Estimated $ Volume Company (Ticker) Coupon Xenon, Incorporated (XIC) Kenny Corporation (KCC) Williams Company (WICO) 5.700 7.150 ?? Maturity January 15, 2037 January 15, 2031 January 15, 2033 Last Price Last Yield 94.219 ?? (000s) ?? 57,365 6.08 48,944 94.765 6.90 43,805 What is the coupon rate for the Williams Company bond? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. nt Coupon rate ences %arrow_forward
- You Answered Correct Answer A life insurance company expects to pay the beneficiary of a policy $3,000,000 in 15 years from today. Suppose the manager of the insurance company wants to immunize her firm against interest rate risk and has two assets available as investments. The assets' information is below: Bond Bond A Bond B Time-to- Maturity 20 years 30 years 694 bonds 345 bonds O714 bonds 144 bonds Coupon Rate Yield 290 bonds 10% 4% 6% 6% How many of Bond should the insurance company purchase to immunize against interest rate risk? Price $1,458.80 $724.70 Duration 11.03 years 15.80 yearsarrow_forward#2 A couple purchased a bond for $950.00 three years ago. The bond pays 7.625% APR with semi-annual coupons with a face value of $1,000. Currently, the bond has exactly 10 years until maturity, and investors seek a return of 12.00% APR on bonds of similar risk. What is the current price of the bond? Submit Answer format: Currency: Round to: 2 decimal places. Hide Hint A couple purchased a bond for $950.00 three years ago. The bond pays 6% APR with semi-annual coupons with a face value of $1,000. Currently, the bond has exactly 10 years until maturity, and investors seek a return of 9% APR on bonds of similar risk. What is the current price of the bond? SOLUTION: Bond Price = PV of Bond Cash Flows Po= = CPN y' -x1- + 1+ Face Value (1+ y')N' APR%x Face Value 6%x$1,000 Coupon CPN = = = $30 per 6 months m 2 y' = y = m 9% 2 = 4.50% per 6 months N' = = Nxm = 10x2 = 20 coupons remaining Po $30 0.045 x(1-(1,045)20) + $1,000 (1.045) 20 = $804.88 KEY POINT: For pricing the bond today, the price…arrow_forwardBOND PRICING #1 for Debt Financing Company Debt Financing Company (DFC) issues a bond on January 1, 2021 with a face value of $2,000,000. The bond has a 15 year maturity date and requires SEMI ANNUAL interest payments. The bond's stated interest rate is 3% and the current market interest rate is 4%. Hint: remember to set your expectations PV tables will be needed. Do not round your PVIF, but round answers to whole dollars. Required: Prepare the journal entry (in proper form) at issuance of this bond for DFC. Include your journal for grading on your PDF upload. Your multiple step calculations must also be shown . . To get a preliminary idea of how you did you may enter your calculated amount for cash received at issuancearrow_forward
- Understanding Bond Pricing Suppose your friend tells you that she recently purchased a 10-year $7,000.00 bond with a 5% coupon. A month later, she saw it quoted at 105:4, but she does not know what this means. You can tell by the way the bond is priced that she has a U.S. Treasury or agency, corporate or municipal bond; otherwise it would have been priced 105, 105 1/8, 105.125 . You explain that the market price of her bond is now 105.13;7,105;7,358.75;738,675, meaning it is now a premium or discount bond. Based on the market price of the bond you calculated, you can tell that market interest rates have gone up or down since the bond was issued. The current yield of the bond is now . answer choice are bolded and italicarrow_forwardYour uncle would like to limit his maturity risk and his default risk, but he would still like to invest in corporate bonds. Which of the possible bonds listed below best satisfies your uncle's criteria? OA. 30 year U.S.. Government Treasury Bond B. BBB bond with 10 years to maturity. OC. AAA bond with 20 years to maturity. D. AAA bond with 10 years to maturity.arrow_forwardHere are data on $1,000 par value bonds issued by Microsoft, GE Capital, and Morgan Stanley Assume you are thinking about buying these bonds Answer the following questions a. Assuming interest is paid annually, calculate the values of the bonds if your required rates of return are as follows Microsoft, 7 percent, GE Capital, 15 percent, and Morgan Stanley 10 percent where 0 b. The bonds are selling for the following amounts Microsoft GE Capital Morgan Stanley $850 $738 $561 What are the expected rates of return for each bond? c. How would the value of the bonds change it (1) your required rate of notumn (r) increased 2 percentage points or (2) decreased 2 percentage points? d. Explain the implications of your answers in part (c) in terms of interest rate nsk, premium bonds, and discount bonds e. Should you buy the bonds? Explain a. If your required rate of return on the Microsoft bond is 7 percent, what is the value of the bond? (Round to the nearest cont) Review Coupon interest rate…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:9781337514835
Author:MOYER
Publisher:CENGAGE LEARNING - CONSIGNMENT
Bonds Explained for Beginners | Bond Types 101; Author: TommyBryson;https://www.youtube.com/watch?v=yuKmHTgqZ5o;License: Standard Youtube License