Excel Applications for Accounting Principles
4th Edition
ISBN: 9781111581565
Author: Gaylord N. Smith
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Question
Chapter 11, Problem 7R
To determine
Compute the effective interest rate in order to achieve the stated
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
You are called in as a financial analyst to appraise the bonds of Olsen’s Clothing Stores. The $1,000 par value bonds have a quoted annual interest rate of 13 percent, which is paid semiannually. The yield to maturity on the bonds is 10 percent annual interest. There are 10 years to maturity. Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods.
a. Compute the price of the bonds based on semiannual analysis. (Do not round intermediate calculations. Round your final answer to 2 decimal places.)
b. With 5 years to maturity, if yield to maturity goes down substantially to 8 percent, what will be the new price of the bonds? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)
A 10-year, ₱20,000 bond was issued at a nominal interest rate of 8% with semiannual compounding. Just after the fourth interest payment, the bond will be sold. Assume that an effective interest rate of 10 1/4 % will apply, and calculate the price of the bond.
Solutions manual with formula we are used. Without using Microsoft Excel.
Suppose a bond with no expiration date has a face value of $10,000 and annually pays a fixed amount of interest of $700.
a. In the table provided below, calculate and enter either the interest rate that the bond would yield to a bond buyer at each of the bond prices listed below or the bond price at each of the interest yields shown.
Instructions: Enter your answers in the gray-shaded cells. For bond prices, round your answers to the nearest hundred dollars. For interest yields, round your answers to 2 decimal places.
Chapter 11 Solutions
Excel Applications for Accounting Principles
Ch. 11 - The University Club recently issued 1,500,000 of...Ch. 11 - The bond pricing formula utilizes the NPV (Net...Ch. 11 - Prob. 3RCh. 11 - Prob. 4RCh. 11 - Use the worksheet to compute the bond issue price...Ch. 11 - Use the worksheet to compute the bond issue price...Ch. 11 - Prob. 7RCh. 11 - a. Reset the Data Section to its initial values....
Knowledge Booster
Similar questions
- 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.arrow_forwardKrystian 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?arrow_forwardOcean Adventures issues bonds due in 10 years with a stated interest rate of 10% and a face value of $330,000. Interest payments are made semi-annually. The market rate for this type of bond is 11%. Using a financial calculator or Excel, calculate the issue price of the bonds.arrow_forward
- Given below is information about three RM $5000 par value bonds, each of which pays coupon semiannually. The required rate of return on each bond is 12%. Calculate the value of the bonds and determine whether the bond is selling at discount, premium or par value……. Bond Coupon Rate (%) Maturity (years) 1 10 5 2 12 10 3 14 15 Using the above table, if the company decided to pay coupon annually (12%), calculate the value of the bonds and determine whether the bond is selling at discount, premium or par value Explain the of Bonds available in the market for the Companies to raise fund……Is there any difference in the value of semiannually and annually……arrow_forwardYour company is planning to issue new bonds soon. Your boss gives you the following informationand asks you to calculate the interest rate at which to issue the bonds. Given this information, whatinterest rate do you recommend? Expected Inflation Rate: 3% Interest rate of similar corporations' (AAA rated) 30-year bonds: 6.5% Interest rate of 30 - Year Treasury Bonds: 5.38% Interest rate of 3 -month treasury bills: 4.89% Liquidity - risk premium: 0.03 Instruction: Type ONLY your numericalanswer in the unit of dollars, NO $ sign, NO comma, and round to two decimal places. E.g., if youranswer is $7, 001.56, should type ONLY the number 7001.56, NEITHER 7,001.6, $7001.6, $7,001.6,NOR 7002. Otherwise, Blackboard will treat it as a wrong answer.arrow_forwardImagine a 4 year bond issued by the Treasury with a nominal value of 1000€ and 2,5% coupon paid annually. Calculate the price of the bond (€), on the same day of issuance, knowing that the relevant interest rate for the discount is 1,9% Round to the closest second decimal.arrow_forward
- The table below shows current and expected future one year interest rates, as well as current interest rates on multiyear bonds. Use the table to calculate the liquidity premium for each multiyear bond. Year One - Year Bond Rate Multiyear Bond Rate 12.00% 2.00% 23.00% 5.00% 34.00% 8.00% 46.00% 11.00% 59.00% 12.00% Part 2 The liquidity premiums for each year are given as: (Enter your responses rounded to two decimal places.)arrow_forwardA 15-year municipal bond was issued 5 years ago. Its coupon interest rate is 4%, interest payments are made semiannually, and its face value is $1000. If the current market interest rate is 6.09%, what should be the bond’s price? Note: The issuer of the bond (city, state, company) makes interest payments to the bondholder (at the coupon rate), as well as a final value payment.arrow_forwardThe table below shows current and expected future one-year interest rates, as well as current interest rates on multiyear bonds. Use the table to calculate the liquidity premium for each multiyear bond. Year One-Year Bond Rate Multiyear Bond Rate 1 2.00% 2.00% 2 3.00% 4.00% 3 6.00% 6.00% 4 9.00% 7.00% 5 11.00% 9.00% Part 2 The liquidity premiums for each year are given as: (Enter your responses rounded to two decimal places.)arrow_forward
- Hillside Excursions issues bonds due in 15 years with a stated interest rate of 11% and a face value of $150,000. Interest payments are made semi-annually. The market rate for this type of bond is 8%. Using a financial calculator or Excel, calculate the issue price of the bonds.arrow_forwardThe interest rate on one-year Treasury bonds is 0.8 percent, the rate on two-year T-bonds is 0.9 percent, and the rate on three-year T-bonds is 1.0 percent. Using the expectations theory, compute the expected one-year interest rate in the second year (Year 2 only). Round your answer to one decimal place. % Using the expectations theory, compute the expected one-year interest rate in the third year (Year 3 only). Round your answer to one decimal place. %arrow_forwardCullumber Railroad Co. is about to issue $296,000 of 6-year bonds paying an 11% interest rate, with interest payable annually. The discount rate for such securities is 12%.Click here to view the factor table.(For calculation purposes, use 5 decimal places as displayed in the factor table provided.)In this case, how much can Cullumber expect to receive from the sale of these bonds? (Round answer to 0 decimal places, e.g. 2,525.) Cullumber can expect to receive $enter a dollar amount rounded to 0 decimal placesarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Excel Applications for Accounting PrinciplesAccountingISBN:9781111581565Author:Gaylord N. SmithPublisher:Cengage LearningPrinciples of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax College
Excel Applications for Accounting Principles
Accounting
ISBN:9781111581565
Author:Gaylord N. Smith
Publisher:Cengage Learning
Principles of Accounting Volume 1
Accounting
ISBN:9781947172685
Author:OpenStax
Publisher:OpenStax College