Chapter 16, Problem 16P

a.

Summary Introduction

To calculate: The current bond price by using the assumptions of semi-annual payments.

Introduction:

Bond:

It is a long-term loan borrowed by corporations, organizations, or the government for the

purpose of raising capital. It is issued at fixed interest depending upon the reputation of the

corporation and also termed as fixed-income security.

b.

Summary Introduction

To calculate: The percentage loss or gain, if the bond was bond at par value by Ms. Robinson.

Introduction:

Profit or Loss:

It refers to the gain or loss arising from the commercial transactions during a specified period of time and used to assess the company’s financial performance.

c.

Summary Introduction

To calculate: The percentage return if the bond is bought by Mr. Pinson at current market value and keeps it till maturity.

Introduction:

Rate of return:

A rate that shows the net profit or loss, an investor earns or loses on the investment over a particular time period is termed as the rate of return.

d.

Summary Introduction

To explain: The reason why the percentage gain is more than the percentage loss.

Introduction:

Profit or Loss:

It refers to the gain or loss arising from the commercial transactions during a specified period of time and is used to assess the company’s financial performance.