Nichols Enterprises has an investment in 31,500 bonds of Elliott Electronics that Nichols accounts for as a security available-for-sale. Elliott bonds are publicly traded, and The Wall Street Journal quotes a price for those bonds of $13 per bond, but Nicholsbelieves the market has not appreciated the full value of the Elliott bonds and that a more accurate price is $19 per bond. Nicholsshould carry the Elliott investment on its balance sheet atMultiple CholceEither $409,500 or $598,500, as elther are defensible valuations.$598,500.$409,500.$504,000, the midpolnt of Nichols's range of reasonably likely valuations of Elliott.

Securities-available-for-sale represents the portion of investment made by the company with the…

Answered: Nichols Enterprises has an investment…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Rupar Financial has an investment in 33,000 bonds of Anand Company that Rupar accounts for as a security available-for-sale. Anand bonds are publicly traded, and The Wall Street Journal quotes a price for those bonds of $14 per bond, but Rupar believes the market does not appreciate the full value of the Anand bonds and that a more accurate price is $24 per bond. Rupar should carry the Anand investment on its balance sheet at: Multiple Choice $627,000, the midpoint of Nichols's range of reasonably likely valuations of Elliott. $792,000. $462,000. Either $462,000 or $792,000, as either are defensible valuations.
You are considering an investment in 30-year bonds issued by Moore Corporation. The bonds have no special covenants. The Wall Street Journal reports that 1-year T-bills are currently earning 0.40 percent. Your broker has determined the following information about economic activity and Moore Corporation bonds: Real risk-free rate = 0.33% Default risk premium = 1.55% Liquidity risk premium = 0.90% Maturity risk premium = 1.05% a. What is the inflation premium?b. What is the fair interest rate on Moore Corporation 30-year bonds? (For all requirements, round your answers to 2 decimal places. (e.g., 32.16)) Inflation Premium= % Fair intrest rate= %
You are considering an investment In 30-year bonds issued by Moore Corporation. The bonds have no special covenants. The Wall Street Journal reports that 1-year T-bills are currently earning 1.40 percent. Your broker has determined the following Information about economic activity and Moore Corporation bonds: Real risk-free rate = 0.60% Default risk premium = 1.30% Liquidity risk premium = 0.80% Maturity risk premium = 1.90% a. What is the inflation premium? (Round your answer to 2 decimal places.) Expected IP b. What is the fair interest rate on Moore Corporation 30-year bonds? (Round your answer to 2 decimal places.) Fair Interest rate
On January 1, 2018, Brandon Electronics issued $85 million of 11.5% bonds, dated January 1. The market yieldfor bonds of maturity issued by similar firms in terms of riskiness is 12.25%. How can Brandon sell debt payingonly 11.5% in a 12.25% market?
If a company issues $15,000,00 worth of bonds with a face interest rate equal to the market interest rate, the bonds will sell at an amount Group of answer choices A)less than $15,000,000. b)equal to $15,000,000. C)greater than $15,000,000. D)that can’t be determined from the information provided in the problem.
You are considering an investment in 30-year bonds issued by Green Corporation. The bonds have no special covenants. The Wall Street Journal reports that 1-year T-bills are currently earning 5.25 percent. Your broker has determined the following information about economic activity and Green Corporation bonds: Real risk-free rate = 2.25% Default risk Premium = 1.15% Liquidity risk premium = 0.50% Maturity risk premium = 1.75% a) What is the inflation premium? b) What is the fair interest rate on Green Corporation 30-year bonds?
You are considering an investment in 30-year bonds issued by Moore Corporation. The bonds have no special covenants. The Wall Street Journal reports that 1-year T-bills are currently earning 1.50 percent. Your broker has determined the following information about economic activity and Moore Corporation bonds: Real risk-free rate = 0.50% Default risk premium = 1.40% Liquidity risk premium = 1.00% Maturity risk premium = 2.00% a. What is the inflation premium? b. What is the fair interest rate on Moore Corporation 30-year bonds? Note: Round your percentage answers to 2 decimal places (ie., 0.1234 should be entered as 12.34). Expected inflation premium Fair interest rate
Suppose Moody's bond rating agency downgraded the risk rating of the bonds motivating Tanner-UNF to sell the investment on January 2, 2022, for $320 million. Prepare the journal entries to record the sale. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions rounded to 2 decimal places (i.e., 5,500,000 should be entered as 5.50).) 1)Record the entry to adjust to fair value on the date of sale. 2)Record the sale of the bonds on January 2, 2022.
On January 1, 2021, Brandon Electronics issued $85 million of 11.5% bonds, dated January 1. The market yield for bonds of maturity issued by similar firms in terms of riskiness is 12.25%. How can Brandon sell debt paying only 11.5% in a 12.25% market?
Fixed-income securities consist of debt instruments and preferred stock. Bonds are debt securities in which a borrower promises to pay a specified interest rate and principal at a future date. Which of the following types of bonds have the least default risk? Municipal bonds Corporate bonds Treasury bonds Based on the information given in the following statement, answer the questions that follow: In July 2009, Hungary successfully issued 1 billion euros in bonds. The transaction was managed by Citigroup. Who is the issuer of the bonds? Citigroup The Hungarian government Hungary Bank What type of bonds are these? Government bonds Corporate bonds Municipal bonds
WonderWorld Widgets (WWW) needs to raise $75 million in debt. To issue thedebt, WWW must pay its underwriter a fee equal to 3 percent of the issue.The company estimates that other expenses associated with the issue will total$466,000. If the face value of each bond is $1,000, how many bonds must beissued to net the needed $75 million? Assume that the firm cannot issue a fractionof a bond (i.e., half of a bond)—only “whole bonds” can be issued.
East Bank securitises a $50 million pool of its business loans. The asset backed securities (ABS) issued, as a result, come in 3 tranches of bonds: one $10 million tranche with an AAA rating bought by an insurance company fund, a $25 million tranche with a BB rating bought by a superannuation fund and one tranche $15 million with a CCC rating sold to a managed fund. b) Conclude whether East Bank has less credit risk and more funds, as a result of securitization. Explain your answers in details.

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