A $1,000 par value bond was issued 20 years ago at a 12 percent coupon rate. It currently has 15 years remaining to maturity. Interestrates on similar obligations are now 10 percent. Assume Ms. Bright bought the bond three years ago when it had a price of $1,020Further assume Ms. Bright paid 25 percent of the purchase price in cash and borrowed the rest (known as buying on margin). Sheused the interest payments from the bond to cover the interest costs on the loan.a. What is the current price of the bond? Use Table 16-2. (Input your answer to 2 decimal places.)Price of the bondb. What is her dollar profit based on the bond's current price? (Do not round intermediate calculations and round your answer to 2decimal places.)Dollar profitc. How much of the purchase price of $1,020 did Ms. Bright pay in cash? Do not round intermediate calculations and round youranswer to 2 decimal places.)Purchase price paid in cash$255.00d. What is Ms. Bright's percentage return on her cash investment? Divide the answer to part b by the answer to part c. (Do not roundIntermediate calculations. Input your answer as a percent rounded to 2 decimal places.) Table 16-2 Interest rates and bond prices (face value is $1,000 and annualcoupon rate is 12%)B234567ACDRate in the Market (%)-Annual Yield to Maturity*8%10%12%14%$1,037.72$1,018.59 $1,000.00 $981.92$1,345.84$1,153.72$1,429.64 $1,182.56Years to Maturity1152516%$964.33$1,000.00 $875.91 $774.84$1,000.00 $861.99$755.33G=+PV(F2/2,A5*2,-120/2,-1000)+PV(rate,nper,pmt [fv])

Bond price refers to the present value of the future payments in a discounted form that reflects the…

A $1,000 par value bond was issued 20 years ago at a 12 percent coupon rate. It currently has 15 years remaining to maturity. Im rates on similar obligations are now 10 percent. Assume Ms. Bright bought the bond three years ago when it had a price of $1,0 Further assume Ms. Bright paid 25 percent of the purchase price in cash and borrowed the rest (known as buying on margin). S used the interest payments from the bond to cover the interest costs on the loan. a. What is the current price of the bond? Use Table 16-2. (Input your answer to 2 decimal places.) Price of the bond b. What is her dollar profit based on the bond's current price? (Do not round intermediate calculations and round your answer decimal places.) Dollar profit

A $1,000 par value bond was issued 20 years ago at a 12 percent coupon rate. It currently has 15 years remaining to maturity. Im rates on similar obligations are now 10 percent. Assume Ms. Bright bought the bond three years ago when it had a price of $1,0 Further assume Ms. Bright paid 25 percent of the purchase price in cash and borrowed the rest (known as buying on margin). S used the interest payments from the bond to cover the interest costs on the loan. a. What is the current price of the bond? Use Table 16-2. (Input your answer to 2 decimal places.) Price of the bond b. What is her dollar profit based on the bond's current price? (Do not round intermediate calculations and round your answer decimal places.) Dollar profit

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter13: Long-term Liabilities

Section: Chapter Questions

Problem 3EA: Krystian Inc. issued 10-year bonds with a face value of $100,000 and a stated rate of 4% when the...

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A $1,000 par value bond was issued 30 years ago at a 12 percent coupon rate. It currently has 25 years remaining to maturity. Interest rates on similar obligations are now 8 percent. Assume Ms. Bright bought the bond three years ago when it had a price of $1,005. Further assume Ms. Bright paid 30 percent of the purchase price in cash and borrowed the rest (known as buying on margin). She used the interest payments from the bond to cover the interest costs on the loan. a. What is the current price of the bond? Use Table 16-2. (Input your answer to 2 decimal places.) b. What is her dollar profit based on the bond’s current price? (Do not round intermediate calculations and round your answer to 2 decimal places.) c. How much of the purchase price of $1,005 did Ms. Bright pay in cash? (Do not round intermediate calculations and round your answer to 2 decimal places.) d. What is Ms. Bright’s percentage return on her cash investment? Divide the answer to part b by the…
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