Assume that three years ago, you purchased a 10-year corporate bond that pays 9.5 percent. The purchase price was $1,000. Also, assume that today comparable bonds are paying 8 percent. a ) What is the annual dollar amount of interest that you receive from your bond investment? (Omit the "$" sign in your response.) Amount of interest $ b) Assuming that comparable bonds are paying 8 percent, what is the approximate market price for which you could sell your bond? (Round your answer to 2 decimal places. Omit the "$" sign in your response.) Market price $ c-1) Did the bond increase or decrease in value? multiple choice 1 Decreased in value. Increased in value. c-2) Why did the bond increase or decrease in value? multiple choice 2 Because market rates decreased. Because market rates increased.

Assume that three years ago, you purchased a 10-year corporate bond that pays 9.5 percent. The purchase price was $1,000. Also, assume that today comparable bonds are paying 8 percent. a ) What is the annual dollar amount of interest that you receive from your bond investment? (Omit the "$" sign in your response.) Amount of interest $ b) Assuming that comparable bonds are paying 8 percent, what is the approximate market price for which you could sell your bond? (Round your answer to 2 decimal places. Omit the "$" sign in your response.) Market price $ c-1) Did the bond increase or decrease in value? multiple choice 1 Decreased in value. Increased in value. c-2) Why did the bond increase or decrease in value? multiple choice 2 Because market rates decreased. Because market rates increased.

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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Krystian 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?
Assume that three years ago, you purchased a corporate bond that pays 6.50 percent. The face value of the bond was $1,000. Also assume that three years after your bond investment, comparable bonds are paying 7.00 percent. (a) What is the annual dollar amount of interest that you receive from your bond investment? (Do not round intermediate calculations. Round your final answer to 2 decimal places.) Annual interest (b) Assuming that comparable bonds are paying 7.00 percent, what is the approximate dollar price for which you could sell your bond? (Do not round intermediate calculations. Round your final answer to 2 decimal places.) Approximate bond price
San Miguel Company's 18-year, $1,000 par value bonds pay 6.5 percent interest annually. The market price of the bond is $1,105, and your required rate of return is 8.5 percent. a. Compute the bond's expected rate of return. b. Determine the value of the bond to you given your required rate or return. c. Should you purchase the bond? Why or why not? (*You must show your calculation process as well.)
3. Assume you purchased a bond for $9,186. The bond pays $300 interest every six months. You sell the bond after 18 months for $10,000. Calculate the following: a. Income. b. Capital gain (or loss). c. Total return in dollars and as a percentage of the original investment. Review Only Click the icon to see the Worked Solution. a. The current income is $ (Round to the nearest dollar.) b. The capital gain (or loss) is $ (Enter a loss as a negative number and round to the nearest dollar.) c. The total return in dollars is $ (Round to the nearest dollar.) The total return as a percentage of the original investment is %. (Enter as a percentage and round to two decimal places.)
A) You invest OMR 900 in a bond which gives 9% interest over a period of 2 years, the compounding is done quarterly. How much will be the value of the investment? Select one: a. 1053.24 b. 1254.74 c. 1075.34 d. 753.24 B) Which of the statements are not correct Select one: a. Profits refers to earnings before Interest and Taxes b. Investment decisions relate to pattern of financing c. Dividend pay out ratio refers to what proportion is paid to shareholders d. Borrowed funds are relatively cheaper than shareholders’ funds
Assume that you have two bond investments and the information follows: Bond A has a par value of $8,000, interest paid semi annual, maturity 2 years, stated interest rate is 6%. Bond B has a par value of $8,000, interest paid semi annual, maturity 10 years, stated interest rate is 6%. The interest rates are increasing to 7%. Assume that you can only sell one of the bonds, which bond will you sell before the interest rate changes to 7%? Explain and support your answer with a present value calculation.
The Saleemi Corporation's $1,000 bonds pay 6 percent interest annually and have 11 years until maturity. You can purchase the bond for $1,155. a. What is the yield to maturity on this bond? b. Should you purchase the bond if the yield to maturity on a comparable-risk bond is 3 percent?
Assume you purchased a high-yield corporate bond with a face value of $1,000 at its current market price of $856. It pays 5.06 percent interest and will mature in eight years. a. Determine the current yield on your bond investment at the time of purchase. Note: Enter your answer as a percent rounded to 2 decimal places. b. Determine the yield to maturity on your bond investment at the time of purchase. Note: Enter your answer as a percent rounded to 2 decimal places.
The Saleemi Corporation's $1000 bonds pay 7 percent interest annually and have 14 years until maturity. You can purchase the bond for $1,095. a. What is the yield to maturity on this bond? b. Should you purchase the bond if the yield to maturity on a comparable-risk bond is 4 percent? ___________________________________________________________________________a. The yield to maturity on the Saleemi bond is ____ %. (Round to two decimal places.)
on Assume that you purchase a 30-year stripped bond with a $100,000 face value. The current bond price is $9,937.73 and the yield is 8%. Calculate the interest revenue during the first year of holding the bond. Calculate amounts to nearest dollar, no $. Answer:
Five years ago, you purchased a $1,000 par value corporate bond with an interest rate of 5 percent. Today, comparable bonds are paying 7 percent. What is the approximate dollar price for which you could sell your bond? (Do not round intermediate calculations. Round your answer to 2 decimal places.) D Approximate market value.
A.) You bought a bond five years ago for $935 per bond. The bond is now selling for $980. It also paid $75 in interest per year, which you reinvested in the bond. Calculate the realized rate of return earned on this bond. B.) Refer again to the bond information in Problem 1. You expect to hold the bond for three more years, then sell it for $990. If the bond is expected to continue paying $75 per year over the next three years, what is the expected rate of return on the bond during this period?