On December 31, 2015, Martin Corp invested in Marlin's 5-year, $200,000 bond with a 5%interest rate for $191,575. The bond pays semiannual interest on June 30th and December31st. The fair values of the bonds at the end of 2016~2018 are $194,500, $194,200, and$195,750. Martin sold its investment in Marlin's bond on July 1, 2019 at 98 ½ (i.e. selling priceis = 98.5% of the face value). Please answer all following questions using Excel Template.1. What is the market interest rate for Marlin's bond?

Market interest rate is the yield to maturity of the bond. It is the rate which the investors will…

Answered: On December 31, 2015, Martin Corp…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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On January 1, 2019, Pancit Company purchased Canton Corporation, P1,000,000, 12% bonds for P1,065,000, a price that yields 10%. The bonds pay interest semi-annually every January 1 and July 1 and they mature on January 1, 2023. At December 31, 2019, each P1,000 bond is selling at P1,055. Assuming that the securities are classified as debt investments at fair value through profit or loss, what is the carrying amount of the debt investment reported on December 31, 2019 statement of financial position? A. P1,065,000B. P1,055,000C. P1,051,163D. P1,000,000
On April 1, 2020 Everjoy Company purchased $80,000 of Miller Corporation's 6% bonds at a purchase price of 96. At the time of purchase the market rate of interest was 8%. Everjoy Company, whose year end is December 31, expects to hold the bonds until their maturity date 5 years from the date of purchase. Interest on the bonds will be paid every April 1 and October 1 until maturity. What is the carrying value (amortized cost) of the bond that Everjoy Company would report on October 1, 2020? O $78,144 O $77,120 O $79,488 O $77,472 O None of the above.
On January 1, 2022, Gorski Corp. purchased $1,000,000, 10% bonds for $1,040,000. These bonds were to mature on January 1, 2032, but were redeemable at 101 any time after December 31, 2025. Interest was payable semiannually on July 1 and January 1. On July 1, 2027, Gorski sold all of the bonds. Bond premium was amortized on a straight-line basis. Gorski’s gain or loss in 2027 was: Select one: a. $30,000 loss b. $12,000 loss c. $10,000 gain d. $8,000 loss e. $12,000 gain
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