Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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- For a standard U.S. Treasury bond, when are the following characteristics of the bond determined? The amounts of any interest payments. The dates of any interest payments. The bond's market yield. The bond's market price. The amount that the Treasury returns to the bondholder, when the bond matures. The price that the bondholder pays to the Treasury to acquire the bond. The maturity date. 1. 2. Fixed before the bonds are sold and does not change. Fixed when the bonds are sold and does not change. 3. Fluctuates continually.arrow_forwardWhen a company uses the the effective-interest method to amortize a bond discount amortization, the interest expense is equal to a) the market rate multiplied by the beginning-of-period carrying amount of the bonds. b) the market rate of interest multiplied by the face value of the bonds. c) the stated rate multiplied by the beginning-of-period carrying amount of the bonds. d) the stated (nominal) rate of interest multiplied by the face value of the bonds.arrow_forwardhow to calculate this? thank youarrow_forward
- The coupon rate of a bond is typically __________.a. fixed at the time of bond issuanceb.subject to change based on the federal funds ratec.zero in the case of zero - coupon bondsd. Both A and Carrow_forwardHow do you solve portion B and C. I don't understand the calcuations.arrow_forwardBonds that are made payable to whoever holds them; also called unregistered bonds. The contract between the bond issuer and the bondholder; it identifies the rights and obligations of the parties. Bonds that mature at different dates with the result that the entire debt is repaid gradually over a number of years. An obligation requiring a series of periodic payments to the lender. 1. Installment Note 2. Coupon Bonds Bonds that have interest coupons attached to their certificates; the bondholders detach the coupons when they mature and present them to a bank or broker for 3. Market Rate 4. Bond Indenture 5. Convertible Bonds collection. 6. Bearer Bonds Bonds that can be exchanged by the bondholders for a fixed 7. Term Bonds number of shares of the issuing corporation's common stock. 8. Unsecured Bonds 9. Serial Bonds An accounting protocol that allocates interest 10. Effective Interest Rate Method expense over the life of the bonds in a way that yields a constant rate of interest. The…arrow_forward
- Term bonds are a.bonds that give the issuing corporation the option of calling the bonds for redemption before the maturity date. b.bonds that give the holder the option of exchanging the bonds for capital stock of the corporation. c.bonds issued in a series so that a specified amount of the bonds matures each year. d.bonds that all have the same maturity date.arrow_forwardABC company issued a 5 year $200,000 bond. The bond has a stated rate of 6% and the market rate of 8%. The company issued the bond at .91889 or $183,778 on January 1", 2019. AMORTIZATION OF BOND DISCOUNT st H J K Interest on Cash Interest Amortization Carrying Value (K + J) Carrying Year Payment. of Discount. Date Description Debit Credit Value. (A * D) (I - H) (K * E) Jan 1 2019 Jan 1, 2019 June 30, 2019 December 31, 2019 June 30, 2020 December 31, 2020 June 30, 2021 December 31, 2021 June 30, 2022 December 31, 2022 June 30, 2023 December 31, 2023 June 30, 2019 Dec 31, 2019 June 30, 2020 A Bond Par Value Discount on Bond Payable B Coupon Rate Jan 1, 2019 June 30, 2,019 Market Rate Dec 31, 2019 Dec 31, 2020 6month coupon rate (B/2) 6 month market rate (C/2) D June 30, 2020 E Dec 31, 2020 Money Received Discount (A-F) F Dec 31,2023arrow_forwardIn what section of the balance sheet would a bond payable be reported if (a) it is payable within one year and (b) it is payable beyond one year?arrow_forward
- There are certain patterns we should expect to see on a bond amortization table. Complete the following statements regarding these patterns. Item Statements A. Assuming a term bond is issued at a premium, the cash interest payment calculated every period should: B. Assuming a term bond is issued at a premium, the interest expense amount calculated every period using the effective interest method should be C. Assuming a term bond is issued at a premium, the carrying value over time should be D. Assuming a term bond is issued at either a premium or a discount, the carrying value on the issuance date should be equal to the bond'sarrow_forward(b) Prepare the journal entry to record the payment of interest and the discount amortization on December 31, 2022. (Credit account titles are automatically indented when amount is entered. Do not indent manually) Account Titles and Explanation Date Dec. 31. 2022 Debit Creditarrow_forward
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