INVESTMENTS-CONNECT PLUS ACCESS
11th Edition
ISBN: 2810022611546
Author: Bodie
Publisher: MCG
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Chapter 14, Problem 1CP
a.
Summary Introduction
To evaluate: The sinking fund provision
Introduction:
Sinking fund factor is one of the ratios used to calculate the
b.
Summary Introduction
To evaluate: The impact of sinking fund provision on expected average life, total principal and interest payments of the proposed security.
Introduction:
Sinking fund factor is one of the ratios used to calculate the future value. This future value is related to the series of equal annual cash flows.
c.
Summary Introduction
To evaluate: The rationale for demanding a sinking fund provision.
Introduction:
Sinking fund factor is one of the ratios used to calculate the future value. This future value is related to the series of equal annual cash flows.
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Students have asked these similar questions
In order to measure the purchase price of an investment in bonds, which of the following time value of money concepts is used?
Group of answer choices
the future value of $1
the present value of an ordinary annuity
all of these
the future value of an ordinary annuity
From the table below, answer comprehensively the following subparts:
a. Which plan do you prefer? Why?
b. How does duration affect the future value of an annuity?
c. How does compounding period affect the future value of an annuity?
Assuming the investment is appropriately recognized as a financial asset intended to collect contractual cash flows and also to sell the bonds in open market: How much is the interest receivable to be recognized on December 31, 2020?
Chapter 14 Solutions
INVESTMENTS-CONNECT PLUS ACCESS
Ch. 14 - Prob. 1PSCh. 14 - Prob. 2PSCh. 14 - Prob. 3PSCh. 14 - Prob. 4PSCh. 14 - Prob. 5PSCh. 14 - Prob. 6PSCh. 14 - Prob. 7PSCh. 14 - Prob. 8PSCh. 14 - Prob. 9PSCh. 14 - Prob. 10PS
Ch. 14 - Prob. 11PSCh. 14 - Prob. 12PSCh. 14 - Prob. 13PSCh. 14 - Prob. 14PSCh. 14 - Prob. 15PSCh. 14 - Prob. 16PSCh. 14 - Prob. 17PSCh. 14 - Prob. 18PSCh. 14 - Prob. 19PSCh. 14 - Prob. 20PSCh. 14 - Prob. 21PSCh. 14 - Prob. 22PSCh. 14 - Prob. 23PSCh. 14 - Prob. 24PSCh. 14 - Prob. 25PSCh. 14 - Prob. 26PSCh. 14 - Prob. 27PSCh. 14 - Prob. 28PSCh. 14 - Prob. 29PSCh. 14 - Prob. 30PSCh. 14 - Prob. 31PSCh. 14 - Prob. 1CPCh. 14 - Prob. 2CPCh. 14 - Prob. 3CPCh. 14 - Prob. 4CPCh. 14 - Prob. 5CP
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- 1) Define liabilities. Provide three examples. 2) Define bond discounts and premiums. Is 2022 a good time to purchase interest-sensitive securities? Please explain. 3) Distinguish between the straight line and effective interest methods. Which is acceptable under GAAP?arrow_forwardWhich of the following is the best explanation of what the call premium is? Group of answer choices The amount above the face value an investor must pay to purchase the bond. The additional amount above the face value that the company must pay to repay the bond early. The additional amount above the market price that a company must pay to repay the bond early. The amount above the market price that an investor must pay to purchase the bond.arrow_forwardWhich of the following is a current liability? Select one: O a. A long-term debt maturing currently, which is to be paid with cash in a sinking fund O b. A long-term debt maturing currently, which is to be converted into ordinary shares O c. None of these O d. A long-term debt maturing currently, which is to be retired with proceeds from a new debt issuearrow_forward
- What is the effective interest rate of a bond or other debt instrument measured at amortized cost? Select the correct response: The interest rate currently charged by the entity or by others for similar debt instruments (i.e., similar remaining maturity, cash flow pattern, currency, credit risk, collateral, and interest basis). The interest rate that exactly discounts estimated future cash payments or receipts through the expected life of the debt instrument or, when appropriate, a shorter period to the net carrying amount of the instrument. The basic, risk-free interest rate that is derived from observable government bond prices The stated coupon rate of the debt instrument.arrow_forwardUse IFRS 9 to determine how to subsequently measure the following financial assets. Three choices of measurement basis are amortized cost, fair value through other comprehensive income, and fair value through profit or loss. Provide justification for your choice. Long-term loans that are held for collecting contractual cash flows till their maturities, but may be subsequently sold if the loans’ credit risk substantially increases. Investments in bonds that are held for collecting contractual cash flows, and may be subsequently sold to re-invest the cash in financial assets with a higher return. Subprime (high risk) mortgage loans that were originated by a mortgage-broker firm that always sell these loans to banks right after their origination. Forward contracts that an EU bank purchased to hedge the exposure to changes in fair value of US$-denominated loans. Investment in bonds that are convertible into common stock of the bond issuer. Investment in bonds that pay a variable market…arrow_forwardWhich is incorrect regarding annuities? A. Annuities do not use the pooling technique to spread risk B. An owner may change the annuity date, the beneficiary, or the settlement option C. Once the payout period begins, the annuitant receives periodic payments D. The accumulation period is the period prior to the annuitization date 6.arrow_forward
- A funding component is O the total funding required for a specified decision point O a long-term source of capital O a collateral agreement, such as pledging an asset as security for a mortgage bond O an ancillary requirement on a loan that affects its risk, such as a restrictive covenantarrow_forwardWhat determines the anticipated interest rate payout for an investment?arrow_forwardWhich of the following characteristics is a necessary feature for pricing a set of cash flows as an ordinary annuity? Group of answer choices The period of time between each cash flow must not vary. More than one of the other options are correct. The cash flows must not be a fixed, regular amount. The cash flows must occur on a yearly basis.arrow_forward
- Assuming the investment is appropriately recognized as a financial asset intended to collect contractual cash flows and also to sell the bonds in open market: How much interest income is to be recognized on December 31, 2020?arrow_forwardIn hedging, interest rate swap (IRS) can be used to hedge against rising rates, falling rates, manage asset-liability durationgaps, protecting revenue and lock-in cost of borrowing.arrow_forwardWhen do you release a performance guarantee/bond?arrow_forward
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