Homework Answers
Interest payments does not decrease the book value of the bond liability. Interest is treated as expense and debited to income summary.
3rd option.
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Which of the following statements does not correctly describe the accounting for bonds that were issued...
4.Which one of the following statements about the approach to bond pricing is NOT true? Select...
4.Which one of the following statements about the approach to bond pricing is NOT true? Select one: A. To calculate a bond's price, one needs to calculate the present value of the bond's expected cash flows. B. The value, or price, of any asset is the future value of its cash flows. 6.Which one of the following statements is NOT true? Select one: A. The yield to maturity of a bond is the discount rate that makes the present value...
Which of the following statements is not true? When referring to bonds, expected rate of return...
Which of the following statements is not true? When referring to bonds, expected rate of return and yield to maturity are often used interchangeably. The par value of a corporate bond indicates the payment that the issuer promises to make to the bondholder at maturity. The sum of the present values of an investment's expected future cash flows is known as the investment’s intrinsic value. The restrictive provisions contained in the bond indenture protect the common stockholders. To determine the...
The E. Harris Company issued bonds in March of 2010. When issued, the bonds had 20...
The E. Harris Company issued bonds in March of 2010. When issued, the bonds had 20 years to maturity, a coupon rate of 7.5% and sold for their face value of $1,000. Now, in March of 2020, the bond price has risen to $1,110.40. What is the current interest rate (assume that the bonds make annual coupon payments)?
Which of the following describes what happens when bonds are issued when the market interest rate...
Which of the following describes what happens when bonds are issued when the market interest rate is less than the stated interest rate? Multiple Choice The bonds are issued at a premium. The bonds are issued at less than their face value. o It raises the effectiv It raises the effective interest rate above the stated rate of interest. o o The bands are su The bonds are issued at a premium and the effective interest rate is higher than...
Which of the following statements about bonds and their prices is correct: There is an inverse...
Which of the following statements about bonds and their prices is correct: There is an inverse relationship between interest rates and price. When the coupon rate of the bond is greater than the required, market interest rate, the price of the bond is greater than the face value of the bond. The bond with a greater term to maturity is affected to a greater extent by the change in the interest rate All of the above A) and B) only...
a) TD Waterhouse issued today $29,000,000 in bonds, each bond having a par value of $1,000,...
a) TD Waterhouse issued today $29,000,000 in bonds, each bond having a par value of $1,000, a coupon rate of 4.50%, and a term to maturity of 9 years. All bonds are issued in Australia therefore, they pay semi-annual interest payments. Find the Present Value (Annuity) of all coupon payments or cash flow stream if you purchased today one bond only. b) Now assume that the bond has 5 years to maturity and the market rates are at 3%. What...
QUESTION 21 If bonds were initially issued at a discount, the carrying value of the bonds...
QUESTION 21 If bonds were initially issued at a discount, the carrying value of the bonds on the issuer's books will 1. decrease as the bonds approach their maturity date 2. fluctuate throughout the bonds' life 3. increase as the bonds approach their maturity date 4. remain constant throughout the bonds' life QUESTION 22 Cash flows from issuing and repurchasing stock or issuing and repaying debt are classified as 1. financing activities. 2. borrowing activities. 3. investing activities. 4. operating...
Two years ago bonds were issued which currently still have 10 years until maturity. When issued...
Two years ago bonds were issued which currently still have 10 years until maturity. When issued the bonds were selling at par, and had a 4% coupon (paid annually). If interest rates for that grade of bond are currently 4.25%, what will be the market price of these bonds? Calculate to 2 decimals. (Don't forget US bonds typically have a face value of $1,000). In the USA coupon payments are typically made twice a year. calculate the price of these...
On January 1, 2018, Parker Company issued bonds with a face value of $53,000, a stated...
On January 1, 2018, Parker Company issued bonds with a face value of $53,000, a stated rate of interest of 11 percent, and a five-year term to maturity. Interest is payable in cash on December 31 of each year. The effective rate of interest was 13 percent at the time the bonds were issued. The bonds sold for $49,272. Parker used the effective interest rate method to amortize the bond discount. Required: a. Prepare an amortization table. b. At what...
Tavinona Company issued 1,000; $1,000 bonds for a bond issue of $1,000,000. The bonds were issued...
Tavinona Company issued 1,000; $1,000 bonds for a bond issue of $1,000,000. The bonds were issued for a 10-year term with a coupon rate of 4.5%. The current market rate is 3.5%. Calculate the present (market) value of one bond, then calculate the amount of the bond premium. Multiple Choice $1,473.90; $473.90 $1,049.09; $49.09 $1,090.36; $90.36 $1,083.76; $83.76
Which of the following describes what happens when bonds are issued when the market interest rate is less than the stated interest rate? Multiple Choice The bonds are issued at a premium. The bonds are issued at less than their face value. o It raises the effectiv It raises the effective interest rate above the stated rate of interest. o o The bands are su The bonds are issued at a premium and the effective interest rate is higher than...
QUESTION 21 If bonds were initially issued at a discount, the carrying value of the bonds on the issuer's books will 1. decrease as the bonds approach their maturity date 2. fluctuate throughout the bonds' life 3. increase as the bonds approach their maturity date 4. remain constant throughout the bonds' life QUESTION 22 Cash flows from issuing and repurchasing stock or issuing and repaying debt are classified as 1. financing activities. 2. borrowing activities. 3. investing activities. 4. operating...
On January 1, 2018, Parker Company issued bonds with a face value of $53,000, a stated rate of interest of 11 percent, and a five-year term to maturity. Interest is payable in cash on December 31 of each year. The effective rate of interest was 13 percent at the time the bonds were issued. The bonds sold for $49,272. Parker used the effective interest rate method to amortize the bond discount. Required: a. Prepare an amortization table. b. At what...
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