I did not get question 3 right, and the
number i got is 278.4
please show all the work and details for this question.
Thank you so much
The answer $278.4 is correct as the interest is received on semi-annual basis.
The amortization amount does not form part of the premium as on the given balance sheet date, hence it should be deducted from the original premium & the premium (after such deduction) should be added to the investment. Accordingly,z
Book Value of the investment in bonds: ($ in millions)
Investment amount in bonds | $240 | |
Add: premium on bonds investments: | ||
Original premium ($280 - $240) | $40 | |
(-) Amortization amount as on 31/12/18 | ($1.6) | $38.4 |
Book value | $278.40 |
Amortization amount as on 31/12/2018:
Interest received semi-annually at 6% on $240 million = $7.2 million
Coupon interest comes out to be 4% on $280 million for 6 months = $5.6 million
Amortization amount = $7.2 million - $240 million = $1.6 million
I did not get question 3 right, and the number i got is 278.4 please show...
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