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Bond Valuation

Accounting Problems

On Jan 1, the Cheng Corp purchased $10,000 of 5%, five-year bonds as a long term investment. Interest is paid annually. The company is not involved in active trading of securities. A. Record the purchase of the bonds for $10,000. B. Record the receipt of the first interest payment on the bonds in part A. C. Assuming the com

Balance Sheet Classification - How are these accounts valued?

Use the code letters listed below (a - l) to indicate, for each balance sheet item (1 - 13) listed below the usual valuation reported on the balance sheet. 1. Common stock 2. Prepaid expenses 3. Natural resources 4. Property, plant, and equipment 5. Trade accounts receivable 6. Copyrights 7. Merchandise invento

Treasury Bonds and Notes

1) A six-month $10,000 Treasury bill is selling for $9,844. What is the annual yield according to the discount method? Does this yield understate or over-state the true annual yield? Explain 2) What is the current taxable equivalent yield for an individual in the 35% federal income tax bracket for intermediate bonds (10 or

Journalizing Bonds

Having difficultly journalizing entry to amortize bond premium, interest payment and redemption of bonds.

Given the current $1,000 price of each bond, what is each bond's duration? Given each bond's duration, what is the forecasted change in the value of the bonds? If the rate on comparable bonds 6 %, what are the price and duration of each bond? Based on the duration of each bond, which portfolio is riskier?

1) You owe the following $1,000 bonds: Bond A 4% coupon due in three yrs Bond B 5% coupon due in 5 yrs Bond C 7% coupon due in 10 yrs Currently the structure of yields is positive so that each bond sells for its par value. However, you expect that inflation

Coupon Paying Bond

Duration of a coupon paying bond is: Equal to its number of payments. Less than a zero coupon bond. Equal to the zero coupon bond. Equal to its maturity. None of the above.


It is January 2007 This company is under some pressure and has a strict capital budget of $20 million, so they need to be careful as to which projects they choose. Examine the following book-value balance sheet for Fairfield Office supplies for the year 2006. What is the capital structure of the firm based on market values?

Market price of bonds

A company's $500 million of 30-year bonds outstanding was issued at a coupon rate of 8%. On 5/1/03, two years after issuance, the market rate for bonds of similar characteristics falls to 5%. What should be the market price of the company's bonds on the bond market at 5/1/03? a. 66.85 b. 100 c. 144.69 d. 146.12

Semi- annual coupon

A publicity trade bond has a par value of $5 million and 10 years to maturity. It is current priced at 102, its YTM is 5.24 % and its coupon is 5.50%. What semi-annual interest payment can bondholders expected to received? Options: ? 131,000 ? 137,500 ? 262,000 ? 275,000 ? 280,000 The boding is trading at Option

Bonds Valuations/Coupons

49. What is the yield to maturity, to the nearest percent, for the following bond: current price is $908, coupon rate is 11 percent, $1,000 par value, interest paid annually, eight years to maturity? (a) 11 percent (b) 12 percent (c) 13 percent (d) 14 percent 50. What is the current price of a $1,000 par value bond matur

Discussing Bond Refunding

Question: Margaret Kimberly, CFO of Charles River Associates, is considering whether or not to refinance the two currently outstanding corporate bonds of the firm. The first one is an 8 % perpetual bond with a $1000 face value with $75 million outstanding. The second one is a 9% perpetual bond with the same face value with $87.5

Callable Bonds and Selling Bonds at Par

Bowdeen Manufacturing intends to use callable perpetual bonds. The bonds are callable at $1,250. One-year interest rates are 12%. There is a 60$ probability that long-term interest rates one year from today will be 15%. With a 40% probability, long term interest rates will be 8%. To simplify the firm's accounting, Bowdeen w

Bond price / duration

What will happen to price of a bond given the following? Yield-to-maturity = 6% Duration = 4 Interest rates rise 1% If interest rates are going to fall, which of the following would you prefer? Why? Bond A with duration = 9 Bond B with duration = 3 What is the conversion price on a bond given the follow

The return on total assets for 19x9 was closest to:

The total assets of the ABC Company on January 1, 19x9 were $2.3 million and on December 31, 19x9 were $2.5 million. Net income for 19x9 was $188,000. Dividends for 19x9 totaled $75,000, interest expenses totaled $70,000, and the tax rate was 30%. The return on total assets for 19x9 was closest to: A) 9.5%. B) 6.8%. C)

Excel - PV function

As an investor, you are considering an investment in the bonds of the Conifer Coal Company. The bonds, which pay interest semiannually, will mature in eight years, and have a coupon rate of 7.5% on a face value of $1,000. Currently, the bonds are selling for $900. a. If your required return is 9% for bonds in this risk cla

Yield to Maturity

I am confused about purchasing a 10% bond and my broker keeps saying it has a 9% yield to maturity. Can you explain this for me?

Refund the old issue of bonds outstanding

The Robinson Corporation has $50 million of bonds outstanding that were issued at a coupon rate of 11 3/4 percent seven years ago. Interest rates have fallen to 10 3/4 percent. Mr. Brooks, the vice-president of finance, does not expect rates to fall any further. The bonds have 18 years left to maturity, and Mr. Brooks would like

Accounting/Finance Multiple Choice

1) Comprehensive financial information about a company is found in its A) Corporate by-law (B) 10-K Report (C) Article of incorporation (D) Presidential address 2) You purchase 100 shares of KLM at $40 a share by depositing the minimum amount of margin. If the initial margin requirement was 50% and the maintenance margin re

T-bills and treasury bonds

Help with this problem: With the following data- -k* real risk rate = 4% -Constant inflation premium =7% -Maturity risk premium = 1% -Default risk premium for AAA bonds =3% -Liquidity premium for long-term T-bonds =2% Assume that a highly liquid market does not exist for long-term T-bonds, and the expected r

Southeast Airlines Bonds

Southeast Airlines is considering tow alternatives for the financing of a purchase of a fleet of airplanes. These two alternatives are: 1) Issue 60,000 shares of common stock at $45 per share (cash dividends have not been paid nor is the payment of any contemplated) 2) Issue 10% 10 year bonds at par for $2,700,000. It is e

Stock and bond markets

Stock and bond markets: a. are independent of each other as to prevailing rates of return b. offer identical returns in order to compete for the investor's dollars c. would offer identical returns if the respective investments had identical terms to maturity d. offer higher returns that tend to move up and down toget

Bond Calculations from Principal Amount

In the March of 1994, you purchased a new 25-year bond. The principal amount (i.e. maturity value) of this bond is $1,000 and it pays a coupon rate of 12%. a. If comparable bonds today (March of 2007) have a yield to maturity of 14%, what is your bond's current market price? b. If interest rates on comparable bonds are current

Bond Valuation Problems

Bond Valuation - Chapter End Problems 6.8 (Yield to Call Ex): Six years ago, The Singleton Company sold a 20 -year bond issue with a 14 percent annual coupon rate and a 9 percent call premium. Today, Singleton called the bond. The bonds originally were sold at their face value of $1,000. Compute the realized rate of r

Coupon Rate

In the bond has a face value of 1,000,000, at what price did the bond sell for that is maturing in 2007? What is the current yield for the bond maturing in 2007? See attached file for full problem description. Suppose you found the following bond quote for AT & T in the Wall Street Journal % Bond Curr Vol.

Valuing Debt & Debt Policy

THEME 1 1. Explain how changes in debt-equity ratio impact the beta of the firm's equity. Provide a mathematical example to support your analysis. 2. What are the ramifications of a firm having a "less than optimal" or "wrong" capital structure? THEME 2 1. In describing an optimal investment portfolio for someon

Journalize transactions for bonds payable and investments in bonds

Journalize the selected transactions Selected transactions completed by Hubcap Products Inc. during the fiscal year ending July 31, 2006, were as follows: a. Issued 10,000 share of $25 par common stock at $52, receiving cash. b. Issued 8,000 shares of $100 par preferred 8% stock at $125, receiving cash. c. Issued $1

Bond Maturity Practice Problem

Please include any formulas if applicable (so I can do more practice problems) How much should you pay for a $1,000 bond with 10% coupon, annual payments, and five years to maturity if the interest rate is 12%

Bonds- Rate of Return, Price at different time periods

1. Six years ago, the Singleton Company sold a 20-year bond issue with a 14 percent annual coupon rate and a 9 percent call premium. Today, Singleton called the bonds. The bonds were originally sold at their face value of $1,000. Compute the realized rate of return for investors who purchased the bond when they were issued and w