How does inflation hurt your savings?

Requirement 1. How much cash did the company receive upon issuance of the bonds payable? (Use the factor tables provided with

Masteriza [31]

Missing information:

A lot of information is missing, but I found several examples with very similar requirements.

For example:

Company, Inc. issued $500,000 of 14%, 10-year bonds payable on January 1, 2018. The market interest rate at the date of issuance was 12%, and the bonds pay interest semiannually.

Answer:

In order to determine the market price of the bonds we must add the present value of the bonds' face value + present value of the coupon payments:

PV of face value = $500,000 / (1 + 6%)²⁰ = $155,902.36

PV of coupon payments = $35,000 x 11.470 (PV annuity factor, 6%, 20 periods) = $401,450

market value of the bonds = $557,352.36

The journal entry to record the issuance of the bonds:

January 1, 2018, bonds are issued at a premium

Dr Cash 557,352.36

Cr Bonds payable 500,000

Cr Premium on bonds payable 57,352.36

7 0

3 years ago

$1,000 par value zero-coupon bonds (ignore liquidity premiums).

Crazy boy [7]

10.70% - Option D

<u>Explanation:</u>

One-year interest rate one year from now:

$=(1+.2750)^{\wedge} 2 /(1+16 \%)-1$

$=1.275 * 1.275 / 0.16$

= 1.625625 divide by 0.16

=10.160

Therefore, an approximate answer is 10.70%

Respect Maturity (YTM) – in any case alluded to as recovery or book yield – is the theoretical pace of return or loan cost of a fixed-rate security, for example, a security. The YTM depends on the conviction or understanding that a financial specialist buys the security at the present market cost and holds it until the security has developed (arrived at its full worth), and that all premium and coupon installments are made in a convenient manner.

7 0

3 years ago

A(n)______allows students to study more specific topics within their majors.

padilas [110]

Answer: The answer would be a interrogation

Explanation:

8 0

2 years ago

Scenario 34-1. Take the following information as given for a small, imaginary economy: When income is $10,000, consumption spend

laiz [17]

Answer:

0.75

Explanation:

Marginal Propensity to Consume (MPC) is the change in consumption due to change in income

Change in consumption = $7,250 - $6,500 = $750

Change in income = $11,000 - $10,000 = $1,000

MPC = Change in consumption / Change in income

MPC = 750 / 100

MPC = 0.75

6 0

3 years ago

In order to receive positive cash returned on investment, the rate of return on an investment during periods of inflation should

Serga [27]

Answer:

should exceed the rising price level.

Explanation:

Inflation occurs when there is a general increase in prices of goods and services in an economy. The price of a basket of goods increases so the purchasing power of money is reduced.

For example when a gallon of petrol sells for $50 under inflation it can rise to $100. More money will be needed to buy the same amount of goods.

In this situation the rate of return of an investment will need to be above the rising price level to maintain a positive cash flow.

This is because value of money has reduced so returns needs to be higher to make positive cash flow.

5 0

3 years ago