rick's pawn shop issued 11% bonds, dated january 1, with a face amount of $400,000 on january 1, 2022. the bonds sold for $370,0

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rick's pawn shop issued 11% bonds, dated january 1, with a face amount of $400,000 on january 1, 2022. the bonds sold for $370,0

00. for bonds of similar risk and maturity the market yield was 12%. interest is paid semiannually on june 30 and december 31. rick's determines interest at the effective rate and elected the option to report these bonds at their fair value. on december 31, 2022, the fair value of the bonds was $365,000, with $2,000 of the change due to a change in general interest rates. rick's statement of comprehensive income will include:

Business

1 answer:

geniusboy [140] · Answer 1 · 2024-08-31T08:52:38+03:00

An unrealized gain of $5,412 from the change in the fair value of the debt.

<h3>How does general interest rate risk work?</h3>

Interest-rate risk (IRR) is the exposure of a financial institution to unfavorable changes in interest rates. Accepting this risk is common practice in the banking industry and can be a key driver of profitability and shareholder value.

Explanation:

Given that the bond's face value is $400 000

Bond selling price: $370,000

yield until maturity equals 12%

Bond has a fair value of $365,000.

Value shifted = $2,000

Net income and OCI are both included in comprehensive income.

To learn more about Interest-rate risk (IRR) refer to:

brainly.com/question/20715710

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