What is interest earned on bonds called?

A portfolio manager is considering the purchase of a bond with a 5.5% coupon rate that pays interest annually and matures in thr

dmitriy555 [2]

Answer:

The price of the bond is closest $101.36

Explanation:

It is noteworthy that a rational investor pays for a bond today the cash flows derivable from the bonds in future discounted to today's terms.

The future cash flows comprise of the yearly coupon interest of $5.5(5.5% *$100) for 3 years as well as the repayment of the principal $100 at the end of year 3.

To bring the cash inflows today's term, we multiply them them by the discounting factor 1/(1+r)^N , where is the yield to maturity of 5% and N is the relevant the cash flow is received.

The discounting is done in attached spreadsheet leading $ 101.36 present value today.

Download xlsx

7 0

3 years ago

When scheduling the audit work to be performed on an engagement, the auditors should consider confirming accounts receivable bal

Dvinal [7]

Answer:

The correct answer is letter "B": Internal control over receivables is good.

Explanation:

Only in the case the internal control of an organization is well-established enough so those account receivables (AR) are paid according to the terms agreed between the organization and its debtors, auditors could consider the balance of the account receivables at a provisional date.

7 0

3 years ago

Victory Company uses weighted-average process costing to account for its production costs. Conversion cost is added evenly throu

son4ous [18]

I’m not sure if I understand this,

But I’ll try to figure this one out

Just give me some time

3 0

3 years ago

On January 1, 2011, Fox Corp. issued 1,000 of its 10%, $1,000 bonds for $1,040,000. These bonds were to mature on January 1, 202

Tju [1.3M]

Answer:

$8,000 gain

Explanation:

the carrying value of the bonds at the time of the redemption:

10 coupon payments were made, so amortization of bond premium = ($40,000 / 20) x 11 = $22,000

carrying value = $1,040,000 - $22,000 = $1,018,000

redemption price = $1,000,000 x 1.01 = $1,010,000

Fox's gain = carrying value - redemption price = $1,018,000 - $1,010,000 = $8,000

Since the carrying value was higher than the redemption value, Fox must report a gain.

4 0

3 years ago

Mark Johnson saves a fixed percentage of his salary at the end of each year. This year he saved $3,000. For each of the next 5 y

patriot [66]

Answer:

Mark Johnson

At the end of six years, Mark will have:

= $26,945.

Explanation:

a) Data and Calculations:

Savings for the first year = $3,000

Annual rate of salary and savings increase = 4%

Interest rate = 9%

Savings for Year 2 = $3,120 ($3,000 * 1.04)

Savings for Year 3 = $3,245 ($3,120 * 1.04)

Savings for Year 4 = $3,375 ($3,245 * 1.04)

Savings for Year 5 = $3,510 ($3,375 * 1.04)

Savings for Year 6 = $3,650 ($3,510 * 1.04)

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6

Savings $3,000 $3,120 $3,245 $3,375 $3,510 $3,650

FV factor 1.677 1.539 1.412 1.295 1.188 1.090

FV = $5,031 $4,802 $4,592 $4,371 $4,170 $3,979

Total FV = $26,945

Total principal contribution = $19,900

Total interest = $7,045

7 0

3 years ago