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sp2606 [1]
2 years ago
10

Canglon, Inc., issues 10%, 5-year bonds with a face value of $150,000 when the effective rate is 12%. Interest is to be paid sem

iannually on June 30 and December 31. Assume Canglon uses the effective interest method to amortize the discount. Prepare calculations to prove that the selling price of the bonds is $138,959.90.
Business
2 answers:
Strike441 [17]2 years ago
8 0

Answer:

$ 138961

Explanation:

Bonds value= $150,000

Time of the bonds= 5 years

Interest are paid semi annually, hence 5 years of which payment are paid twice in a year= 10 payment in total

Interest rate of bonds= 10% (meaning 5% per payment)

Effective of bonds= 12% (meaning 6% per payment)

Actual interest to be paid

150,000 x 5/100 = 7500

To get the present value, we will use the effective rate of 6%

-Present value of Bonds of face value $150000 = 150000 x 0.5584= $83,761

-Present value of interest of $ 45000 = 7500 x 7.3601= $55,200

Total present value of bonds

=$ 83760 + $ 55200= $ 138961

The bond is a debt security, under which the issuer owes the holders a debt and (depending on the terms of the bond) is obliged to pay them interest (the coupon) or to repay the principal at a later date, termed the maturity date.

Dmitry_Shevchenko [17]2 years ago
7 0

Answer:

Explanation:

Base on the scenario been described in the question, the calculation is done using this method

Particulars

Present value of principal

Add: present value of interest

Selling prices of bonds

Amount (A)

$150,000

$7,500

Present value factor (B)

O.558395

7.360087

Value of the bonds (A × B)

$83,759.25

$55,200.65

$138,959.90

Bond is said to be the long term promissory notes issued by company as the the lend money from investors to raise money that will be use in financing their operations.

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Asymmetric information creates the potential of misconduct from the leading party as they can easily cheat the other party by concealing that important information.

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A.

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To ensure that the outsourcing initiative succeeds, even as personnel, business needs, and operating conditions change

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Outsourcing

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the​ risk-free rate is 3​% and you believe that the​ S&P 500's excess return will be 10​% over the next year. If you invest
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The expected excess return will be 11.4%

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Answer:

1. Discount rate.

2. Increase.

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A Federal Reserve Bank is one of the twelve regional banks of the Federal Reserve System in the United States of America. The Federal Reserve Banks are saddled with the responsibility of implementing the monetary policy designed and provided by the Federal Open Market Committee (FOMC).

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The Federal Reserve Board is the governing body which essentially manages the Federal Reserve System and performs an oversight function on domestic monetary policies.

<em>Additionally, the interest rate that the Federal Reserve Bank (the Fed) charges member banks for loans is known as the discount rate. Also, the Fed can increase the money supply by lowering this rate (discount rate) and thus, empowering the member banks to lend more money.</em>

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