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kenny6666 [7]
3 years ago
14

Suppose you purchase a 8-year AAA-rated Swiss bond for par that is paying an annual coupon of 8 percent and has a face value of

2,200 Swiss francs (SF). The spot rate is U.S. $0.66667 for SF1. At the end of the year, the bond is downgraded to AA and the yield increases to 10 percent. In addition, the SF depreciates to U.S. $0.74074 for SF1. a. What is the loss or gain to a Swiss investor who holds this bond for a year
Business
1 answer:
vekshin13 years ago
5 0

Answer:

97.37 SF

Explanation:

Swiss bond purchase price = 1,000 SF

Swiss bond current value = PV at maturity + PV of coupon payments  = (1000 / (1 + 0.10)^7) + (80 * (1 - (1 + 0.1)^-7) / 10% = 513.16 + 389.47 = 902.63 SF

Loss to investor who holds Swiss bond for a year = 1,000 - 902.53 = 97.37 SF

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giannis corporation purchases debt investments as trading securities at a cost of $150,000 on december 1. this is its first and
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In a condition given above where the Giannis Corporation sells a proportion of its trading securities, costing $9,000, for an amount of $10,000, the journal entry of the transaction would include a gain of $1,000. Therefore, the option C holds true.

<h3>What is the significance of gains?</h3>

The gains of a business organization can be referred to or considered as the surpluses earned by a company from the extraordinary and indirect operations, which are unrelated to its normal business activities. Any such gains are recorded under ''Other Revenues'' Accounts of the firm.

Therefore, the option C holds true and states regarding the significance of gains.

Learn more about gains here:

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The question seems to be incomplete. It has been added below.

Giannis corporation purchases debt investments as trading securities at a cost of $150,000 on December 1. This is its first and only purchase of such securities. On January 5, Giannis corporation decides to sell a portion of its trading securities (costing $9,000) for $10,000 cash. The journal entry to record this sale would include a:

A. Loss of $10,000

B. Gain of $10,000

C. Gain of $1,000

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d. buyers will make purchases from other sellers

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