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butalik [34]
3 years ago
9

Wesimann Co. issued 13-year bonds a year ago at a coupon rate of 8.5 percent. The bonds make semiannual payments and have a par

value of $1,000. If the YTM on these bonds is 6.8 percent, what is the current bond price?
Business
2 answers:
4vir4ik [10]3 years ago
5 0

Answer:

$1,137.94

Explanation:

<em>The value of the bond is the present value (PV) of the future cash receipts expected from the bond. The value is equal to present values of interest payment plus the redemption value (RV).</em>

Value of Bond = PV of interest + PV of RV

The value of bond for Wesimann Co be worked out as follows:

Step 1

<em>PV of interest payments</em>

Semi annul interest payment

= 8.5% × 1000 × 1/2

= $42.5

Semi-annual yield = 6.8/2 = 3.4 % per six months

Total period to maturity (in months)

= (2 × 12) = 24 periods (Note it was issued a year ago)

PV of interest =

PV = A × (1-(1+r)^(-n))/r

r-3.4 %- n- 24

42.5 × (1- (1+0.034)^(-2× 12)/0.034)

=$689.70

Step 2

<em>PV of Redemption Value</em>

= 1,000 × (1.034)^(-2× 12)

= 448.236

Step 3

Price of bond

= 689.70 + 448.23

= $1,137.94

guajiro [1.7K]3 years ago
5 0

Answer:

Current Price of the bond is $1,137.94

Explanation:

Price of a bond equals present value of coupon payments and the present value of face value at maturity

Face value = $1000

years to maturity equals to 12 years since the bond was issued a year ago and had 13 years to mature and payments are made semiannual = 12*2 =24

coupon payment since coupons are paid semiannual

1000*8.5/2=$40.25

YTM = 6.8%/2 = 3.4%

bond price = C * [1-(1+r)^-n / r) + FV/ (1+r)^n

                  =42.5 * [ 1-(1+0.034)^-24/0.034] + 1000/(1+0.034)^24

                  =689.7046 + 448.2363

                  =$1,137.94

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Ivan

Answer:

The answer is: $18,289.50

Explanation:

The interest earned from the investment in Birmingham Bonds is not included in Mitch's gross income.

If Mitch earned $100,000, so he will fall under the fourth bracket for single filers.

He will have to pay $14,089.50 plus 24% of any income over $82,500.

taxes due = $14,089.50 + [($100,000 - $82,500) x 24%]

taxes due = $14,089.50 + $4,200 = $18,289.50

6 0
3 years ago
In 20X1, Modern Property Groups collected rent revenue for 20X2 tenant occupancy. For financial reporting, the rent is recorded
vekshin1

Answer:

Debit deferred tax asset for $12,000

Debit income tax expense for $18,000

Credit income tax payable for $30,000

Explanation:

The journal entries will look as follows:

<u>Date     Account Name and Description       Debit ($)      Credit ($)   </u>

20X1     Deferred tax asset (w.1)                        12,000

             Income tax expense (w.3)                    18,000

                Income tax payable (w.2)                                      30,000

<em><u>             (To record income taxes at the end of 20X1.)                             </u></em>

Workings:

w.1: Deferred tax asset = Deferred portion of the rent collected in 20X1 * Tax rate = $40,000 * 12% = $12,000

w.2: Income tax payable = Taxable income * Tax rate = $100,000 * 30% = $30,000

w.3: Income tax expense = Income tax payable - Deferred tax asset = $30,000 - $12,000 = $18,000

7 0
3 years ago
Goodwill is: Multiple Choice Amortized over the greater of its estimated life or 40 years. The excess of the fair value of a bus
Svet_ta [14]

Answer:

Goodwill is:

The excess of the fair value of a business over the fair value of all net identifiable assets.

Explanation:

This definition of Goodwill implies that it is usually acquired by the purchaser of another business, when it pays a price higher than the fair market value of the other company's net assets.  It is not a physical asset like property, plant, and equipment, but intangible.

Goodwill arises from a company's good reputation, loyal customers or clientele base, brand identity, talented workforce, and proprietary technology.

Goodwill does not have a definite life and under US GAAP and IFRS standards.  Therefore, it is not amortized like other intangible assets but is evaluated for impairment every year.

8 0
3 years ago
Which of the following statements is true of feature appeals?
Ivanshal [37]

Answer:

A. They present attributes that can be the basis of rational purchase decisions

Explanation:

A Feature appeal is an advertisement appeal that stimulate consumer's mindset towards buying a product or service provided by a company. It is therefore important that the company gets it right. Feature appeal appeal highlights the attributes of the product to influence consumers into making a purchase and is common in high-involvement products.

6 0
2 years ago
5 years ago, Barton Industries issued 25-year noncallable, semiannual bonds with a $1,000 face value and an 8% coupon, semiannua
Reika [66]

Answer:

Firms after tax of debt is 6.87%

Explanation:

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=RATE(nper,pmt,pv,fv)*(1-tax rate)

=(RATE(20*2,40,-894.87,1000)*2)*(1-25%)

=6.87%

7 0
2 years ago
Read 2 more answers
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