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joja [24]
3 years ago
15

Both Bond Sam and Bond Dave have 7 percent coupons, make semiannual payments, and are priced at par value. Bond Sam has three ye

ars to maturity, whereas Bond Dave has 16 years to maturity. a. If interest rates suddenly rise by 2 percent, what is the percentage change in the price of Bond Sam and Bond Dave? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) b. If rates were to suddenly fall by 2 percent instead, what would be the percentage change in the price of Bond Sam and Bond Dave? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)
Business
1 answer:
3241004551 [841]3 years ago
4 0

Solution:

Each bonds have a 7 percent coupon limit. Since sales are also equivalent to 7 percent with par with YTM. The age of Bond Sam is three years and the maturity of Bond Dave is sixteen. At a sudden increase of 2%, interest rates. Decide the shift in both bond price by percentage.

Bond Sam:

Bond Value = pv(rate,nper,pmt,fv)  

Rate = (7%+2%)* 1/2 = 4.5%

nper = 3*2 = 6

fv = 1000

pmt = 7%*1000*1/2 = $35

Bond Value = -pv (4.5%,6,35,1000)

Bond Value =$936.65

Percentage change in the price of Bond Sam = (936.65-1000)/1000 Percentage change in the price of Bond Sam = -6.33%  

Bond Dave:

Bond Value = pv (rate, nper, pmt, fv)

Rate = (7%+2%)*1/2 = 4.5%

nper = 16*2 = 32

fv = 1000

pmt = 7%*1000*1/2 = 35

Bond Value = pv (4.5%,32,35,1000)

Bond Value = $854.66

Percentage change in the price of Bond Dave = (854.66-1000)/1000 Percentage change hi the price of Bond Dave = -14.53%  

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natali 33 [55]

Answer:

  • b. Cash from Financing Activities  
  • d. Bonds Payable
  • e. Net Income

Explanation:

Bonds are a form of long term debt and in the cashflow statement this goes to the Financing section. A retirement of bonds would reduce cash and this would come from the Financing activities.

Bonds Payable will also decrease because the bond that is being retired will reduce the number of bonds payable that the company has to pay off.

Finally the Net income will reduce as well to reflect the loss on bond retirement. The bonds were issued at a discount owing to interest rates being higher than the coupon rate in 2011 but on the day the bonds were retired they were selling at a premium with interest rates at 4%. The company paid more than they received and this loss will reduce the net income.

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The Internet Fraud Complaint Center, run by the FBI and the National White Collar Crime Center, indeed analyzes fraud-related complaints.

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First one7,6,65,and last 3
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3 years ago
Read 2 more answers
Quantity (Units) Private Value (Dollars) Private Cost (Dollars) External Cost (Dollars)
bija089 [108]

Answer:

c. there is a negative externality.

Explanation:

At the time when one individual actions develops the benefits for others but at the same time they dont pay so it is to be known as positive externality

At the time when one individual action develops loss but the other who received the loss because of the action of the person so for this they didnt get the compensation so it is the negative externality

As we can see that there is three types of values so the correct option is c.  

3 0
3 years ago
The difference between pretax accounting income and taxable income is due to subscription revenue for one-year magazine subscrip
Aleks04 [339]

Question Completion:

Times-Roman Publishing Company reports the following amounts in its first three years of operation: ($ in 000s) Pretax accounting income Taxable income 2018 2019 2020 S340 $320 $310 380 330 350

Required:

1. What is the balance sheet account for which a temporary difference is created by this situation?

2. For each year, indicate the cumulative amount of the temporary difference at year-end. (Enter your answers in thousands.)

3. Determine the balance in the related deferred tax account at the end of each year. Is it a deferred tax asset or a deferred tax liability? (Enter your answers in thousands.)

Answer:

Times-Roman Publishing Company

1. The balance sheet account for which a temporary difference is created by this situation is the Deferred Subscription Revenue.

2. Cumulative amount of the temporary difference at year-end:

December 31, ($ in 000s)               2018    2019    2020

Cumulative Temporary Difference $40      $50     $90

3. The balance in the related deferred tax account for each year:

December 31, ($ in 000s)               2018    2019    2020

Deferred Tax Asset (Liability)          $10      $2.5     $10

They are all deferred tax assets.

Explanation:

a) Data and Calculations:

December 31, ($ in 000s)               2018    2019    2020

Pretax accounting income             $340    $320    $310

Taxable income                                380      330      350

Temporary Difference                     $40       $10     $40

Cumulative Temporary Difference $40      $50     $90

Deferred Tax Asset (Liability)          $10      $2.5     $10

a) A deferred tax asset arises from the overpayment or advance payment of taxes as a result of the temporary differences between the accounting income and the taxable income.  On the other hand, a deferred tax liability arises from the underpayment of taxes as a result of the temporary differences between accounting income and taxable income.

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