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Aloiza [94]
2 years ago
6

Suppose that Ford issues a coupon bonds at a price of $1,000, which is the same as the bond's par value. Assume the bond has a c

oupon rate of 4.5%, pays the coupon once per year, and has a maturity of 20 years. If an investor purchased this bond at the price of $1,000, for each year except the last year, the investor would receive a payment of 45. (Round your answers to the nearest dollar) When the bond matures, t investor would receive a final payment of $1045. (Round your answers to the nearest dollar.) Now suppose the price of the bond changes to $1, 060. Assuming an investor purchased the bond at a price of $1, 060, the investor would receive a current yield equal to ()
Business
1 answer:
uysha [10]2 years ago
3 0

Answer:

YTM approximated 4.08%

Explanation:

If the price of the bond changes to 1,060

we will need to calcualte the YTM

we could do it with an approxmation method like this:

YTM = \frac{C + \frac{F-P}{n }}{\frac{F+P}{2}}

Cuopon payment =1,000 x 4.5% = 45

Face value       = 1,000

Purchase value= 1,060

n= 20 years

quotient 4.0776699%

It will yield approximately 4.08%

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At the end of the prior year, Doubtful Inc. had a deferred tax asset of $18,500,000 attributable to its only timing difference,
iren [92.7K]

Answer:

Journal entries to record Doubtful's income tax expense for the current year.

No   Account titles and Explanation             Debit'$    Credit'$

1       Income tax expense                             8,945,000

                  Deferred tax asset                                     3,800,000

                  [(42,000,000*35%) - 18,500,000]

                   Income taxes payable                               5,145,000

                   [(14,700,000*35%)]

         (To record tax expenses)

2        Income tax expense                            1,270,000

                 Valuation allowance - deferred tax asset  1,270,000

                   (3,730,000 - 5,000,000

          (To record valuation allowance)

7 0
3 years ago
On November 7, Mura Company borrows $370,000 cash by signing a 90-day, 8%, $370,000 note payable. 1. Compute the accrued interes
Hatshy [7]

Answer:

At 31 December, the Interest for 54 days accrues as follows :

Interest expense $17,740 (debit)

Note Payable $17,740 (credit)

On payment February 5, the Interest expense will be capitalized in the Note Payable as follows :

Note Payable $407,473 (debit)

Cash $407,473 (credit)

Explanation:

AT, November 7, When Mura Company borrows the money :

Cash $370,000 (debit)

Note Payable $370,000  (credit)

At 31 December, the Interest for 54 days accrues as follows :

Interest expense $17,740 (debit)

Note Payable $17,740 (credit)

Interest expense calculation = $370,000 × 8% × 54/90

                                                = $17,740

At February 5, the interest for 60 days accrues as follows :

Interest expense $19,733 (debit)

Note Payable $19,733 (credit)

Interest expense calculation = $370,000 × 8% × 60/90

                                                = $19,733

On payment February 5, the Interest expense will be capitalized in the Note Payable as follows :

Note Payable $407,473 (debit)

Cash $407,473 (credit)

Note Payable Calculation = $370,000 + $19,733 + $17,740

                                              $407,473

3 0
3 years ago
The higher the firm's flotation cost for new common equity, the more likely the firm is to use preferred stock, which has no flo
kirill115 [55]

Answer:

B. False

Explanation:

Flotation costs are cost that are concerned with issuing new common stock. It is the amount of money or cost incurred by an organization when offering its securities to the public. The cost may include legal fees, auditing fees and registration fees. When the flotation cost goes higher, firms are more likely to use debts rather than preferred stock. This is simply because debt is lesser than both common stock and preferred stock. Also, its fallacy to think that preferred stock doesnt have flotation cost. Its only that its not as high as the ones for new common equity.

8 0
3 years ago
Company X wants to borrow $10,000,000 floating for 5 years. Company Y wants to borrow $10,000,000 fixed for 5 years. Their exter
CaHeK987 [17]

Answer:

The answer is:

10% fixed rate = Company X's external borrowing (rate);

11.8% fixed rate = Company Y's payment to X (rate);

LIBOR + 1.5% = Company X's payment to Y (rate);

LIBOR + 1.5% = Company Y's external borrowing rate.

Explanation:

First, X will borrow at 10% fixed and Y will borrow at LIBOR + 1.5% floating; both at notational principal of $10 million.

Then; they will enter into a interest swap where:

- X will pay to the swap the interest rate of Libor +1.5% and receive from the swap the fixed interest rate of 11.8%. Thus, X interest income and interest expenses will be: Borrowed at fixed 10% and payment at Libor+1.5% to the swap; Receipt of 11.8% from the Swap=> Net effect: X borrowed at LIBOR - 0.3% ( saving of 0.3%).

- Y will pay to the swap the fixed interest rate 11.8% and receive from the swap LIBOR +1.5%. Thus, Y interest income and interest expenses will be: Borrowed at LIBOR +1.5 and payment 11.8% fixed to the swap; Receipt of Libor + 1.5% from Bthe Swap=> Net effect: Y borrowed at 11.8% fixed ( saving of 0.2%).

4 0
3 years ago
Which of the following statements are true regarding owners' equity and ownership rights held in noncorporate entities?
Degger [83]

Answer: A. Owners' equity for proprietorships and partnerships is usually referred to as capital.

B. No distinction is made between invested capital and retained earnings for a proprietorship or a partnership.

C. Neither proprietorships or partnerships issue stock.

Explanation:

The statements that are true regarding owners' equity and ownership rights held in noncorporate entities include:

• No distinction is made between invested capital and retained earnings for a proprietorship or a partnership.

• Neither proprietorships or partnerships issue stock.

• Owners' equity for proprietorships and partnerships is usually referred to as capital.

We should note that sole proprietorships and partnership typically don't have stockholders and shouldn't issue stock as they aren't separated from their founders.

Also, the owners' equity for proprietorships and partnerships is usually referred to as capital. We should note that for a sole proprietorship or a partnership, the equity is the owners capital account which can be seen on the balance sheet.

Based on the above explanation, all the options given above are correct.

5 0
3 years ago
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