On April 1, 2014, Fredriksen Corp. sold a $700 million bond issue to finance the purchase of a new distribution facility. These bonds were issued in $1,000 denominations with a maturity date of April 1, 2034. The bonds have a coupon rate of 8.00% with interest paid semiannually. Required: a) Determine the value today April 1, 2024 of one of these bonds to an investor who requires a 12 percent return on these bonds. Why is the value today different from the par value? b) Assume that the bonds are selling for $925.00. Determine the current yield and the yield-to-maturity. Explain what these terms mean. c) Explain what layers or textures of risk play a role in the determination of the required rate of return on Fredriksen's bonds.
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- Chung Inc. issued $50,000 of 3-year bonds on January 1, 2018, with a stated rate of 4% and a market rate of 4%. The bonds paid interest semi-annually on June 30 and Dec. 31. How much money did the company receive when the bonds were issued? The bonds would be quoted at what rate?Krystian Inc. issued 10-year bonds with a face value of $100,000 and a stated rate of 4% when the market rate was 6%. Interest was paid semi-annually. Calculate and explain the timing of the cash flows the purchaser of the bonds (the investor) will receive throughout the bond term. Would an investor be willing to pay more or less than face value for this bond?Smashing Cantaloupes Inc. issued 5-year bonds with a par value of $35,000 and an 8% semiannual coupon (payable June 30 and December 31) on January 1, 2018, when the market rate of interest was 10%. Were the bonds issued at a discount or premium? Assuming the bonds sold at 92.288, what was the sales price of the bonds?
- On November 1, 2013, Matthew Corp. sold a $600 million bond issue to finance the purchase of a new distribution facility. These bonds were issued in $1,000 denominations with a maturity date of November 1, 2033. The bonds have a coupon rate of 8.00% with interest paid semiannually. Required: Determine the value today, November 1, 2023 of one of these bonds to an investor who requires a 10 percent return on these bonds. Why is the value today different from the par value? Assume that the bonds are selling for $870.00. Determine the current yield and the yield-to-maturity. Explain what these terms mean. Explain what layers or textures of risk play a role in the determination of the required rate of return on Matthew’s bonds. For each of the following events, explain what the impact would be on the yield-to-maturity: The bond is downgraded by a rating agency. The economy seems to be shifting from a recession to a boom economy. The bond is subordinated to other bonds. Congressional…On January 1, 2024, Ithaca Corporation purchases Cortland Incorporated bonds that have a face value of $210,000. The Cortland bonds have a stated interest rate of 10%. Interest is paid semiannually on June 30 and December 31, and the bonds mature in 10 years. For bonds of similar risk and maturity, the market yield on particular dates is as follows: Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) January 1, 2024 11.0% June 30, 2024 12.0% December 31, 2024 14.0% Prepare all appropriate journal entries related to the bond investment during 2024, assuming that Ithaca chose the fair value option when the bonds were purchased, and that Ithaca determines fair value of the bonds semiannually. Ithaca calculates interest revenue at the effective interest rate as of the date it purchased the bonds. 1. Record the investment in bonds with a face value of $210,000, a stated interest rate of 10% and a market…On January 1, 2024, Ithaca Corporation purchases Cortland Incorporated bonds that have a face value of $330,000. The Cortland bonds have a stated interest rate of 5%. Interest is paid semiannually on June 30 and December 31, and the bonds mature in 10 years. For bonds of similar risk and maturity, the market yield on particular dates is as follows: Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) January 1, 2024 11.0% June 30, 2024 12.0% December 31, 2024 14.0% Required: 1-a. Calculate the price Ithaca would have paid for the Cortland bonds on January 1, 2024 (ignoring brokerage fees). 1-b. Prepare a journal entry to record the purchase. 2. Prepare all appropriate journal entries related to the bond investment during 2024, assuming Ithaca accounts for the bonds as a held-to-maturity investment. Ithaca calculates interest revenue at the effective interest rate as of the date it purchased the bonds. 3.…
- On January 1, 2024. Ithaca Corporation purchases Cortland Incorporated bonds that have a face value of $300,000. The Cortland bonds have a stated interest rate of 7%. Interest is paid semiannually on June 30 and December 31 , and the bonds mature in 10 years. For bonds of similar risk and maturity, the market yield on particular dates is as follows: Note: Use tables, Excel, or a financial calculator. (EV of \$1. PV of \$1, EVA of \$1, PVA of \$1. FVAD of \$1 and PVAD of \$1) January 1, 2023 8.0% June 30, 202 9.0% December 31, 2024 10.0% Required: 1-a. Calculate the price lthaca would have paid for the Cortand bonds on January 1, 2024 (ignoring brokerage fees). and prepare a journal entry to record the purchase. 2. Prepare all appropriate journal entries related to the bond investment during 2021 assuming Ithaca accounts for the bonds as a held-to maturity investment. Ithaca calculates interest revenue at the effective interest rate as of the date it purchased the bonds. 3. Prepare all…On June 1, 2024, Cullumber Bottle Company sold $3,840,000 in long-term bonds for $3,368,086. The bonds will mature in 10 years and have a stated interest rate of 8% and a yield rate of 10%. The bonds pay interest annually on May 31 of each year. The bonds are to be accounted for under the effective-interest method. (a) Construct a bond amortization table for this problem to indicate the amount of interest expense and discount amortization at each May 31. Include only the first four years. (Round answers to O decimal places, e.g. 25,000.) Date 6/1/24 5/31/25 5/31/26 5/31/27 5/31/28 LA Credit Cash LA Debit Interest Expense 1 $ LA Credit Bond Discount 11 Carrying Amoun $On September 30, 2024, the Techno Corporation issued 8% stated rate bonds with a face amount of $460 million. The bonds mature on September 30, 2044 (20 years). The market rate of interest for similar bonds was 10%. Interest is paid semiannually on March 31 and September 30. Required: Determine the price of the bonds on September 30, 2024. Note: Use tables, Excel, or a financial calculator. Round your final answers to nearest whole dollar amount, not in millions. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Time values are based on: n = i= Cash Flow Interest Principal Price of bonds Amount Present Value
- On November 1, 2012, Anderson Corp. sold a $500 million bond issue to finance the purchase of a new factory. These bonds were issued in $1,000 denominations with a maturity date of November 1, 2032. The bonds have a coupon rate of 12.00% with interest paid semiannually. Required: Determine the value today, November 1, 2022 of one of these bonds to an investor who requires a 8 percent return on these bonds. Why is the value today different from the par value? Assume that the bonds are selling for $950.00. Determine the current yield and the yield-to-maturity. Explain what these terms mean. Explain what layers or textures of risk play a role in the determination of the required rate of return on Anderson’s bonds.On June 1, 2024, Sheridan Bottle Company sold $3,420,000 in long-term bonds for $2,999,701. The bonds will mature in 10 years and have a stated interest rate of 8% and a yield rate of 10%. The bonds pay interest annually on May 31 of each year. The bonds are to be accounted for under the effective-interest method. (a) Construct a bond amortization table for this problem to indicate the amount of interest expense and discount amortization at each May 31. Include only the first four years. (Round answers to 0 decimal places, e.g. 25,000.) Credit Bond Discount Date 6/1/24 5/31/25 5/31/26 5/31/27 5/31/28 $ Credit Cash Debit Interest Expense Carrying Amou $ M W Ở Aca QL Acc Qui AcceOn January 1, 2023, Marigold Corporation purchased a newly issued $1,250,000 bond. The bond matured on December 31, 2025, and paid interest at 6% every June 30 and December 31. The market interest rate was 8%. Marigold's fiscal year-end is October 31, and the company had the intention and ability to hold the bond until its maturity date. The bond will be accounted using the amortized cost model. Click here to view Table A.2-PRESENT VALUE OF 1-(PRESENT VALUE OF A SINGLE SUM) Click here to view Table A.4-PRESENT VALUE OF AN ORDINARY ANNUITY OF 1 (a) Calculate the price paid for the bond using a financial calculator or Excel functions. (Round answers to 2 decimal places, eg. 52.75.) PV S