(Related to Checkpoint 9.2 and Checkpoint 9.3) (Bond valuation relationships) The 16-year, $1,000 par value bonds of Waco Industries pay 7 percent interest annually. The market price of the bond is $1,075, and the market's required yield to maturity on a comparable-risk bond is 5 percent. a. Compute the bond's yield to maturity. b. Determine the value of the bond to you given the market's required yield to maturity on a comparable-risk bond. c. Should you purchase the bond?

(Related to Checkpoint 9.2 and Checkpoint 9.3) (Bond valuation relationships) The 16-year, $1,000 par value bonds of Waco Industries pay 7 percent interest annually. The market price of the bond is $1,075, and the market's required yield to maturity on a comparable-risk bond is 5 percent. a. Compute the bond's yield to maturity. b. Determine the value of the bond to you given the market's required yield to maturity on a comparable-risk bond. c. Should you purchase the bond?

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter13: Long-term Liabilities

Section: Chapter Questions

Problem 3EA: Krystian Inc. issued 10-year bonds with a face value of $100,000 and a stated rate of 4% when the...

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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?
a. Reset the Data Section to its initial values. The price of this bond is 1,407,831. What would it be if there were only 9 or 8 years to maturity? Use the worksheet to compute the bond issue prices and enter them in the spaces provided. Bond issue price (9 years to maturity) __________________ Bond issue price (8 years to maturity) __________________ b. Compare these prices to the bond-carrying values found in the effective interest amortization schedule you originally printed out in requirement 3. Explain the similarity. c. Click the Chart sheet tab. The chart presented shows the price behavior of this bond based on years to maturity. Explain what effect years to maturity has on bond prices. Check your explanation by trying 8% as the effective rate (cell E10) and clicking the Chart sheet tab again. Also try 9%. When the assignment is complete, close the file without saving it again. Worksheet. Modify the BONDS3 worksheet to accommodate bonds with up to 20-year maturity. Use your new model to determine the issue price and amortization schedules of a 2,000,000, 18-year, 10% bond issued to yield 9%. Preview the printout to make sure that the worksheet will print neatly, and then print the worksheet. Save the completed file as BONDST. Hint: Expand both amortization schedules to 20 years. Expand the scratch pad to 20 years. Modify FORMULA1 in cell F17 to include the new ranges. Chart. Using the BONDS3 file, prepare a line chart that plots annual interest expense over the 10-year life of this bond under both the straight-line and effective interest methods. No Chart Data Table is needed. Put A23 to A32 in the Label format and then select A23 to A32, D23 to D32, and B40 to B49 as a collection. Enter all appropriate titles, legends, formats, and so forth. Enter your name somewhere on the chart. Save the file again as BONDS3. Print the chart.
Related to Checkpoint 9.2 and Checkpoint 9.3) (Bond valuation) Fingen's 16-year,1000 $ par value bonds pay 13 percent interest annually. The market price of the bonds is $1070 and the market's required yield to maturity on a comparable-risk bond is 14 percent. a. Compute the bond's yield to maturity. b. Determine the value of the bond to you, given your required rate of return. c. Should you purchase the bond? a. What is your yield to maturity on the Fingen bonds given the market price of the bonds? % (Round to two decimal places.)
2:37 a. Compute the bond's yield to maturity. b. Determine the value of the bond to you, given your required rate of return. c. Should you purchase the bond? (Related to Checkpoint 9.2 and Checkpoint 9.3) (Bond valuation) Fingen's 14-year, $1,000 par value bonds pay 9 percent interest annually. The market price of the bonds is $850 and the market's required yield to maturity on a comparable-risk bond is 13 percent. a. What is your yield to maturity on the Fingen bonds given the market price of the bonds? % (Round to two decimal places.) ||| Vo) 1 LTE2 = O 4Gl 41%
(Related to Checkpoint 9.2 and Checkpoint 9.3) (Bond valuation) Fingen's 12-year, $1,000 par value bonds pay 14 percent interest annually. The market price of the bonds is $940 and the market's required yield to maturity on a comparable-risk bond is 17 percent. a. Compute the bond's yield to maturity. b. Determine the value of the bond to you, given your required rate of return. c. Should you purchase the bond? a. What is your yield to maturity on the Fingen bonds given the market price of the bonds? % (Round to two decimal places.)
K (Related to Checkpoint 9.2 and Checkpoint 9.3) (Bond valuation relationships) The 13-year, $1,000 par value bonds of Waco Industries pay 7 percent interest annually. The market price of the bond is $855, and the market's required yield to maturity on a comparable-risk bond is 10 percent. a. Compute the bond's yield to maturity. b. Determine the value of the bond to you given the market's required yield to maturity on a comparable-risk bond. c. Should you purchase the bond? a. What is your yield to maturity on the Waco bonds given the current market price of the bonds? % (Round to two decimal places.)
(Related to Checkpoint 9.2 and Checkpoint 9.3) (Bond valuation) Fingen's 19-year $1,000 par value bonds pay 8 percent interest annually. The market price of the bonds is $880 and the marker's required yield to maturity on a comparable-risk bond is 11 percent.a. Compute the bond's yield to maturity.b. Determine the value of the bond to you, given your required rate of retumc. Should you purchase the bond?
(Related to Checkpoint 9.2 and Checkpoint 9.3) (Bond valuation) Fingen's 19-year, $1,000 par value bonds pay 12 percent interest annually. The market price of the bonds is $920 and the market's required yield to maturity on a comparable-risk bond is 15 percent. a. Compute the bond's yield to maturity b. Determine the value of the bond to you, given your required rate of return c. Should you purchase the bond? RCEDE a. What is your yield to maturity on the Fingen bonds given the market price of the bonds? % (Round to two decimal places.)
(Related to Checkpoint 9.2 and Checkpoint 9.3) (Bond valuation) The 15-year $1,000 par bonds of Vail Inc. pay 9 percent interest. The market's required yield to maturity on a comparable-risk bond is 6 percent. The current market price for the bond is $1,100. a. Determine the yield to maturity. b. What is the value of the bonds to you given the yield to maturity on a comparable-risk bond? c. Should you purchase the bond at the current market price? ---------------------------------------------------------------------------------------------------------------------------------------- a. What is your yield to maturity on the Vail bonds given the current market price of the bonds? % (Round to two decimal places.)
Related to Checkpoint 9.2) (Yield to maturity) The Saleemi Corporation's $1,000 bonds pay 8 percent interest annually and have 15 years until maturity. You can purchase the bond for $1,075. a. What is the yield to maturity on this bond? b. Should you purchase the bond if the yield to maturity on a comparable-risk bond is 6 percent? Question content area bottom Part 1 a. The yield to maturity on the Saleemi bonds is enter your response here%. (Round to two decimal places.) Part 2 b. You ▼ should should not purchase the bonds because your yield to maturity on the Saleemi bonds is ▼ greater less than the one on a comparable risk bond. (Select from the drop-down menus.)
(Related to Checkpoint 9.2 and Checkpoint 9.3) (Bond valuation) Fingen's 19-year, $1,000 par value bonds pay 11 percent interest annually. The market price of the bonds is $1,050 and the market's required yield to maturity on a comparable-risk bond is 12 percent. a. Compute the bond's yield to maturity. b. Determine the value of the bond to you, given your required rate of return. c. Should you purchase the bond? a. What is your yield to maturity on the Fingen bonds given the market price of the bonds? nothing% (Round to two decimal places.)
(Related to Checkpoint 9.2 and Checkpoint 9.3) (Bond valuation relationships) The 17-year, $1,000 par value bonds of Waco Industries pay 9 percent interest annually. The market price of the bond is $1,105,and the market's required yield to maturity on a comparable-risk bond is 6 percent a. Compute the bond's yield to maturity. b. Determine the value of the bond to you given the market's required yield to maturity on a comparable-risk bond. c. Should you purchase the bond?