Martin Shipping Lines issued bonds 10 years ago at $1,000 per bond. The bonds had a 30-year life whenissued, with semiannual payments at the then annualrate of 12 percent. This return was in line with requiredreturns by bondholders at that point, as describedbelow: Real rate of return 2% Inflation premium 4 Riskpremium 4 Total return 10 % Assume that today theinflation premium is only 3 percent and is appropriatelyreflected in the required return (or yield to maturity) ofthe bonds. Compute the new price of the bond. (Use aFinancial calculator to arrive at the answers. Do notround intermediate calculations. Round the final answerto 2 decimal places.) New price of the bond $

The price of bonds is the present value of the interest annuity & maturity amount at market rate…

Answered: Martin Shipping Lines issued bonds 10…

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?
Martin Shipping Lines issued bonds 10 years ago at $1,000 per bond. The bonds had a 30-year life when issued, with semiannual payments at the then annual rate of 9 percent. This return was in line with required returns by bondholders at that point, as described below: Real rate of return Inflation premium Risk premium Total return 6% 4 2 12% Assume that today the inflation premium is only 2 percent and is appropriately reflected in the required return (or yield to maturity) of the bonds. Compute the new price of the bond. Use Appendix B and Appendix D. (Round "PV Factor" to 3 decimal places. Do not round intermediate calculations. Round the final answer to 2 decimal places.) New price of the bond
Tom Cruise Lines Incorporated issued bonds five years ago at $1,000 per bond. These bonds had a 30-year life when issued and the annual interest payment was then 15 percent. This return was in line with the required returns by bondholders at that point as described below: Real rate of return Inflation premium Risk premium Total return 58 6 4 158 Assume that five years later the inflation premium is only 2 percent and is appropriately reflected in the required return (or yield to maturity) of the bonds. The bonds have 25 years remaining until maturity. Compute the new price of the bond. Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods. Note: Do not round intermediate calculations. Round your final answer to 2 decimal places. Assume interest payments are annual. New price of the bond t
Tom Cruise Lines Incorporated issued bonds five years ago at $1,000 per bond. These bonds had a 25-year life when issued and the annual interest payment was then 14 percent. This return was in line with the required returns by bondholders at that point as described below: Real rate of return Inflation premium Risk premium Total return 5% 14% Assume that five years later the inflation premium is only 3 percent and is appropriately reflected in the required return (or yield to maturity) of the bonds. The bonds have 20 years remaining until maturity. New price of the bond Compute the new price of the bond. Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods. Note: Do not round intermediate calculations. Round your final answer to 2 decimal places. Assume interest payments are annual. Check my
Media Blas Incorporated issued bonds 10 years ago at $1,000 per bond. These bonds had a 25-year life when issued and the annual Interest payment was then 10 percent. This return was in line with the required returns by bondholders at that point in time as described below: Real rate of return Inflation premium Risk premium Total return 2% 4 10% Assume that 10 years later, due to good publicity, the risk premium is now 2 percent and is appropriately reflected in the required return (or yield to maturity) of the bonds. The bonds have 15 years remaining until maturity. Compute the new price of the bond. Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods. Note: Do not round intermediate calculations. Round your final answer to 2 decimal places. Assume interest payments are annual. New price of the bond Answer is complete but not entirely correct. 972 72
A $1,000 face value bond issued by the Purdue Company currently pays total annual interest of $80 per year and has a 15-year life. a-What is the present value, or worth, of this bond if investors are willing to accept a 10 percent annual rate of return on bonds of similar quality bond? b. How would your answer change is the bond makes semi-annual payments? c-How would your answer in (a) change if, one year from now, investors only required a 6 percent annual rate of return on bond investments similar in quality to the Purdue bond? d-Suppose the original bond can be purchased for $925. What is the bond’s yield to maturity?
Media Bias Incorporated issued bonds 10 years ago at $1,000 per bond. These bonds had a 40-year life when issued and the annual interest payment was then 11 percent. This return was in line with the required returns by bondholders at that point in time as described below: Real rate of return 2% Inflation premium 4 Risk premium 5 Total return 11% Assume that 10 years later, due to good publicity, the risk premium is now 3 percent and is appropriately reflected in the required return (or yield to maturity) of the bonds. The bonds have 30 years remaining until maturity. Compute the new price of the bond. Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods.
The company issues 10.0%, 10-year bonds with a total face amount of $1,000,000. The market interest rate for bonds of similar risk and maturity is 9.8%. Interest is paid semi-annually. DO NOT ROUND YOUR ANSWERS UNTIL YOU FULLY COMPLETE THE PROBLEM SET. 1. $ 2. $ 3. $ How much will be paid in interest each interest payment? (rounded to nearest dollar). What is the present value of the interest payments? (rounded to nearest dollar). What is the issue price of the bond?
Atom Endeavour Co. Issued $27 million face amount of 5.6% bonds when market Interest rates were 6.24% for bonds of similar risk and other characteristics. Required: a. How much Interest will be paid annually on these bonds? (Enter your answer in dollars, not millions of dollars, 1.e. 1,234,567.) Annual interest payment b. Were the bonds issued at a premium or discount? O Premium O Discount c. Will the annual Interest expense on these bonds be more than, equal to, or less than the amount of Interest paid each year? O Interest expense will be less than the Interest paid. O Interest expense will be more than the Interest paid. O Interest expense will be equal to the Interest paid.
You issued debt in the form of bonds, with a face value of $1,000, and have 9 years until maturity. The bonds have an annual coupon rate of 7.8%, which are paid semiannually. a. The current price is $1,100. What is the pretax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e. g 12.34.) b. The tax rate is 22%. What is the aftertax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 12.34.)
The Wall Street Journal reports that the current rate on 10-year Treasury bonds is 2.85 percent and the rate on 20-year Treasury bonds is 5.10 percent. Assume that the maturity risk premium is zero. Calculate the expected rate on a 10-year Treasury bond purchased ten years from today, E(10r10). (Do not round intermediate calculations. Round your answer to 2 decimal places.) Expected rate ____.__%
13. Tom Cruise Lines Inc. issued bonds five years ago at $1,000 per bond. These bonds had a 25-year life when issued and the annual interest payment was then 15 percent. This return was in line with the required returns by bondholders at that point as described next: Real rate of return 4% Inflation premium 6 Risk premium 5 Total return 15% Assume that five years later the inflation premium is only 3 percent and is appropriately reflected in the required return (or yield to maturity) of the bonds. The bonds have 20 years remaining until maturity. Compute the new price of the bond. 14. A) Find thr present value of 2 percent x 1000 (or $20) for 20 years at 10 percent. The $20 is assumed to be an annual payment. B) Add this value to $1000 C) explain why the answers to problem 14b and problem 13 are basically the same. * Just need help with #14 not #13 thank you

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