CMA Study Group

bond

  • 1.  bond

    Posted 5 days ago


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    Syed Yousuf Jamal

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  • 2.  RE: bond

    Posted 5 days ago
    Good morning, Syed,

    I think A.  Use the annuity 5% for the interest as stated rate and the 4% as current market rate for the bond.
    $40,000 x 7.72173 = $308,869.20
    $800,000 x .67556 = $540,448.00

    I hope this helps and is correct.

    Rebecca

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    Rebecca McNeely Wetzel
    Accountant
    Ormond Beach, Florida
    USA
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  • 3.  RE: bond

    Posted 5 days ago
    Actually, I don't understand because Young is issuing the bonds and would get $800,000 at time of issuance (no?), and it pays out the interest (does not receive it).
    I would be interested to know what you find out.  Thank you.

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    Rebecca McNeely Wetzel
    Accountant
    Ormond Beach, Florida
    USA
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  • 4.  RE: bond

    Posted 5 days ago
    Face amount $800,000 *0.6756 plus $40,000 * 8.111 = to answer D, remember interest paid twice per year so divide 8%by 2

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    Deon Denton
    Accountant
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  • 5.  RE: bond

    Posted 4 days ago
    how you calculate 0.6756 and  8.111, I know it is mention in question but what percentage is he taking.

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    Syed Yousuf Jamal
    None
    Alexandria
    Egypt
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  • 6.  RE: bond

    Posted 3 days ago
    okay this bond is old at a premium since the market interest rate is lower than the coupon interest rate and therefore we need to discount all the cash flows proceed from the bond to lower rate.
    1- face value is 800,000 will be multiplied by 0,67556 factor. = 540448
    2- interest rate actually paid equal to 80000 divided by two since its paid semi-annually so 40000 * 1-(1/(1+.04 power 10) all divided .04 or by multiply it by 8.11090 factor will result in 324436 - thus, the amount porceed equal to 540448+324436 = 864884 which is answer C

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    Mohamed Shamsaldin
    Accountant
    Dammam
    Saudi Arabia
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