Face rate of Interest- or coupon, the amount of interest that will be paid on the bonds as indicated in the bond contract during the time between when the bond is issued and when it matures. 7. Issue Price- the amount of money the issuing company will receive at the time the bonds are issued. This amount represents the present value of the cash flows the bond will produce. III.
80*7.1607+1000*.3555 = $928 • 5-2 Yield to Maturity for Annual payments Wilson Wonders’s bonds have 12 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 10%. The bonds sell at a price of $850. What is their yield to maturity? 100+1000-850/12/1000+850/2 = 112.5/925 = .1216 or 12.16% • 5-6 Maturity Risk Premium The real risk-free rate is 3%, and inflation is expected to be 3% for the next 2 years.
They use bond equivalent yields. 3. Why can discount yields not generally be compared to yields on other (nondiscount) securities? a. The discount yield uses the terminal price, or the security’s face value, as the base price in calculating an annualized interest rate.
1. What is yield to maturity for Nike’s bonds 1. Why is it important to estimate a firm’s cost of capital? What does it represent? Is the WACC set by investors or by managers?
1. For Cingular, the primary investing activities are: A. Construction and capital expenditures B. Investments in and advances to equity affiliates. These activities were financed using the income (adjusted for cash basis) generated from operating activities and financing activities.
The meaning and implications of using FIFO, LIFO, and weighted average cost-flow assumptions. 6. How to calculate depreciation using the straight-line method. 7. The journal entry for the issuance of bonds (at par, discount, or premium) and for the issuance of stock (at par or above par).
Contrast these types of bonds: (a) Secured and unsecured. Secured bonds have particular assets of the issuer promised as collateral for the bonds. An unsecured bond is given against the general credit of the borrower. (b) Convertible and callable. A convertible bond can be converted into common stock and a callable bond can be retired at a stated dollar amount prior to maturity.
1500 As of December 31, 2014, Stoneland Company has assets of $3,500 and stockholders' equity of $2,000. What are the liabilities for Stoneland Company as of December 31, 2014? 5. Asset Indicate whether the following item is an asset, liability or part of stockholders' equity: Equipment 6. Asset Indicate whether the following item is an asset, liability or part of stockholders' equity: Prepaid Insurance 7.
Portfolio Income -This type of income is derived directly from investments such as stock Earnings, mutual fund investments, or interest income. 7-13 13. Briefly, what is "material participation"? Why is the determination of whether a taxpayer materially participates important? (Smith 7-30) Material participation is the point at which an individual spends enough time working on a project that we can no longer be considered a passive investor in the project.
• Kelly lost her job in December 2013. She received unemployment for a brief period in 2014 until she found a new job. • While she was unemployed, she cashed in her 401(k) savings from her previous employer and used the money for household expenses. She does not qualify for any exception to the additional tax on early distributions. • Mia and Logan attended day-care while Kelly worked.