Bond amortization constant yield method
CHAPTER I
Hernandez has recorded amortization of the bond premium on the straight-line method (which was not materially different from the effective-interest method). On December 31, 2010, when the fair market value of the bonds was 96, Hernandez repurchased $1,000,000 of the bonds in the open market at 96.
[DOC File]Chapter 10
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Calculate the Bond Amortization Schedule if the bond is bought to yield 8% annually. Calculate the Bond Amortization Schedule if the bond in Problem 28 is bought to yield 5%. A 40 year bond with a par value of 5000 is redeemable at par and pays semi-annual coupons at a rate of 7% convertible semi-annually. The bond is purchased to yield 6%.
[DOC File]Chapter 1, Section 4
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Amortization under straight-line method. Time . Straight-Line Method • Constant amount of amortization per period . Effective Interest Method • Less amortization in the initial years • More amortization in the latter years . Dollar amount of amortization always increases over the life of the bonds . 6-9 OH-07 (MC #30)
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The annual spot yield curve for this risk class of bond in the financial press is given as. Year % 1 3.3 2 3.8 3 4.2 4 4.8 5 5.5 Required: (a) The expected price at which the bond can be issued. (b) The yield to maturity of the bond. Solution: (a) Expected bond price. Year. Cash flow ($) Discount at. Present value ($) 1 4 1 / 1.033. 3.87 2 4 1 ...
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Analysts usually assume that the “risk free” rate is the yield of a constant maturity 20-year U. S. Treasury bond. Twenty years is used because many investments have long lives and the bond accounts for that fact. However, the bond is not completely risk-free because its …
Constant Yield Method Definition
Using OID tax rules, the cost basis and imputed interest under the constant yield method are obtained by discounting bond payments at the original 8% yield to maturity, and simply reducing maturity by one year at a time: Constant yield prices: compare these to …
[DOC File]4 ASSIGNMENT, DEPRECIATION, AND AMORTIZATION OF …
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3Amortization of bond discount—effective-interest . method for 2007 and 2008: Face value of bonds (400 ( $1,000) $400,000. Purchase price of bonds 364,547. Bond discount $ 35,453. Amortization of bond discount for 2007: 6 months ended December 1, 2007 ($364,547 ( 5% = $18,227 effective interest; $18,227 – $16,000 cash. interest) $ 2,227
[DOC File]1._Some of the factors to be considered in determining ...
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3.2.2 Earning yield method. Earnings yield = EPS × 100% Market price per share 3.3. Dividend valuation model (DVM) 3.3.1 The dividend valuation model is based on the theory that an equilibrium price for any share on a stock market is: (a) The . future expected stream of income. from the security. (b) Discounted. at a suitable . cost of capital ...
[DOC File]Chapter 5 Valuation and the Use of Free Cash Flows
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2. The difference between cost and book value ($600,000) is allocated as presented in Illustration 5-22. In this example, we assume that values are allocated on the basis of the fair value of the subsidiary as a whole, imputed from the transaction. 3. In 2004, S Company reported net income of $32,500.
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