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Home / Questions / When calculating the value of a bond using present value techniques, which of the followin

When calculating the value of a bond using present value techniques, which of the followin

When calculating the value of a bond using present value techniques, which of the following is not relevant?

 

a.

The dollar amount of the discount or premium

b.

The present value of a single sum table

c.

The amount of the periodic interest payment

d.

The face amount of the bonds

 

 

 

138.On January 2, 20x7, Barham Corporation issued ten-year bonds payable with a face value of $400,000 and a face interest rate of 9 percent. The bonds were issued to yield a market interest rate of 10 percent. Interest is payable semiannually on January 2 and July 1. In calculating the present value of the bond issue on January 2, 20x7,

 

a.

the 10 percent rate will be used to calculate the present value of the face amount and the present value of the periodic interest payments.

b.

a 5 percent rate will be used to calculate the present value of the face amount and the present value of the periodic interest payments.

c.

the 9 percent rate will be used to calculate the present value of the face amount and the present value of the periodic interest payments.

d.

the 10 percent rate will be used to calculate the present value of the face amount and a 5 percent rate will be used to calculate the present value of the periodic interest payments.

 

 

 

139.On January 2, 20x7, McGowan Corporation issued 20-year bonds payable with a face value of $300,000 and a face interest rate of 8 percent. The bonds were issued to yield a market interest rate of 9 percent. Interest is payable annually on January 2. In calculating the present value of the bond issue of January 2, 20x7, the

 

a.

9 percent rate will be used to calculate the present value of the face amount and the 8 percent rate will be used to calculate the present value of the periodic interest payments.

b.

8 percent rate will be used to calculate the present value of the face amount and the 9 percent rate will be used to calculate the present value of the periodic interest payments.

c.

8 percent rate will be used to calculate the present value of the face amount and the present value of the periodic interest payments.

d.

9 percent rate will be used to calculate the present value of the face amount and the present value of the periodic interest payments.

 

 

 

140.Which of the following is not needed in calculating the value of a bond?

 

a.

Future value of periodic interest payments

b.

Market interest rate

c.

Present value of face (maturity) amount

d.

Face interest rate

 

 

 

141.A bond premium has the effect of

 

a.

lowering the carrying value of the bond.

b.

raising the effective interest rate above the face interest rate.

c.

increasing the amount of cash paid for interest each six months.

d.

lowering the effective interest rate below the face interest rate.

 

 

 

142.The total interest cost on forty-one ten-year, 6 percent, $1,000 bonds that are issued at 98 is

 

a.

$23,780.

b.

$25,010.

c.

$25,420.

d.

$24,600.

 

 

 

143.When bonds are issued at a premium, the total interest cost of the bonds over the life of the bonds is equal to the amount of

 

a.

interest payments made over the life of the bonds.

b.

issuance premium.

c.

interest payments made over the life of the bonds plus the amount of issuance premium.

d.

interest payments made over the life of the bonds minus the amount of issuance premium.

 

 

 

144.Suffolk Corporation issued $90,000 of 20-year, 6 percent bonds at 98 on one of its semiannual interest payment dates. The straight-line method of amortization is to be used. How much bond interest expense will be recorded on the next interest payment date?

 

a.

$5,400

b.

$2,700

c.

$2,745

d.

$5,445

 

 

 

145.Suffolk Corporation issued $100,000 of 20-year, 6 percent bonds at 98 on one of its semiannual interest payment dates. The straight-line method of amortization is to be used. After seven years, what is the carrying value of the bonds?

 

a.

$98,700

b.

$99,650

c.

$98,350

d.

$99,300

 

 

 

146.Suffolk Corporation issued $100,000 of 20-year, 6 percent bonds at 98 on one of its semiannual interest payment dates. The straight-line method of amortization is to be used. What is the total interest cost of the bonds?

 

a.

$117,500

b.

$120,000

c.

$118,000

d.

$122,000

Dec 10 2019 View more View Less

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