F4 - Bonds (Andrew)

Question 1

Use excel for the bonds, but use this chart format in columns:

Answer 1

Cash / Int / Amort /CV

Question 2

For the CASH column remember its called INT PAYABLE it stays the same every period and you solve it by:

Answer 2

FACE VALUE X Contractual(stated rate)

Question 3

For the INT column remember its called INT EXPENSE cv changes so new number everytime and you solve it by:

Answer 3

CV X effective rate(mkt rate/yield rate)

Question 4

TIP: Focus on DATES

Question 5

Straight line ammortization -

Answer 5

higher in at the beg. but at the end it makes NO IMPACT

Question 6

In a DISCOUNT bond INT Expense(column) is ,…

Answer 6

higher than cash payment (column)

Question 7

For the AMMORT column you solve it by:

Answer 7

By subtracting int payable - int exepnse or cash column - int column

Question 8

For the CV column you solve it by

Answer 8

Beg CV +/- Ammort and then keep using the newest CV to subtract from

Question 9

In a discount bond you add or subtract to CV?

Answer 9

You add the ammort to CV

Question 10

In a premium bond you add or subtract to CV?

Answer 10

You subtract the ammort to CV

Question 11

Redeemed bonds JE is?

Answer 11

DR - BP (original)
DR - Loss on debt extinguishment
CR - Cash (BP X %)
CR - Discount BP + issuanc cost