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AC_391_Spring_2010_Exam_2_problem_soluti

# AC_391_Spring_2010_Exam_2_problem_soluti - Exam 2 Solutions...

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Exam 2 Solutions and Practice Pr Problem 1: In this problem, you must determine the PV of a note receivable and a) Face amt of note 200,000 Discount (market) rate 5% Time till paid 3 PV 172,768 Sale Price (PV of note) 172,768 (see note) less: Book value 200,000 Gain (loss) on sale (27,232) dr. cr. b) Note receivable 172,768 Accumulated depreciation 100,000 Loss on sale 27,232 Building 300,000 c) Note receivable (or int rec) 8,638 Interest revenue 8,638 Problem 2: In this problem, you must first determine the cash to be received by Face of bond 1,000 coupon rate 10% market rate 6% duration/maturity 10 years Annual cash to Maturity cash to total cash to Year be Received be Received be Received 1 100 0 100 2 100 0 100 3 100 0 100 4 100 0 100 5 100 0 100 6 100 0 100 7 100 0 100 8 100 0 100 9 100 0 100 10 100 1,000 1,100 value of bond a) 1,294 debit credit b) Bonds Receivable 1,000 Premium on Bonds 294

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Cash 1,294 c) Cash 100 Premium on Bonds 22 Interest revenue 78 NOTE! I graded this problem using a 10 year bond. I believe I told you in Face of bond 1,000 coupon rate 10% market rate 6% duration 4 Cash To Be Year Received PV 1 100 94 2 100 89 3 100 84 4 1,100 871 1,139 value of bond a) 1,139 b)
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AC_391_Spring_2010_Exam_2_problem_soluti - Exam 2 Solutions...

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