Kaloy invested in the bonds of AAA Company in the United States. The bonds were issued at a price of P26,000,000 in Peso equivalent. The bonds pay 9% annual interest and matures in 4 years. Kaloy transferred the bonds at a consideration of P27,000,000 in the Philippines t
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Kaloy invested in the bonds of AAA Company in the United States. The bonds were issued at a price of P26,000,000 in Peso equivalent. The bonds pay 9% annual interest and matures in 4 years. Kaloy transferred the bonds at a consideration of P27,000,000 in the Philippines to ABM Investors. Compute the DST.
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- K- Annika bought euro denominated bonds when the exchange rate was 909 euro to the dollar. She paid $11,881 for the bonds. At the end of the year, the bonds were worth 10.000 euroshe received 400 euro in interest and the exchange rate was 921 euro to the dollar. What was her holding period return in US dollars? OA 5.30% OB 15% O-0.74% OD 0.53%Grupo Bimbo, although Mexican by incorporation, evaluates all business results, including financing costs, in U.S. dollars. The company needs to borrow $ 10,000,000 or the foreign currency equivalent for one year. For all issues, interest is payable once per year (annual compounding), at the end of the year. Available alternatives are: Issue Japanese yen bonds at par yielding 3% per annum. The current exchange rate is ¥106/$, and the yen is expected to strengthen against the dollar to ¥100/$. Issue euro-denominated bonds at par yielding 7% per annum. The current exchange rate is $1.15/€, and the euro is expected to weaken against the dollar to $1.1/€. Issue U. S. dollar bonds at par yielding 5% per annum. Which course of action do you recommend Grupo Bimbo take?On January 1, 2020, Growth Inc. (Growth) purchased, in US funds, $500,000 of bonds of Big Company (Big). On that date, the bonds were trading at par. These bonds pay 10% interest annually each December 31. The bonds mature on December 31, 2022. The following exchange rates were applicable between 2020 and 2022. The following are the relevant foreign exchange rates: January 1, 2020 US$1 = CDN$1.5254 %3| Average rate for 2020 US$1 = CDN $1.5140 December 31, 2020 US$1 = CDN $1.4725 %3| Average rate for 2021 US$1 = CDN $1.4600 December 31, 2021 US$1 = CDN $1.4425 Average rate for 2022 US$1 = CDN $1.4500 December 31, 2022 US$1 = CDN $1.4575 Prepare Growth's journal entries for each of 2020, 2021 and 2022.
- Leader Inc. has the following foreign financing: The company borrowed US$350,000, for five years, when US$1.00 = Cdn$1.02. The exchange rate at the end of the first year is US$1.00 = Cdn$1.03, and at the end of the second year is US$1.00 = Cdn$0.99. Assume the debt was raised at par. Ignore interest. Required: How much exchange gain or loss would be shown in earnings in the second year? (Do not round intermediate calculations.) Exchange Earnings in second year Gain LossLafayette Group (U.S.). The Lafayette Group, a private equity firm headquartered in Boston, borrows £5,000,000 for one year at 7.375% interest. a. What is the dollar cost of this debt if the pound depreciates from $2.0260 = £1.00 to $1.9460 = £1.00 over the year? b. What is the dollar cost of this debt if the pound appreciates from $2.0260 = £1.00 to $2.1640 = £1.00 over the year? a. What is the dollar cost of this debt if the pound depreciates from $2.0260 = £1.00 to $1.9460 = £1.00 over the year? % (Round to two decimal places.) b. What is the dollar cost of this debt if the pound appreciates from $2.0260 = £1.00 to $2.1640 = £1.00 over the year? % (Round to two decimal places.)Warm Runnings Inc. issued ₱400,000 bonds with a nominal interest rate of 4% when the market rate was 5%. This resulted in receiving cash proceeds of ₱389,107.01. The life of the bonds is 3 years. What will be the carrying value of the bonds after 2 years? (Provide solution/ explanation) a. ₱364,671.29 b. ₱384,671.29 c. ₱392,562.36 d. ₱396,190.48
- Hector Kane HK) owns vast amounts of corporate bonds Suppose HKbuys $1,300.000 of Ovon bonds at a price of 103. The Oxon bonds pay cash interest at the annual rate of 79% and mature at the end of five years (The bonds pay cash interest annualy) How much did HK pay to purchase the bond investment? How much wi HK colect when the bond investment matures? How much cash interest will HK receive each year trom Ovon? WiI HKS annual interest revenue on the bond investment be more or less than the amount of cash interest received each year? Gve your reason. Compute HKs annual interest revenue on this bond investment. Use the straightine method to amortize the investment 1. 1. How much did HK pay to purchase the bond investment? How much will HK colect when the bond investment matures? HK paid sto purchase the bond investment HK will colect at maturity 2. How much cash interest will HK receive each year trom Con? HKw recerve annual cash interest of 5 3. W HCs annual intarest revenue on the bond…A Multi-national Corporation sold an issue of bonds in the Pakistani bonds market. The main features of these bonds were as follow:a) Maturity period = 10 Yearsb) Face value = Rs.1,000c) Coupon rate = 10% per annumd) Interest is paid semi-annuallyRequired:1) Two years after the bonds were issued, thegoing rate of interest on bonds such as these fell to 6% per annum. At what price would the bonds sell in the market?New Hampshire Corp A. New Hampshire Corp. has decided to issue three-year bonds in Russia, denominated in 5,000,000 Russian rubles at par. The bonds have an annual coupon rate of 17%. New Hampshire Corp does not expect to have ruble cash flows to repay the bonds, so they must convert U.S. dollars to rubles to make interest and principal payments on the bonds. The current spot rate is Rub 33.3333/$. Assume relative PPP holds between Russia and the U.S. If inflation in Russia is 5% and is 1% in the U.S., and is expected to remain constant over the three-year life of the bonds, what is the annual U.S. dollar financing cost of these bonds? (HINT: Draw a timeline with the annual Rub cash flows, the annual exchange rates and the annual USD cash flows on it.) A. 10.66% B. 12.54% C. 14.87% D. 19.29%
- C. XY Ltd has bonds outstanding with 7 years left before maturity. The bonds are currently selling for K800 per K1,000 face value bond. The interest is paid annually at a rate of 12 percent. The firm's tax rate is 40 percent. Calculate the after-tax cost of debt.A Multi-national Corporation sold an issue of bonds in the Pakistani bondsmarket. The main features of these bonds were as follow:a) Maturity period = 10 Yearsb) Face value = Rs.1,000c) Coupon rate = 10% per annumd) Interest is paid semi-annuallyRequired:1) Two years after the bonds were issued, thegoing rate of interest on bondssuch as these fell to6% per annum. At what price would the bonds sell inthe market? 2) Suppose that, two yearsafter the initial offering, the going interest ratehad risen to 12%. At what price would the bonds sell?3) Comment on your resultsNote: In both cases you need to calculate market price/bond.Discuss the effect if the company’s bond is downgraded. Scenic City issued bonds to build hypermarkets as well as a high rise condominium. The home currency is Ringgit and the cost of the project has been estimated to be RM50 million. To finance the construction of the hypermarket and condominium, Scenic City issued pesodenominated bonds in Philippines whose currency is the peso. When the bond was issued, the interest rate was low in Philippines. The foreign bond issue raised 600 million pesos when the exchange rate at the time was 12 pesos/RM. Of the total amount raised, 50% was zero coupon bond and the balance was straight bond. Each foreign straight bond has a par value of 100 pesos and pays 7% interest in pesos at the end of each year. The bonds will be redeemed in six years’ time at par. The current cost of dent of peso-denominated bonds of similar risk is 8%. The zero coupon bond also has a par value of 100 pesos with a redemption period of six years. The zero coupon bond is…