## FA Mod 10 Debt amortization practice exam questions

 Author Message NEAS Supreme Being Group: Administrators Posts: 4.2K, Visits: 1.2K FA Module 10 Debt amortization practice exam questions(The attached PDF file has better formatting.)A firm issues a five year 4% annual coupon 100,000 par value bond on December 31, 20X1. The interest expense on the bond in 20X6 is 4,501. The firm reports under IFRS. Question 10.1: Interest paidWhat is the interest paid in 20X6?Answer 10.1: 4% × 100,000 = 4,000(interest paid = par value × coupon rate)Question 10.2: Accrual of discount or amortization of premiumWhat is the amortization of premium (accrual of discount) in 20X6?Answer 10.2: 4,000 – 4,501 = (501)(amortization of premium = interest paid – interest expense)Question 10.3: Carrying valueWhat is the carrying value of the bond on December 31, 20X5?Answer 10.3: 100,000 – 501 = 99,499(carrying value at the end of the year = carrying value at the beginning of the year – amortization of premium or + accrual of discount)Question 10.4: Yield to maturityWhat is the yield to maturity on December 31, 20X1?Answer 10.4: 4,501 / 99,499 = 4.5237%(yield to maturity (constant in all years) = interest expense / carrying value at the beginning of the year)Question 10.5: Sale priceWhat is the sale price of the bond on December 31, 20X1?Answer 10.5: 4,000 × (1.045237–1 + 1.045237–2 + 1.045237–3 + 1.045237–4) + 104,000 × 1.045237–5 = 97,702.49(sale price = present value of future cash flows) Attachments FA Module 10 Debt amortization practice exam questions.pdf (167 views, 31.00 KB)
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