| bond | P | V | ||
| bond classification | held-to-maturity | held-for-trading | ||
| face value | $10 million | $7 million | ||
| coupon | 4%, annual | 5%, semi-annual | ||
| maturity | - | 19.5 years | ||
| 1/2/2009 | $9.2 million (yield=5%) purchase price | |||
| 7/1/2009 | $7 million (par) purchase price | |||
| 12/31/2009(current) | $9.6 million fair value (*2) $9,260,000 carrying value | (yield = 4%) fair value (*1) $7,941,591 carrying value |
(*1) Trading securities are reported on the balance sheet at fair value. (carrying value = fair value)
N = 19.5*2 = 39
I/Y = 4/2 = 2
PMT = 5% * (1/2) * 7,000,000 = 175,000
FV = 7,000,000
CPT PV = -7,941,590.609
(*2) Held-to-maturity securities are reported on the balance sheet at amortized cost.
Carrying value = issue price + discount amortization
= 9,200,000 + (9,200,000*5% - 10,000,000*4%)
= 9,260,000
Thus, at the end of 2009, the investment portfolio is reported at:
9,260,000 + 7,941,591 = 17,201,591
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