Question

How can there be interest expense each period for noninterest-bearingbonds if there are no interest payments?

Answer #1

Non interest bearing bonds are like zero coupon bonds.

The zero coupon bond is issued at discount value and redeemed at par value , the difference between issue price & redemption price is return earned on that bond.

There is no annual interest expenses like coupon bonds but however calculation of interest expense for non interest bearing bonds in the form of imputed interest basis and the IRS uses imputed interest as a tool to collect tax from non interest bearing securities.

Bank A’s gross interest income =5.3%, gross interest expenses =
2.5%, noninterest income = 3%, noninterest expense = 3.5%, loss
loss provision = 1%, securities gain = 0.1%, tax rate on income =
30%. Calculate Bank A’s net income after tax.

1.If a bond sells at a premium,
(A)interest expense can not be calculated.
(B)cash interest will equal interest expense each period.
(C)interest expense exceeds cash interest each period.
(D)cash interest exceeds interest expense each period.
2.
A bond will sell at a discount when
(A)the stated rate is less than the market rate
(B)the stated rate is more than the market rate
(C)interest rates fall
(D)the company's stock price goes down

The Prime Bank had interest income of $85 million and
noninterest income of $10 million. This
bank also had interest expenses of $30 million and noninterest
expenses of $25 million. This
bank’s provision for loan losses is $5 million and taxes are $5
million. This bank has total assets
of $1 billion and has equity capital totaling 15 percent of total
assets. What would be this bank’s
net interest margin (use total assets as earning assets), ROA and
ROE?

Calculate the total payments and total interest expense for a
$150,000 loan with terms 6%, 30 years compounded monthly. The loan
is assumed to be held to maturity.

Multiple Choices
Interest expense in GAAP financial statements is computed based
on:
The coupon rate times the carrying value of the debt
The coupon rate times the face value of the debt
The effective rate times the carrying value of the debt
The effective rate times the face value of the debt
Coopers Inc. issued $10,000,000 of 10-year bonds on 1/1/2016
for $10,858,432. The bonds pay interest semi-annually. A journal
entry was recorded for the first interest payment on June...

CONSIDER:
In Period 1 (at the end of the period):
Net Income = 300
Interest Expense = 100
Depreciation = 40
Cap Ex = 43
Net Increases to Working Capital = 10
Cash Flow to Invested Capital = NI + D&A - Cap Inv +
Interest Exp – Net Add to Work Cap
CFIC = 300 + 40 – 43 + 100 – 10
CFIC = 387
NOW CONSIDER:
CF1 = 387
CF2 = 1.333 x CF1 = 515.871
CF3...

CONSIDER:
In Period 1 (at the end of the period):
Net Income = 300
Interest Expense = 100
Depreciation = 40
Cap Ex = 43
Net Increases to Working Capital = 10
Cash Flow to Invested Capital = NI + D&A - Cap Inv +
Interest Exp – Net Add to Work Cap
CFIC = 300 + 40 – 43 + 100 – 10
CFIC = 387
NOW CONSIDER:
CF1 = 387
CF2 = 1.333 x CF1 = 515.871
CF3...

The budgeted amount of selling and administrative expense for a
period can be found in the
a.
sales budget.
b.
cash budget.
c.
pro forma balance sheet.
d.
pro forma income statement.

Journalize the appropriate entries for bad debt expense and
payments, if any, for each independent scenario:On June 30, Brown
Company had credit sales were $500,000 for the period. Accounts
receivable balance was $20,000. Brown Company determined that Blue
Company’s accounts receivable account which made up 50% of the
accounts receivable balance was uncollectible and wrote-off the
uncollectible amount on June 30 under the direct write-off method.
Blue Company made a $5,000 payment on the written off account on
August 1

An annuity-due has 29 payments of $800 per period. The effective
rate of interest per period is 7% for the first 9 periods and 3%
for the following 20 periods.
(A) Find the accumulated value of the annuity using the portfolio
method. Round your answer to 2 decimal places.
(B) Find the accumulated value of the annuity using the yield-curve
method. Round your answer to 2 decimal places.

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