What is the implicit interest for this bond

Assignment Help Financial Management

Reference no: EM13937434

Lee Michaels Jewelers recently issued a $1,000 face, 10 year zero coupon bond. The initial offering sold in January, 2008 for $500. Despite the fact that the bond doesn’t pay interest, the IRS says you must declare the implicit interest for tax purposes. What is the implicit interest for this bond in year 5?

Reference no: EM13937434

Questions Cloud

How much interest will you pay to the bank during year : Assume you borrow $100,000 from a bank to buy a house at 7% interest for 30 years with monthly payments. How much do you need to pay every month? And how much interest will you pay to the bank during year 4 only?

What is current equilibrium stock price : The earnings of Kao, Inc. are expected to grow over the next 3 years by 30%, 20%, and 10%, respectively, and by 2% thereafter. The most recent dividend paid by the company was $1.00 (that is, D0 = 1.00). If the required rate of return is 5%, what is ..

Investment opportunity set formed with two securities : Consider an investment opportunity set formed with two securities that are perfectly negatively correlated. The global minimum-variance portfolio has a standard deviation that is always _________.

What is the break-even point in sales dollars : Sweet Tooth Bakery bakes and sells pies. Sweet Tooth has annual fixed costs of $880,000 and a variable cost per pie of $7.50. Each pie sells for $15.50 each. The firm expects to sell 500,000 pies annually. What is the break-even point in sales dollar..

What is the implicit interest for this bond : Lee Michaels Jewelers recently issued a $1,000 face, 10 year zero coupon bond. The initial offering sold in January, 2008 for $500. Despite the fact that the bond doesn’t pay interest, the IRS says you must declare the implicit interest for tax purpo..

What is the reward-to-volatility ratio of best feasible CAL : A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term government and corporate bond fund, and the third is a T-bill money market fund that yields a sure rate of 5.8%. The probability distributi..

What is the average return for stock : If the returns on Stock A are as follows: Year 1 return = -2 %, Year 2 return = -20 %, Year 3 return = 20 %, Year 4 return = -17 %, and Year 5 return = -13 %, what is the average return for Stock A over this 5 year period?

What is the reward-to-variability ratio : Asset A has an expected return of 21% and a standard deviation of 25%. The risk-free rate is 7%. What is the reward-to-variability ratio?

Interest rate risk-market risk-credit risk-currency risk : Explain the following financial risks: interest rate risk, market risk, credit risk, and currency risk. How would a global insurance company, for example John Hancock, possibly manage each one of these risks; provide current assumptions and figures i..

User Account

All Pages