CMOS Chips is hedging a 20-year, $19 million, 8% bond payable with a 20-year interest rate swap and has designated the swap as a fair value hedge. The agreement called for CMOS to receive payment based on a 8% fixed interest rate on a notional amount of $19 million and to pay interest based on a floating interest rate tied to LIBOR. The contract calls for cash settlement of the net interest amount on December 31 of each year. At December 31, 2021, the fair value of the derivative and of the hedged bonds has increased by $109,000 because interest rates declined during the reporting period. Required: 1-a. Does CMOS have an unrealized gain or loss on the derivative for the period? 1-b. Does CMOS have an unrealized gain or loss on the bonds? 1-c. Will earnings increase or decrease due to the hedging arrangement? 2. Suppose interest rates increased, rather than decreased, causing the fair value of both the derivative and of the hedged bonds to decrease by $109,000. a. Would CMOS have an unrealized gain or loss on the derivative for the period? b. Would CMOS have an unrealized gain or loss on the bonds? c. Would earnings increase or decrease due to the hedging arrangement? 3. Suppose the fair value of the bonds at December 31, 2021, had increased by $138,000 rather than $109,000, with the additional increase in fair value due to investors perceptions that the creditworthiness of CMOS was improving. a. Would CMOS have an unrealized gain or loss on the derivative for the period? b. Would CMOS have an unrealized gain or loss on the bonds? c. Would earnings increase or decrease due to the hedging arrangement? 4. Suppose the notional amount of the swap had been $21 million, rather than the $19 million principal amount of the bonds. As a result, at December 31, 2021, the swaps fair value had increased by $138,000 rather than $109,000. a. Would CMOS have an unrealized gain or loss on the derivative for the period? b. Would CMOS have an unrealized gain or loss on the bonds? c. Would earnings increase or decrease due to the hedging arrangement? 5. Suppose BIOS Corporation is an investor, having purchased all $19 million of the bonds issued by CMOS as described in the original situation above. BIOS is hedging its investment, classified as available-for-sale, with a 20-year interest rate swap and has designated the swap as a fair value hedge. The agreement called for BIOS to make payment based on a 8% fixed interest rate on a notional amount of $19 million and to receive interest based on a floating interest rate tied to LIBOR. a. Would BIOS have an unrealized gain or loss on the derivative for the period due to interest rates having declined? b. Would BIOS have an unrealized gain or loss on the bonds? c. Would earnings increase or decrease due to the hedging arrangement?

2 CMOS Chips is hedging a 20-year, S19 million, 8% bond payable with a 20-year interest rate swap and has designated the swap as a fair value hedge. The agreement called for CMOS to receive payment based on a 85 foxed interest rate on a notional amount of $19 million and to pay interest based on a floating interest rate tied to LIBOR. The contract calls for cash settlement of the net interest amount on December 31 of each year. A: December 31, 2021 the for value of the derivative and of the hedged bonds has increased by $109.000 because Interest rates declined during the reporting period Required: 1-a. Does CMOS have an unrealized gain or loss on the derivative for the period? 1-b. Does CMOS have an unrealized gain or loss on the bonds? 1-C. Will earnings increase or decrease due to the hedging arrangement? 2. Suppose interest rates increased, rather than decreased, causing the fair value of both the derivative and of the hedged bonds to decrease by $109,000 a. Would CMOS have an unrealized gain or loss on the derivative for the period? b. Would CMOS have an unrealized gain or loss on the bonds? c. Would earnings increase or decrease due to the hedging arrangement? 3. Suppose the fair value of the bonds at December 31 2021, had increased by $138.000 rather than $109.000, with the additional increase in for value due to investors perceptions that the creditworthiness of CMOS was improving, 6. Would CMOS have an unrealized gain or loss on the derivative for the period? b. Would CMOS have an unrealized goin or loss on the bonds? c. Would earnings increase or decrease due to the hedging arrangement? 4. Suppose the notional amount of the swep had been $21 million, rather than the $19 million principal amount of the bonds. As. result of December 31, 2021 the swap's fair valuehad increased by $138.000 rather than $109.000 a. Would CMOS have an unrealized gain or loss on the derivative for the period? b. Would CMOS have an unrealized gain or loss on the bonds? c. Would earnings increase or decrease due to the hedging arrangement? 5. Suppose Bios Corporation is an investor having purchased all 519 milion of the bonds issued by CMOS as described in the original situation above. BIOS is hedging its investment classified as available for sale with a 20-year interest rate swap and has designated the swap as a fair value hedge. The agreement called for BIOS to make payment based on a 85 fed interest rate on a notional amount of S19 million and to receive interest based on a floating interest rate tied to LIBOR a. Would BIOS have an unrealized gain or loss on the derivative for the period due to interest rates having declined? b. Would BIOS have an unrealized gain or loss on the bonds? c. Would earnings increase or decrease due to the hedging arrangement? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required Does CMOS have an unrealized gain or loss on the derivative for the period? Does CMOS have an unrealized gain or loss on the bonds? Will earnings increase or decrease due to the hedging arrangement? 2 2. Suppose interest rates increased rather than decreased, causing the fair value of both the derivative and of the hedged bonds to decrease by $109.000 6. Would CMOS have an unrealized gain or loss on the derivative for the period? b. Would CMOS have an unrealized gain or loss on the bonds? c. Would earnings increase or decrease due to the hedging arrangement? 3. Suppose the fair value of the bonds or December 31 2021, had increased by $138.000 rather than $109.000, with the additional increase in fair value due to investors' perceptions that the creditworthiness of CMOS was improving a. Would CMOS have an unrealized gain or loss on the derivative for the period? b. Would CMOS have an unrealized gain or loss on the bonds? c. Would earnings increase or decrease due to the hedging arrangement? 4. Suppose the notional amount of the swop had been $21 million, rather than the $19 million principal amount of the bonds. As a resultat December 31, 2021, the swap's fair value had increased by S138,000 rather than $109.000 6. Would CMOS have an unrealized gain or loss on the derivative for the period? b. Would CMOS have an unrealized gain or loss on the bonds? c. Would earnings increase or decrease due to the hedging arrangement? 5. Suppose Bios Corporation is an investor having purchased all 519 milion of the bonds issued by CMOS as described in the original situation above. BIOS is hedging its investment classified as available for sale with a 20-year interest rate swap and has designated the swap as a fair value hedge. The agreement called for BIOS to make payment based on a 8% foved interest rate on a notional amount of S19 million and to receive interest based on a floating interest rate tied to LIBOR a. Would BIOS have an unrealized gain or loss on the derivative for the period due to interest rates having declined? b. Would BIOS have an unrealized gain or loss on the bonds? c. Would earnings increase or decrease due to the hedging arrangement? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required) Required 4 Required Does CMOS have an unrealized gain or loss on the derivative for the period? Does CMOS have an unrealized gain or loss on the bonds? Will earnings increase or decrease due to the hedging arrangement? 1-a. Does CMOS have an unrealized gain or loss on the derivative for the period? Unreased gan 1-6. Does CMOS have an unrealized gain or loss on the bonds? United loss 1. Will earnings increase or decrease due to the hedging arrangement Neither increase or decrease (Required Required 2 > 2 2. Suppose interest rates increased, rather than decreased, causing the fair value of both the derivative and of the hedged bonds to decrease by $109.000 a. Would CMOS have an unrealized goin or loss on the derivative for the period? b. Would CMOS have an unrealized gain or loss on the bonds? c. Would earnings increase or decrease due to the hedging arrangement? 3. Suppose the fair value of the bonds of December 31 2021, had increased by $138.000 rather than $109.000 with the additional increase in feir value due to investors' perceptions that the creditworthiness of CMOS was improving 8. Would CMOS have an unrealized gain or loss on the derivative for the period? b. Would CMOS have an unrealized gain or loss on the bonds? c. Would earnings increase or decrease due to the hedging arrangement? 4. Suppose the national amount of the swep had been 521 million rather than the S19 million principal amount of the bonds. As resultat December 31, 2021.the swap's fair value had increased by $138.000 rather than $109.000 8. Would CMOS have an unrealized goin or loss on the derivative for the period? b. Would CMOS have an unrealized gain or loss on the bonds? c. Would earnings increase or decrease due to the hedging arrangement? 5. Suppose BIOS Corporation is an investor having purchased all s19 million of the bonds issued by CMOS os described in the original situation above. BIOS is hedging its investment, classified as available-for-sale, with a 20-year interest rate swap and has designated the swap as a fair value hedge. The agreement called for BIOS to make payment based on a 8% fixed interest rate on anotional amount of $19 million and to receive interest based on a floating interest rate tied to LIBOR a. Would BIOS have an unrealized gain or loss on the derivative for the period due to interest rates having declined? b. Would BIOS have an unrealized in or loss on the bonds? c. Would earnings increase or decresse due to the hedging arrangement? Complete this question by entering your answers in the tabs below. Required Required 2 Required) Required 4 Required Suppose Interest rates increased, rather than decreased, causing the fair value of both the derivative and of the hedged bonds to decrease by $109,000. Would CMOS have an unrealized gain or loss on the derivative for the period? Would CMOs have an unrealized gain or loss on the bonds? Would earnings increase or decrease due to the hedging arrangement? Would CMOS have an unrealized gain or loss on the derivative for the period ? Would CMOS have an unrealized gain or loss on the bonds? 26. Would earnings increase or decrease due to the hedging arrangement ? 2 UIZ APPENDIX A Saved 2. Suppose interest rates increased, rather than decreases, causing the fair value of both the derivative and of the heaged bonds to decrease by $109.000 a. Would CMOS have an unrealized gain or loss on the derivative for the period? b. Would CMOS have an unrealized gain or loss on the bonds? c. Would earnings increase or decrease due to the hedging arrangement? 3. Suppose the fair value of the bonds at December 31, 2021, had increased by $138.000 rather than $109,000 with the additional Increase in fair value due to investors' perceptions that the creditworthiness of CMOS was improving 6. Would CMOS have an unrealized gain or loss on the derivative for the period? b. Would CMOS have an unrealized gain or loss on the bonds? c. Would earnings increase or decrease due to the hedging arrangement? 4. Suppose the notional amount of the swap had been 521 million, rather than the $19 million principal amount of the bonds. As a resultat December 31 2021, the swep's fair value has increased by $138.000 rather than $109.000. a. Would CMOS have an unrealized gain or loss on the derivative for the period? b. Would CMOS have an unrealized gain or loss on the bonds? c. Would earnings increase or decrease due to the hedging arrangement? 5. Suppose BIOS Corporation is an investor having purchased all $19 milion of the bonds issued by CMOS as described in the original situation above. BIOS is hedging is investment, classified as available-for-sale, with a 20-year interest rate swap and has designated the swep as a fair value hedge. The agreement called for BIOS to make payment based on a 8% fixed interest rate on a notional amount of $19 million and to receive interest based on a floating interest rate tied to LIBOR 6. Would BIOS have an unrealized gain or loss on the derivative for the period due to interest rates having declined? b. Would BIOS have an unrealized gain or loss on the bonds? c. Would earnings increase or decrease due to the hedging arrangement? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required Suppose the fair value of the bonds at December 31, 202, had increased by $138,000 rather than $109,000, with the additional increase in fair value due to investors' perceptions that the creditworthiness of CMOS was improving. Would CMOS have an unrealized gain or loss on the derivative for the period? Would CMOS have an unrealized gain or loss on the bonds? Would earnings increase or decrease due to the hedging arrangement? Show less XP Would CMOS have an unrealized gain or loss on the derivative for the period? Would CMOS have an unrealized gain or loss on the bonds? 3. Would eamings increase or decrease due to the hedging arrangement? C. WOUVNon of the bonds issued by CMOS es described in the original Sad 2 QUIZ APPENDIX A 2. Suppose interest rates increased, rather than decreased, causing the fair value of both the derivative and of the hedged bonds to decrease by $109.000 a. Would CMOS have an unrealized gain or loss on the derivative for the period? b. Would CMOS have an unrealized gain or loss on the bonds? e. Would earnings Increase or decrease due to the hedging arrangement? increase in fair value due to investors 3. Suppose the fair value of the bonds at December 31, 2021 had increased by $138,000 rather than $109.000, with the additional perceptions that the creditworthiness of CMOS was improving Would CMOS have an unrealized gain or loss on the derivative for the period? 2. Id earnings increase or decrease due to the hedging arrangement? 4. Suppose the notional amount of the wop had been $21 million rather than the $19 million principal amount of the bonds. As result of December 31, 2021 the swep's fair value had increased by $138.000 rather than $109,000 Would CMOS have an unrealized gain or loss on the derivative for the period? . Would the swap as a fair value hedge. The agreement called for BIOS to make payment based on a 8% fixed interest rate on a notional amount of $19 million and to receive interest based on a floating interest rate tied to LIBOR Would BIOS have an unrealized gain or loss on the derivative for the period due to interest rates having declined? c. Would earnings increase or decresse due to the hedging arrangemene? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required Required Required Suppose the notional amount of the swap had been s21 million, rather than the $19 million principal amount of the bonds. As a result, at December 31, 2021, the swap's fair valuehad increased by $138,000 rather than $109,000. Would CMOS have an unrealized gain or loss on the derivative for the period? Would CMOS have an unrealised gain or loss on the bonds? Would earnings increase or decrease due to the hedging arrangement? Show less 4-a. Would CMOS have an unrealized gain or loss on the derivative for the period? 4.6. Would CMOS have an ad gain or loss on the bonds? 4. Would earnings increase or decrease due to the hedging arrangement? decrease by $109.000 8. Would CMOS have an unrealized gain or loss on the derivative for the period? b. Would CMOS have an unrealized gain or loss on the bonds? c. Would earnings increase or decrease due to the hedging arrangement? 3. Suppose the fair value of the bonds at December 31, 2021, had increased by $138.000 rather than $109.000 with the additional increase in foir value due to investors' perceptions that the creditworthiness of CMOS was improving a. Would CMOS have an unrealized gain or loss on the derivative for the period? b. Would CMOS have an unrealized gain or loss on the bonds? c. Would earnings increase or decrease due to the hedging arrangement? 4. Suppose the notional amount of the swap had been 521 million, rather than the $19 million principal amount of the bonds. As a result, st December 31, 2021, the swap's fair valuehad increased by $138.000 rather than $109,000 8. Would CMOS have an unrealized gain or loss on the derivative for the period? b. Would CMOS have an unrealized gain or loss on the bonds? c. Would earnings increase or decrease due to the hedging arrangement? 5. Suppose BIOS Corporation is an investor having purchased all $19 million of the bonds issued by CMOS as described in the original situation above. BIOS is hedging its investment, classified as available for sale, with a 20-year interest rate swap and has designated the swep as a fair value hedge. The agreement called for BIOS to make payment based on a 85 fixed interest rate on a notional amount of $19 million and to receive interest based on a floating interest rate tied to LIBOR 8. Would BIOS have an unrealized gain or loss on the derivative for the period due to interest rates having declined? b. Would BIOS have an unrealized gain or loss on the bonds? c. Would earnings increase or decrease due to the hedging arrangement? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required Required 4 Required Suppose BIOS Corporation is an investor, having purchased all $19 million of the bonds issued by CMOS as described in the original situation above. BIOS is hedging its Investment, classified as available-for-sale, with a 20-year interest rate swap and has designated the swap as a fair value hedge. The agreement called for BIOS to make payment based on a 5% fixed interest rate on a notional amount of $19 million and to receive interest based on a floating Interest rate tied to LIBOR. Would BIOS have an unrealized gain or loss on the derivative for the period due to interest rates having declined? Would BIOS have an unrealized gain or loss on the bonds? Would earnings increase or decrease due to the hedging arrangement? Show less 5-a. Would BIOS have an unrealized gain or loss on the derivative for the period due to interest rates having declined? 56. Would BIOS have an unrealized gain or loss on the bonds? BcWould earnings increase or decrease due to the hedging arrangement?