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On January 1, 2017, Lamily Ltd. acquired an investment in a BC Hydro bond with a 10% coupon rate (pays interest annually each December 31).
On January 1, 2017, Lamily Ltd. acquired an investment in a BC Hydro bond with a 10% coupon rate (pays interest annually each December 31). The bond has a face value of $600,000 and matures on December 31, 2019. On January 1, 2017, the market yield for bonds of equivalent risk and maturity was 14%. On December 31, 2017, the market yield for bonds of equivalent risk and maturity was 13%. On December 31, 2018, the market yield for bonds of equivalent risk and maturity was 12%. Required: a. How much did Lamily pay for this bond on January 1, 2017? b. Prepare an amortization schedule for this bond. C. Assuming that Lamily Inc. holds this bond in a portfolio to collect contractual cash flows of principal and interest only, and no trading or selling of bonds takes place, calculate the following amounts: i Balance sheet value of this bond on December 31, 2017 and December 31, 2018 Income reported in 2017 and 2018 for this bond OCI and AOCI for fiscal years 2017 and 2018 d. Now assume that this bond is held in a port
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