The Argyle Company acquired a $10 million face value bond that has an 8% coupon (pays interest

Question:

The Argyle Company acquired a $10 million bond that has an 8% (pays interest annually on December 31) on January 1, 2012. The bond matures on December 31, 2017. On January 1, 2012, the market yield for bonds of equivalent risk and was 6%.
Required:
a. How much did Argyle pay for this bond on January 1, 2012?
b. On December 31, 2012, the market yield for bonds of equivalent risk and is 7%. What would be the market value of this bond on December 31, 2012 immediately after the payment on that date?
c. On December 31, 2013, the market yield for bonds of equivalent risk and is 8%. What would be the market value of this bond on December 31, 2013 immediately after the payment on that date?
d. Assume one of three scenarios: the bond is to be (i) held to (ii) available for sale, or (iii) held for trading:
■ How much would the value of this bond be on December 31,2012 and December 31, 2013?
■ How much income would be reported in 2012 and 2013 for this bond?
■ How much would other comprehensive income (OCI) and cumulative OCI be for fiscal years 2012 and 2013? Balance Sheet
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A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a... Face Value
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the... Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...