Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

7. Receivables and Investments

Introduction to Investments in Securities

Financial Accounting

7. Receivables and Investments

Introduction to Investments in Securities

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Multiple Choice

By the end of year 8, DeMarco and Tanya would have to pay a final payout of which of the following, assuming they invested in a bond with a face value of $10,000, an annual coupon rate of 5%, and the bond matures at the end of year 8?

$800 (the final year's interest payment)

$0 (no payout required at maturity)

$10,000 (the face value of the bond)

$10,500 (face value plus one year's interest)

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Verified step by step guidance

Step 1: Understand the components of the bond. A bond typically has a face value (the principal amount), an annual coupon rate (interest paid annually), and a maturity period (the time after which the bondholder is repaid the face value).

Step 2: Calculate the annual interest payment using the formula: Interest Payment = Face Value × Annual Coupon Rate. In this case, the face value is $10,000 and the annual coupon rate is 5%. Use MathML to represent this formula:

Interest = Face \times Rate

Step 3: Determine the total payout at maturity. At the end of year 8, the bondholder is entitled to receive the face value of the bond ($10,000) plus any interest payments for the final year, if applicable.

Step 4: Analyze the options provided in the problem. Compare the calculated payout (face value + final year's interest payment) with the given choices: $800, $0, $10,000, and $10,500.

Step 5: Conclude that the correct payout at maturity includes the repayment of the face value of the bond ($10,000) and potentially the final year's interest payment, depending on the terms of the bond agreement.