SOL.-MAN._CHAPTER-10_INVESTMENTS-IN-DEBT-SECURITIES PDF

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Chapter 10Investments in Debt SecuritiesPROBLEM 1: TRUE OR FALSE1 – fair value plus transaction costs2345 – higher because there is discount6 - increases78 – same amount of interest income9 – Interest income on debt-type FVOCI assets iscalculated using the effective interest method.10 – 100 sale pri...

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Chapter 10 Investments in Debt Securities PROBLEM 1: TRUE OR FALSE 1. F ALSE–f ai rval uepl ust r ans ac t i onc os t s 2. F ALSE 3. TRUE 4. TRUE 5. F ALSE–hi ghe rbe c a us et he r ei sdi s c ount 6. F ALSE-i nc r e as e s 7. TRUE 8. F ALSE–s ameamountofi nt e r e s ti nc ome 9. F ALSE–I nt er e s ti nc omeonde bt t ypeFVOCIas s e t si s c al c ul a t e dus i ngt hee ffe c t i vei nt er e s tme t hod. 10.TRUE–100s al epr i c e–80amor t i ze dc os t=20gai n

PROBLEM 2: MULTIPLE CHOICE – THEORY 1. A 2. D 3. D Choi c e( b)i si nc or r e c t .Thec a r r yi ngamountof“ t er m”bonds( a s oppos edt o“ s e r i al ”bonds )i sr e por t e dasnonc ur r entunt i laye ar be f or et hema t ur eda t e . 4. A 5. A 6. C 7. A 8. C 9. D 10.A–Thei nve s t mentwasac qui r e da tadi s c ountbec aus et he i ni t i alc a r r yi ngamounti sl e s st hant hef ac eamount( ₱86, 580< ₱100, 000)andt heeffe c t i vei nt e r e s tr a t ei shi ghe rt hant he nomi nalr a t e( i . e . ,8% >6%) . Ther e f or e ,t heamor t i za t i on i nc r e as e st hec ar r yi ngamountoft hei nve s t me nte ac hye ar . PROBLEM 3: EXERCISES 1 . So l ut i o ns : Re qui r e me nt( a) :Amor t i zat i ont abl e

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Dat e 1 /1 / x 1 1 /1 / x 2 1 /1 / x 3 1 /1 / x 4 1 /1 / x 5

I nt e r e s t r e c e i ve d

I nt e r e s t i nc ome

Amor t i z at i on

Pr e s e ntval ue 1 , 0 6 0, 7 4 7

1 4 0 , 00 0

12 7, 2 9 0

1 2 , 7 10

1 , 0 4 8, 0 3 7

1 4 0 , 00 0

12 5, 7 6 4

1 4 , 2 36

1 , 0 3 3, 8 0 1

1 4 0 , 00 0

12 4, 0 5 6

1 5 , 9 44

1 , 0 1 7, 8 5 7

1 4 0 , 00 0

12 2, 1 4 3

1 7 , 8 57

1 , 0 0 0, 0 0 0

Re qui r e me nt( b) : J our nale nt r i e s 1 / 1 / x 1 I nve s t me nti nbonds Ca s h

1 , 0 6 0 , 74 7 1 , 0 6 0 , 74 7

1 2 / 3 1 / x 1 I nt e r e s tr e c e i va bl e 1 4 0 , 0 00 I nve s t me nti nbonds I nt e r e s ti nc ome 1 / 1 / x 2 Ca s h I nt e r e s tr e c e i va bl e

1 2 , 7 10 1 2 7 , 2 90

1 4 0 , 0 00 1 4 0 , 0 00

1 2 / 3 1 / x 2 I nt e r e s tr e c e i va bl e 1 4 0 , 0 00 I nve s t me nti nbonds I nt e r e s ti nc ome 1 / 1 / x 3 Ca s h I nt e r e s tr e c e i va bl e

1 4, 2 3 6 1 2 5 , 7 64

1 4 0 , 0 00 1 4 0 , 0 00

1 2 / 3 1 / x 3 I nt e r e s tr e c e i va bl e 1 4 0 , 0 00 I nve s t me nti nbonds I nt e r e s ti nc ome

1 / 1 / x 4 Ca s h I nt e r e s tr e c e i va bl e 1 2 / 3 1 / x 4

1 5, 9 4 4 1 2 4 , 0 56

1 4 0 , 0 00 1 4 0 , 0 00

Page|3 I nt e r e s tr e c e i va bl e 1 4 0 , 0 00 I nve s t me nti nbonds I nt e r e s ti nc ome 1 / 1 / x 5 Ca s h I nt e r e s tr e c e i va bl e

1 7, 8 5 7 1 2 2 , 1 43 1 4 0 , 0 00 1 4 0 , 0 00

Ca s h I nv e s t me nti nbonds

1 , 0 0 0 , 00 0 1 , 0 0 0 , 00 0

Re qui r e me nt( c ) :Unamor t i ze ddi s c ountorpr e mi um ( 1, 033, 801-1, 00 0, 000)=33, 801pr e mi um Re qui r e me nt( d) : Gai norl os sons al e Sa l epr i c e( 1 M x11 0%) Tr ans a c t i onc os t s Ne tdi s po s a lpr o c e e d s Car r yi nga mountonda t eofs a l e( s e et a b l ea b o v e ) Gai nons al e J a n. 1 , 2 0x 3

Cas h[ ( 1M x110 %)-40 K] I nve s t me nti nbonds Gai nons a l e( s que e ze )

1 , 10 0, 0 00 ( 40 , 00 0) 1 , 06 0, 0 00 ( 1, 03 3, 801 ) 2 6, 1 99 1 , 06 0, 0 00 1 , 03 3, 8 0 1 2 6, 1 99

Re qui r e me nt( e ) :Gai norl os sons al e Dat e 1 /1 / x 1 1 /1 / x 2 1 /1 / x 3 7 /1 / x 3

I nt e r e s t r e c e i ve d

I nt e r e s t i nc ome

Amor t i z at i on

Pr e s e ntval ue 1 , 0 6 0, 7 4 7

1 4 0 , 00 0

12 7, 2 9 0

1 2 , 7 10

1 , 0 4 8, 0 3 7

1 4 0 , 00 0

12 5, 7 6 4

1 4 , 2 36

1 , 0 3 3, 8 0 1

7 0 , 0 0 0

62 , 02 8

7 , 9 7 2

1 , 0 2 5, 8 2 9

Sa l epr i c ei nc l udi nga c c r ue di nt e r e s t( 1 M x9 8 %) Ac c r ue di nt e r e s t( s e et a b l ea b o v e ) Sa l epr i c ee xc l udi nga c c r ue di nt e r e s t Tr ans a c t i onc os t s Ne tdi s po s a lpr o c e e d s

9 80 , 00 0 ( 70 , 00 0) 9 10 , 00 0 ( 38 , 00 0) 8 72 , 00 0

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Car r yi nga mountonda t eofs a l e( s e et a b l ea b o v e ) Los sons al e J ul y 1 , 2 0x 3

I nt e r e s tr e c e i vabl e I nve s t me nti nbonds I nt e r e s ti nc ome

J ul y 1 , 2 0x 3

Cas h( 1M x98% –38 K) Los sons a l e( s que e ze ) I nve s t me nti nbonds I nt e r e s tr e c e i vabl e

7 0, 0 00 7 , 97 2 6 2, 0 28

t or e c o r dt hedi s c o unta mo r t i z a t i o n

9 42 , 00 0 1 53 , 82 9 1 , 02 5, 8 2 9 7 0, 0 00

t or e c o r dt hes a l e

2 . So l ut i o ns : Re qui r e me nt( a) :Amor t i zat i ont abl e Dat e 1 /1 /x 1 1 2 /3 1 /x 1 1 2 /3 1 /x 2 1 2 /3 1 /x 3 1 2 /3 1 /x 4

Pr e s e nt val ue 1 , 93 7, 9 5 0

I nt e r e s t r e c e i ve d

I nt e r e s t i nc ome

Amor t i z at i on

2 0 0 , 0 00

2 13 , 17 5

1 3 , 1 7 5

1 , 9 5 1, 1 2 5

2 0 0 , 0 00

2 14 , 62 4

1 4 , 6 2 4

1 , 9 6 5, 7 4 9

2 0 0 , 0 00

2 16 , 23 2

1 6 , 2 3 2

1 , 9 8 1, 9 8 1

2 0 0 , 0 00

2 18 , 01 9

1 8 , 0 1 9

2 , 0 0 0, 0 0 0

Re qui r e me nt( b) : J our nale nt r i e s 1 / 1 / x 1 I nve s t me nti nbonds Ca s h

1 , 9 3 7 , 95 0

1 2 / 3 1 / x 1 Ca s h I nve s t me nti nbonds I nt e r e s ti nc ome

2 0 0 , 0 0 0 1 3 , 17 5

1 2 / 3 1 / x 2 Ca s h I nve s t me nti nbonds I nt e r e s ti nc ome

2 0 0 , 0 0 0 1 4 , 62 4

1 , 9 3 7 , 95 0

2 1 3 , 1 75

2 1 4 , 6 24

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1 2 / 3 1 / x 3 Ca s h I nve s t me nti nbonds I nt e r e s ti nc ome

2 0 0 , 0 0 0 1 6 , 23 2

1 2 / 3 1 / x 4 Ca s h I nve s t me nti nbonds I nt e r e s ti nc ome

2 0 0 , 0 0 0 1 8 , 01 9

1 2 / 3 1 / x 4 Ca s h I nve s t me nti nbonds

2 , 0 0 0 , 00 0

2 1 6 , 2 32

2 1 8 , 0 19

2 , 0 0 0 , 00 0

Re qui r e me nt( c ) :Unamor t i ze ddi s c ountorpr e mi um ( 2, 000, 000-1, 965, 749)=34, 251di s c ount Re qui r e me nt( d) : Fi nanc i als t at e me ntpr e s e nt at i on Thebondsar epr e s ent edi nSl e ekCo. ’ s20x2financ i als t a t e ment sas nonc ur r e ntas s e tbe c aus et he yar ec ol l e c t i bl eonl ya tma t ur i t y .The bondswi l lbepr e s e nt e dasc ur r e ntas s e t si nt he20x3financ i al s t a t e ment s , aye arbe f or et hema t ur i t yda t e . Re qui r e me nt( e ) :Gai norl os sons al e Sa l epr i c e( 2 M x98 %) Tr ans a c t i onc os t s Ne tdi s po s a lpr o c e e d s Car r yi nga mountonda t eofs a l e( s e et a b l ea b o v e ) Los sons al e J a n. 1 , 2 0x 3

Cas h[ ( 2M x98%)-4 0K] Los sons a l e( s que e z e ) I nve s t me nti nbonds

1 , 96 0, 0 00 ( 40 , 00 0) 1 , 92 0, 0 00 ( 1, 96 5, 749 ) ( 45 , 74 9) 1 , 92 0, 0 00 4 5, 7 49 1 , 96 5, 7 4 9

Re qui r e me nt( f ) : Gai norl os sons al e Dat e

I nt e r e s t r e c e i ve d

I nt e r e s t i nc ome

Amor t i z at i on

1 /1 /x 1 1 2 /3 1 /x 1 1 2 /3 1 /x

2 0 0 , 0 00

2 13 , 17 5

1 3 , 1 7 5

1 , 9 5 1, 1 2 5

2 0 0 , 0 00

2 1 4 , 6 2 4

1 4, 6 2 4

1 , 9 6 5, 7 4 9

Pr e s e nt val ue 1 , 93 7, 9 5 0

Page|6 2 7 /1 /x 3

1 00 , 0 00

1 0 8 , 1 1 6

8 , 1 1 6

1 , 9 7 3 , 8 6 5

1 , 08 0, 0 0 0 ( 5 0, 00 0) 1 , 03 0, 0 0 0 ( 20 , 00 0) 1 , 01 0, 0 0 0 ( 98 6, 93 3 ) 2 3, 0 67

Sa l epr i c ei nc l udi nga c c r ue di nt e r e s t( 2 M x1 / 2x108 %) Ac c r ue di nt e r e s t( 1 00, 00 0x1/ 2 ) Sa l epr i c ee xc l udi nga c c r ue di nt e r e s t Tr ans a c t i onc os t s To t a l Car r yi nga mountonda t eofs a l e( 1 , 9 73 , 8 65x1 / 2 ) Gai nons al e J ul y 1 , 2 0x 3

I nt e r e s tr e c e i vabl e I nve s t me nti nbonds I nt e r e s ti nc ome

J ul y 1 , 2 0x 3

Cas h( 2M x½x1 0 8% –20K) I nve s t me nti nbonds( 1 , 9 7 3, 865x½) I nt e r e s tr e c e i vabl e( 1 00Kx½) Gai nons a l e( s que e ze )

1 00 , 00 0 8 , 11 6 1 08 , 11 6

t or e c o r dt hedi s c o unta mo r t i z a t i o n

1 , 06 0, 0 00 9 86 , 93 3 5 0, 0 00 2 3, 0 67

t or e c o r dt hes a l e

3 . So l ut i o n: Apr i l I nve s t me nti nbonds( 2 M x9 8 %) 1, I nt e r e s ti nc ome( 2M x12 % x3 /1 2) 2 0x1

1 , 96 0, 0 00 6 0, 0 00

Ca s h( 2M x98 % +60 K)

2 , 02 0, 0 00

4 . So l ut i o ns :

Re qui r e me nt( a) :J our nale nt r i e s Thet ot alannualc ol l e c t i onsar ec omput edasf ol l ows : Dat e

Pr i nc i pal

I nt e r e s tonout s t andi ng

Tot al

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De c . 31 ,20x 1 De c . 31 ,20x 2 De c . 31 ,20x 3 De c . 31 ,20x 4

a 1 , 00 0, 0 00 1 , 00 0, 0 00 1 , 00 0, 0 00 1 , 00 0, 0 00

pr i nc i palbal anc e b ( 4 , 00 0 , 0 0 0x1 2 %)=4 8 0 , 0 00 ( 3 , 00 0 , 0 0 0x1 2 %)=3 6 0 , 0 00 ( 2 , 00 0 , 0 0 0x1 2 %)=2 4 0 , 0 00 ( 1 , 00 0 , 0 0 0x1 2 %)=1 2 0 , 0 00

c ol l e c t i ons c=a+b 1 , 48 0, 0 00 1 , 36 0, 0 00 1 , 24 0, 0 00 1 , 12 0, 0 00

Amo r t i z a t i o nt a b l e-i ns t a l l me nt : I nt e r e s t Dat e Col l e c t i ons i nc ome Amor t i z at i on J a n. 1 ,2 0 x1 De c . 3 1 , 20 x1 De c . 3 1 , 20 x2 De c . 3 1 , 20 x3 De c . 3 1 , 20 x4

J a n. 1 , 2 0x 1 De c . 31, 2 0x 1 De c . 31, 2 0x 2 De c . 31, 2 0x 3 De c . 31, 2 0x 4

1 , 48 0, 0 00 1 , 36 0, 0 00 1 , 24 0, 0 00 1 , 12 0, 0 00

4 16 , 6 03 3 10 , 2 63 2 05 , 2 89 1 01 , 8 18

1 , 06 3, 3 97 1 , 04 9, 7 37 1 , 03 4, 7 11 1 , 01 8, 1 82

Pr e s e nt val ue 4 , 16 6, 0 27 3 , 102 , 63 0 2 , 052 , 89 3 1 , 018 , 18 2 -

I nve s t me nti nbondsa ta mor t i z e dc os t 4 , 16 6, 0 27 Cas h 4 , 16 6, 0 2 7 Cas h 1 , 48 0, 0 00 I nt e r e s ti nc ome 4 16 , 60 3 I nve s t me nti nbondsa tamor t i ze dc os t 1 , 06 3, 3 9 7 Cas h 1 , 36 0, 0 00 I nt e r e s ti nc ome 3 10 , 26 3 I nve s t me nti nbondsa tamor t i ze dc os t 1 , 04 9, 7 3 7 Cas h 1 , 24 0, 0 00 I nt e r e s ti nc ome 2 05 , 28 9 I nve s t me nti nbondsa tamor t i ze dc os t 1 , 03 4, 7 1 1 Cas h 1 , 12 0, 0 00 I nt e r e s ti nc ome 1 01 , 81 8 I nve s t me nti nbondsa tamor t i ze dc os t 1 , 01 8, 1 8 2

Re qui r e me nt( b) : Cur r e ntandNonc ur r e ntpor t i onson12/ 31/ 20x1 Cur r entpor t i onon12/31/x1: 1, 049, 737 Nonc ur r e ntpor t i onon12/31/x1:2, 0 52, 893

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5 . So l ut i o ns :

Re qui r e me nt( a) :I nt e r e s tr e c e i vabl e 2 0x1 : ( 1 00 , 00 0x10 %)=10 , 0 00 2 0x2 : ( 1 00 , 00 0+10 , 00 0)x10 % =11 , 00 0+10 , 00 0f r om 20 x1=21 , 000 Re qui r e me nt( b) : I nve s t me nt Dat e 1 /1 /x 1 1 2 /3 1 /x1 1 2 /3 1 /x2 1 2 /3 1 /x3

I nt e r e s ti nc ome

Di s c ount I GNORED I GNORED I GNORED I GNORED

1 1 , 3 6 9 1 2 , 7 3 3 1 4 , 2 6 1

Pr e s e ntval ue 9 4 , 7 38 1 0 6 , 1 07 1 1 8 , 8 39 1 3 3 , 1 00

12/31/x1: ( 10 6, 107–10, 000i nt er e s tr ec e i vabl e )=96, 107 12/31/x1: ( 11 8, 839–21, 000i nt er e s tr ec e i vabl e )=97, 839 Re qui r e me nt( c ) :J our nale nt r i e s 1 / 1 / x 1 I nve s t me nti nbonds Ca s h

9 4 , 7 3 8

1 2 / 3 1 / x 1 I nt e r e s tr e c e i va bl e I nve s t me nti nbonds( s que e ze ) I nt e r e s ti nc ome

1 0 , 0 0 0 1 , 3 69

1 2 / 3 1 / x 2 I nt e r e s tr e c e i va bl e I nve s t me nti nbonds( s que e ze ) I nt e r e s ti nc ome

1 1 , 0 0 0 1 , 7 33

9 4 , 7 3 8

1 1 , 3 6 9

1 2 , 7 3 3

1 2 / 3 1 / x 3 I nt e r e s tr e c e i va bl e[ ( 1 00K+10 K+11K)x10%] 1 2 , 1 0 0 I nve s t me nti nbonds( s que e ze ) 2 , 1 61 I nt e r e s ti nc ome 1 4 , 2 6 1 1 2 / 3 1 / x 3 Ca s h I nt e r e s tr e c e i va bl e I nve s t me nti nbonds

1 3 3 , 1 0 0 3 3 , 1 0 0 1 0 0 , 0 00

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6 . So l ut i o n:  I ni t i a lme a s ur e me nt : 1 / 1x 1 I nve s t me nti nbonds-FVOCI Ca s h

9 0 7 , 1 35 90 7, 1 3 5

s e q ue ntme a s ur e me nt :  Sub Dat e 1 /1 /x 1 1 2 /3 1 / x 1 1 2 /3 1 / x 2 1 2 /3 1 / x 3

I nt e r e s t r e c e i ve d

I nt e r e s t i nc ome

Amor t i z at i o n

1 0 0 , 0 0 0

1 2 6 , 9 99

2 6 , 9 9 9

9 3 4, 1 3 4

1 0 0 , 0 0 0

1 3 0 , 7 79

3 0 , 7 7 9

9 6 4, 9 1 3

1 0 0 , 0 0 0

1 3 5 , 0 87

3 5 , 0 8 7

1 , 0 0 0 , 0 0 0

1 2 / 3 1 / x1 Ca s h I nve s t me nti nbonds-FVOCI I nt e r e s ti nc ome I nve s t me nti nbonds–FVOCI Unr e a l i z e dg a i n( l os s )–OCI [ ( 1M x9 8 %)–9 3 4 , 1 3 4 ]

1 2 / 3 1 / x2 Ca s h I nve s t me nti nbonds-FVOCI I nt e r e s ti nc ome I nve s t me nti nbonds–FVOCI Unr e a l i z e dg a i n( l os s )–OCI

1 0 0 , 0 0 0 2 6 , 9 9 9 1 26 , 9 99 4 5 , 8 66 4 5 , 8 6 6

1 0 0 , 0 0 0 3 0 , 7 7 9 1 30 , 7 79 9 , 2 2 1

*F ai rva l ue-1 2 /3 1 /x 2 Amor t i z e dc os t-1 2 /3 1 /x2 Cumul a t i v eb a l a nc eo fg a i n-1 2 / 3 1 / x 2 Cumul a t i veba l a nc eofg ai n-1 2 /3 1 /x 1 Unr e al i ze dg ai n-OCIi n2 0 x 2

l e :  Sa

Pr e s e ntval ue 9 0 7, 1 3 5

9 , 2 2 1 *

1 , 0 2 0 , 00 0 9 6 4 , 9 1 3 5 5 , 0 8 7 4 5 , 8 66 9 , 2 2 1

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1 / 1/ x 3 Unr e a l i z e dga i n( l os s )–OCI[ 1M x( 1 01% -1 02%) ] I nve s t me nti nbonds–FVOCI Ca s h( 1M x10 1%) I nve s t me nti nbonds-FVOCI Unr e a l i z e dga i n( l os s )–OCI Ga i nons al e

1 0 , 0 0 0 1 0 , 0 0 0 1 , 0 1 0 , 00 0 1 , 0 1 0 , 00 0 4 5 , 08 7* * 4 5 , 0 87

* *Ne tpr oc e e ds( 1M x101 %) Amor t i ze dc os t–1/1/x3( s e et a b l ea b o v e ) Cumul a t i v eg a i ni ne q ui t y/ Re c l a s s i fic a t i o na d j us t me nt– 1 / 1 / x 3

1 , 01 0, 0 00 9 64 , 91 3 45 , 08 7

PROBLEM 4: MULTIPLE CHOICE – COMPUTATIONAL 1. A( 9 46, 00 0–40, 000)=906, 0 00a c q ui s i t i o nc o s t . Col l e c t i o n

Dat e 7 /1 /2 0 0 3 1 2 /3 1 /2 0 0 3

40, 000

I nt e r e s t i nc ome

Amor t i z at i o n

45, 30 0

5, 300

Pr e s e nt val ue 906, 0 00 911, 300

2. A So l ut i o n: Dat e 1 /1 /x 1 1 2 /3 1 /

I nt e r e s t r e c e i ve d 50 , 0 00

I nt e r e s ti nc ome Amor t i z at i on Pr e s e ntval ue 6 3 , 4 9 9

1 3 , 4 9 9

4 5 3 , 5 67 * 46 7 , 0 6 6

Page|11 x 1 1 2 /3 1 / x 2 1 2 /3 1 / x 3

5 0 , 0 00

6 5 , 3 8 9

1 5 , 3 8 9

4 82 , 45 5

5 0 , 0 00

6 7 , 5 4 5

1 7 , 5 4 5

5 00 , 00 0

* ( 4 28 , 5 6 7+2 5 , 0 0 0 )= 4 5 3 , 5 6 7

3. B So l ut i o n: I nt e r es ti nc omei n20x2=65, 38 9( s e et a b l ea b o ve ) Car r yi ngamounton12/31/20x2=( 100x₱5, 000x102%)= 510, 000

4. B So l ut i o n: Ne tpr oc e e ds[ ( 100x5 , 00 0x102 %)–15 K] Amor t i ze dc os t–1/1/x3( s e et a b l ea b o v e ) Ga i no ns a l e/ Re c l a s s i fic a t i o na d j us t me nt–1/ 3/ x3

4 95 , 00 0 4 82 , 45 5 1 2, 5 45

5. B( 500, 000x8% x6/12)=20, 000 6. A So l ut i o n:

be g. I nt e r e s t r e ve nue

I nt e r e s t r e c e i vabl e 3 8, 000 160, 500

152, 000 Col l e c t i onofi nt e r es t 4 6, 500 e nd.

7. D So l ut i o n: I ni t i a lme a s ur e me nt : [ 487, 656+( 500, 000x5%) ]=512, 656

Page|12 Tr i alande r r or :  Fut ur ec as hflowsxPV f ac t oratx% =Pr es entval ue  ( 50 0KxPVof₱1@x%,n=3)+( 1M x12 % xPVofanor di nar y a nnui t yof₱1@x%, n=3)=51 2, 65 6 The r ei spr e mi um be c a us et hec a r r yi nga mounti sgr e at e rt hant he f a c ea mount( 5 1 2 , 6 56>5 0 0 , 0 00 ) .The r e f or e ,t hee ffe c t i v ei nt e r e s tr a t emus tbe l o we rt h a nt he1 0 % no mi na lr a t e .

Fi r s tt r i a l :( us i ng9%) ( . 5 M xPVof₱1@9 %, n=3 )+( . 5 M x1 0 % xPVofa nor di na r ya nnui t yof ₱1@9 %,n=4 )=5 1 2 , 6 5 6 ( . 5 M x0 . 7 7 21 83 48 00 5)+( 5 0 , 0 0 0x2 . 5 3 1 29 46 66 11 )=5 12 , 6 56 ( 3 8 6 , 0 9 2+1 2 6 , 5 6 5)=5 12 , 6 56i se qualt o5 1 2 , 6 56

  

 Thee ffe c t i vei nt e r es tr a t ei s9%.

Dat e 1 /1 /x 1 1 2 /3 1 / x 1 1 2 /3 1 / x 2 1 2 /3 1 / x 3

I nt e r e s t r e c e i ve d

I nt e r e s ti nc ome Amor t i z at i on Pr e s e ntval ue 5 12 , 65 6

5 0 , 0 00

4 6 , 1 3 9

3 , 8 6 1

50 8 , 7 9 5

5 0 , 0 00

4 5, 7 9 2

4 , 2 0 8

5 0 4 , 5 87

5 0 , 0 00

4 5 , 4 1 3

4 , 5 8 7

50 0 , 0 0 0

8. D–( 504, 587c ar r yi ngamt .–500, 000f ac eamt . )=4, 587 pr e mi um

9. C So l ut i o n: Fa i rval ue-12 /31 /x2( . 5 M x1 0 4%) Amor t i ze dc os t-12 /31 /x2( s e et a b l ea b o v e ) Cumul at i vebal anc eofg ai ni ne qui t y–1 2/ 3 1/ x 2 Cumul a t i vebal a nc eofgai ni ne qui t y–12 /31 /x1(1) Unr e al i z e dg ai n-OCI( 2 0x 2) ( 1 )

[ ( . 5M x10 2%)-5 08 , 79 5]=1, 20 5g a i n

5 20 , 00 0 5 04 , 58 7 1 5, 4 13 1, 2 05 1 4, 2 08

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10.A So l ut i o n: Dat e 1 /1 /x 1 1 2 /3 1 / x 1 1 2 /3 1 / x 2 7 /1 /x 3

I nt e r e s t r e c e i ve d

I nt e r e s ti nc ome Amor t i z at i on Pr e s e ntval ue 5 12 , 65 6

5 0 , 0 00

4 6 , 1 3 9

3 , 8 6 1

50 8 , 7 9 5

5 0 , 0 00

4 5 , 7 9 2

4 , 2 0 8

50 4 , 5 8 7

2 5 , 0 0 0

2 2 , 7 0 6

2 , 2 9 4

5 0 2 , 2 9 3

Sa l epr i c ei nc l udi nga c c r ue di nt e r e s t( . 5M x1/ 2x103 %) Ac c r ue di nt e r e s t( 2 5Kx1 / 2) Sa l epr i c ee xc l udi nga c c r ue di nt e r e s t Tr ans a c t i onc os t s To t a l Car r yi nga mountonda t eofs a l e( 5 02 , 2 9 3x½) Los sons al e

2 57 , 50 0 ( 12 , 50 0) 2 45 , 00 0 ( 7, 00 0) 2 38 , 00 0 ( 25 1, 14 7 ) ( 13 , 14 7)

11.A So l ut i o n: Tr i a l&Er r o r PV =CFxPVF The r ei sdi s c ount . The r e f or e , t heEI Rmus tbehi ghe rt han10%. Fi r s tt r i a l :@12% pe ra nnum 4, 639, 522=( 5, 0 00, 000xPVof1@12%,n=5)+( 5 00, 00 0xPV or di nar yannui t y@12%, n=5)  4, 639, 522=( 5, 000, 000x0. 567 43)+( 50 0, 000x 3. 604776)  4, 639, 522=2, 837, 150+1, 802, 388  4, 639, 522appr oxi mat e s4, 639, 538( adi ffer e nc eofonl y₱16. 00)  TheEI Ri s12%.

Page|14

Dat e 1 /1 /x 1 1 2 /3 1 / x 1

I nt e r e s t r e c e i ve d

I nt e r e s ti nc ome Amor t i z at i on Pr e s e ntval ue 4 , 6 39 , 52 2

5 0 0 , 0 00

5 56 , 7 43

5 6, 7 4 3

4 , 69 6 , 26 5

 ( 5M x98...