Will issue a new 10 year AA rated corporate bond with a coupon rate of 7.00%. The bond pays interest semi-annually and has a face value of $ 1,000. If existing AA corporate bonds with 10 years to maturity have a yield to maturity of 5.00%, what will be the discount or premium of JAN Corp.’s bond relative to its face value.

The bond is sold at a premium of $1155.89 -$1000 = $155.89

Explanation:

N = 10 years * 2 semiannual =20 payments of interest

coupon interest = 7% /2 =  0.035

market interest = 5% /2 = 0.025

interest = 1000*0.035 = $35 per semiannual

Pv interest for interest = [1-1/(1+0.025)^20]0.025 = 15.89 * $35 = $545.62

Pv for capital = 1000/(1+0.025)^20 = $610

value of the Bond = 610.27+ 545.62 = 1155.89

The market rate is less than the coupon rate meaning the bond is traded at a premium

Pv factor for many years = [1-1/(1+r)^n]/r

both are integral parts of a corporate balance sheet. the cash flow statement, or statement of cash flows, measures the sources of a company's cash and its uses of cash over a specific time period. the income statement measures a company's financial performance, such as revenues, expenses, profits or losses over a specific time period (in fact, it's sometimes called a statement of financial performance).

a cash flow statement shows exactly how much money a company has received and how much it has spent, traditionally over a period of one month. it captures the current operating results and changes on the balance sheet, such as increases or decreases in accounts receivable or accounts payable, and does not include noncash accounting items such as depreciation and amortization. the cash flow generally comes from revenue received as a result of business activity, but it may be augmented by funds available as a result of credit. a cash flow statement is used to determine the short-term viability and liquidity of a company, specifically how well it is positioned to pay its bills and vendors.