On January 1, 2019, a company\'s balance sheet reports its investments in debt s
ID: 2335380 • Letter: O
Question
On January 1, 2019, a company's balance sheet reports its investments in debt securities as follows: Assets Investment in HTM securities..... $207,544 Supporting information: The HTM securities are $200,000 face value securities purchased on January 1, 2017, at a yield of 4%. The securities have a 4-year total life and pay interest annually on December 31, at a coupon rate of 6%. Q: Investment in HTM securities reported on the December 31, 2019 balance sheet is: a. $203,846 b. $204,938 c. $207,544 d. $207,997
Explanation / Answer
The correct answer is C. $ 207,544
Explanation : -
The price of the HTM securities as on December 31, 2019 = 0.06 * $ 200,000 * PVIFAr=4%, n = 2 years + $ 200,000 * PVIFr=4%, n = 2 years
The price of the HTM securities as on December 31, 2019 = $ 12,000 * 1.886095 + $ 200,000 * 0.924556
The price of the HTM securities as on December 31, 2019 = $ 207,544.34
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