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I have a similar question where the item was financed on the first day of the current period. As far as I’m aware you always unwind in the first period so not sure where you heard you start in the 2nd year, unless as stated it starts at the end of the period when I could understand you not immediately unwinding. My question though is what are the journal entries for the following years as you unwind the provision?
I’ve tried them all and Kaplan is by far the best. I found BPP was ok if you knew the subject but if not it was quite hard to follow. I also found lots of mistakes in the BPP text. Good luck which ever you choose though.
Cheers for this and the other answer! Lifesaver. Goodluck if you are sitting this exam too.
Em
I am stuck on this too as the extra 10 comes from a redemption premium of 10% but I can’t see any mention of a redemption premium or where they get the 10% from? I have never seen this before so is it just something for this question because the bondes are quoted at 93% or should I be doing this on every question?
Hi can I ask you a question about Question 1 too? I understand most of the IRR except where the figure for 110 comes from for t10 redemption. When I looked at the answer it was made up of 100 recemption @ par plus Redemption premium of 10%. I could not see any mention of a redemption premium in the question so is this automatically added to any bond that is redeemed? Just want to know if I need to do that in every question or just this one. Also where does the 10% come from?