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Kingtim Co. (paper Dec 2020 )

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Kingtim Co. (paper Dec 2020 )

  • This topic has 1 reply, 2 voices, and was last updated 3 months ago by John Moffat.
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  • May 2, 2022 at 2:44 am #654745
    Kevin1107
    • Topics: 3
    • Replies: 2
    • ☆

    Hello sir,
    This may be a silly doubt.
    the bond is issued at premium, so I think the first year interest expense after tax maybe
    Additional finance cost (BV*YTM*0.75)=(60m/100*109.9*6.43%*0.75) =(3179)

    But answer is Additional finance cost ($60m x 7·5% x 0·75) (3,375 )
    Can I assume that the answer simplifies the process, it seems to think that this bond is issue at par value.

    Many thanks.

    May 2, 2022 at 7:09 am #654750
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 50034
    • ☆☆☆☆☆

    No. Interest is always based on the nominal value, regardless of the price at which the bond was issued.

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