Reading 29 Schweser, concept checker 7: Security A; cost=950; time1=850; time2=900
Security B; cost=250; time1=180; time2=350 Question says assume both are debt securities held to maturity. At time2, what is carrying value. No amortisations are mentioned in the question, and so as a result, do we just assume amortisation is 0? The answer is 1,200.
certainly seems like it, tough to tell without seeing the question and understanding what the values in time1/time2 are supposed to represent.
The concept checker states that they are purchased at par. No amortization hence. Only discount or premium gets amortized.
this is actually reading 19 (not 29), concept checker 7. Anyways, I understand that if it was purchased at par there would be no amortisation, but the question does not mention ‘par’ and the beginning of the vignette only says “Kirk Company acquired shares in the equity of both Company A and Company B. We have the following information (above) from the public market about the investment value at the time of purchase and at two subsequent dates”. ?
But your original question says they are debt securities?
Bro see here in the book i am holding my hands it says assume for this question only that security A and security B are both debt securities held-to-maturity purchased initially at par. Maybe a typo in the textbook you have???
In the beginning it does state that it acquires equity in both but in this question it states as i have mentioned above. If it does not state in ur text i am sure there is a typo.
ro424, initial part of question says they are equity, but question 7 says: assume for this question only that they are both debt securities held to maturity. nitinsiwach, thanks for the clarification.
ah, ok, so if HTM and no amortizations (i.e. paydowns, discount, or premium) then i think it’s safe to assume the b/s carrying value is the same at t=2 as at t=0.
But sort of a annoying question on Schweser’s part.