CAS Exam 6C Spring 2016, Question 26
Study guide: Exam 6C
A Canadian property and casualty insurance company holds the following three bonds. Assume the company is an income tax exempt corporation and that it has no other investments. All amounts are in thousands of dollars ($000s).
| Bond | Classification | Amortized value at 12/31/2014 | Market value at 12/31/2014 | Coupon received in 2015 | Amortized value at 12/31/2015 | Market value at 12/31/2015 |
|---|---|---|---|---|---|---|
| AAA | Held to maturity | 2,000 | 2,100 | 50 | 2,000 | 2,200 |
| BBB | Available for sale | 1,000 | 900 | 100 | 900 | 950 |
| CCC | Held for trading | 1,500 | 1,600 | 75 | 1,400 | 1,300 |
Part a (0.75 points)
Determine the value of each bond to be shown in its financial statements at 12/31/2015.
Part b (1 point)
Calculate the impact of holding these investments on net income and other comprehensive income in 2015.
Part c (0.5 points)
Describe the implications of selling $1,500 of the AAA bond.
No current syllabus covers this question; it is kept for the record.
Answer this question and see the worked solution
Concepts tested
- Financial Asset Classification
- Comprehensive Income
- Net Income
- Financial Statements
- Bond Amortization