The statement that is NOT correct is A. The change in equity at the time of each coupon payment due to amortisation alone is a gain of $10.

Here's why:

A. The change in equity at the time of each coupon payment due to amortisation alone is a gain of $10. This is NOT correct. Amortization is the process of gradually reducing a debt through regular payments over a period of time. In this case, the bond is being amortized, or paid off, over 2 years. However, this does not directly result in a gain in equity. Equity is the difference between a company's assets and liabilities. While amortization reduces a liability (the bond), it does not directly increase equity.

B. After 1 year and a half, after the payment of a third coupon, the value of the bond recorded in the balance sheet of L'Oreal is $90. This is correct. The bond was initially issued at $60, and with each coupon payment, the value of the bond on the balance sheet increases by $10. After three coupon payments (1.5 years), the value of the bond would be $90.

C. At the time of each coupon payment, the value of the bond in the balance sheet increases by $10. This is correct. As the bond is being amortized, its value on the balance sheet increases.

D. At maturity date, when amortization is complete, the redemption value (ignoring the final coupon) to get rid of the bonds from the balance sheet will be $100. This is correct. At the end of the 2-year period, the bond will be fully amortized and its value on the balance sheet will be its face value of $100.

E. The amortization value at the time of each coupon payment is $10. This is correct. The bond is being amortized at a rate of $10 per coupon payment.

Question

The statement that is NOT correct is A. The change in equity at the time of each coupon payment due to amortisation alone is a gain of $10.

Here's why:

A. The change in equity at the time of each coupon payment due to amortisation alone is a gain of $10. This is NOT correct. Amortization is the process of gradually reducing a debt through regular payments over a period of time. In this case, the bond is being amortized, or paid off, over 2 years. However, this does not directly result in a gain in equity. Equity is the difference between a company's assets and liabilities. While amortization reduces a liability (the bond), it does not directly increase equity.

B. After 1 year and a half, after the payment of a third coupon, the value of the bond recorded in the balance sheet of L'Oreal is $90. This is correct. The bond was initially issued at $60, and with each coupon payment, the value of the bond on the balance sheet increases by $10. After three coupon payments (1.5 years), the value of the bond would be $90.

C. At the time of each coupon payment, the value of the bond in the balance sheet increases by $10. This is correct. As the bond is being amortized, its value on the balance sheet increases.

D. At maturity date, when amortization is complete, the redemption value (ignoring the final coupon) to get rid of the bonds from the balance sheet will be $100. This is correct. At the end of the 2-year period, the bond will be fully amortized and its value on the balance sheet will be its face value of $100.

E. The amortization value at the time of each coupon payment is $10. This is correct. The bond is being amortized at a rate of $10 per coupon payment.

Knowee AI · Accepted Answer

The statement that is NOT correct is A. The change in equity at the time of each coupon payment due to amortisation alone is a gain of $10.

Here's why:

A. The change in equity at the time of each coupon payment due to amortisation alone is a gain of $10. This is NOT correct. Amortization is the process of gradually reducing a debt through regular payments over a period of time. In this case, the bond is being amortized, or paid off, over 2 years. However, this does not directly result in a gain in equity. Equity is the difference between a company's assets and liabilities. While amortization reduces a liability (the bond), it does not directly increase equity.

B. After 1 year and a half, after the payment of a third coupon, the value of the bond recorded in the balance sheet of L'Oreal is $90. This is correct. The bond was initially issued at $60, and with each coupon payment, the value of the bond on the balance sheet increases by $10. After three coupon payments (1.5 years), the value of the bond would be $90.

C. At the time of each coupon payment, the value of the bond in the balance sheet increases by $10. This is correct. As the bond is being amortized, its value on the balance sheet increases.

D. At maturity date, when amortization is complete, the redemption value (ignoring the final coupon) to get rid of the bonds from the balance sheet will be $100. This is correct. At the end of the 2-year period, the bond will be fully amortized and its value on the balance sheet will be its face value of $100.

E. The amortization value at the time of each coupon payment is $10. This is correct. The bond is being amortized at a rate of $10 per coupon payment.

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