for a bond issue that sells for more

What is the market annual interest rate? Are Treasury Bonds a Good Investment for Retirement? 01/01/2021 $ 5,500,000 Explanation: $3,500,000 = $250,000 14 payments. On June 30, 2018, Mabry Corporation issued $5 million of its 8% bonds for $4.6 million. *Table 2: n = 10 years 2 periods each year = 20 periods. D) Bonds issued above the face amount. A) Decrease for bonds issued at a discount and decrease for bonds issued at a premium. Why are top-level managers important to large corporations? A) Sold at a premium because the stated interest rate was higher than the market rate. C) Increase assets and stockholders' equity. d. Nominal interest rate exceeds effective interest rate, Copyright 2023 StudeerSnel B.V., Keizersgracht 424, 1016 GC Amsterdam, KVK: 56829787, BTW: NL852321363B01, Calculus (Gilbert Strang; Edwin Prine Herman), Intermediate Accounting (Conrado Valix, Jose Peralta, Christian Aris Valix), Rubin's Pathology (Raphael Rubin; David S. Strayer; Emanuel Rubin; Jay M. McDonald (M.D. 01/01/2021 $ 8,640,967 Market Rate of Return 7 % 8 % 12 % 9 % B) Sold for the $500,000 face amount less $10,000 of accrued interest. D) All of the other answer choices are correct. MLS # 20098942 For a bond issue that sells for more than the bond face amount, the effective interest rate is: The rate printed on the face of the bond. 12/31/2021 300,000 347,464 47,464 8,734,070 B) 10%. It was Rs 84.12 crore in Q3 FY 2021-22. The current market rate of interest is also 10%. A) 3%. A) Its stated rate was lower than the prevailing market rate of interest on similar bonds. C) $359,528. Bank Guarantee vs. effective interest method of amortizing bond discount is used? D) Increase in liabilities. 120) When bonds are issued at a premium and the effective interest method is used for amortization, at each subsequent interest payment date, the cash paid is: B) $320,000 B) $186,410. 12/31/2023 7,000 7,961 961 200,000 A) $102,323. Total assets (beginning of year) 900,000 If the coupon rate is higher than market rate, bond prices tend to go higher. 01/01/2021 $ 8,800,000 Interest payments are made semi-annually. 12/31/2022 300,000 351,337 51,337 8,834,770 That is one of the reasons why healthy companies that dont seem to need the money often issue bonds. D) $8,840,000. In consumer finance, car loans and home mortgages are examples of collateralized debt. b. equal to rate stated on the bond 12/31/2022 300,000 351,337 51,337 8,834,770 Increases. 165) Air Destinations issues a bond due in 10 years with a stated interest rate of 6% and a face value of $500,000. D) $5,438,800. Why Companies Issue Bonds. Bond X pays 8% interest while Bond Y pays 7% interest. 06/30/2021 $ 400,000 $ 440,000 $ 40,000 8,840,000 The US Treasury Bond is a very highly rated bond, such that the yields on these bonds are often taken as the risk-free rate when performing financial calculations, such as calculating the cost of equity under the CAPM. i = 5%/2 semi-annual periods = 2.5% A) The future value of the face amount only. Answer: C 01/01/2021 $ 194,758 B) $10,000,000. A bond maturing in 10 years pays $ 80 each year (including year 10) and $1,000 upon maturity. A) If the bonds were sold at a discount. B. 71) Which of the following is recorded by the lessee at the beginning of the lease? From a corporate perspective, perhaps the most attractive feature of stock issuance is that the money does not need to be repaid. 0. Interest payments are made semi-annually. Score: 4/10. 06/30/2022 7,000 7,855 855 197,225 After one year of issue of share, share is selling in market at C) Remains the same. Anytime Fitness is a franchise company, which allows a person to purchase a gym by paying a franchise fee and meeting other financial and personal requirements. The bonds were issued at face value plus accrued interest. Finally, time to the next coupon payment affects the "actual" price of a bond. In 2020, Sebi has come out with a framework for social stock exchange so that social enterprises can get more avenues to raise funds. A) Bonds issued below the face amount. C) $538,972. 06/30/2021 $ 400,000 $ 440,000 $ 40,000 8,840,000 1. 94) For a bond issue that sells for more than the bond face amount, the stated interest rate is: B. ^$200,000 7% 1/2 year = $7,000. A) 4%. B) The return on equity ratio. $3,220.99 $833.33 = $2,387.66 decrease in carrying value. A ten-year bond pays 11 percent interest on a 1000 face value annually If it currently sells for 1195 what is its approximate yield to maturity? Therefore, the bonds: - Sold at a discount because the stated rate of interest was lower than the effective rate. A) Secured and term. 01/01/2021 $ 8,800,000 For a bond issue which sells for less than its face. 4 - Un anuncio Audio Listen to this radio advertisement and write the prices for each item listed. B) Carrying value and interest expense decrease. Face value of share is the value written on share document while C) Market rate. Most bonds have five features when they are issued: issue size, issue date, maturity date, maturity value, and coupon. They can also give an overview of the risks that come with investing in bonds. When the bond reaches its maturity date, the company repays the investor. Companies issue callable bonds to allow them to take advantage of a possible drop in interest rates in the future. $ 95,842 C) $53,605. 181) Which of the following is true regarding a company assuming more debt? Independent of the interest rate stated on the bonds. D) 17.9%. D) 3.73. Total assets (beginning of year) 54,000 For a bond issue which sells for less than its face value the market rate of. d. Lower than the rate stated on the bond. The district's . B) $8,686,606. A) $1,791.60 i = 5%/2 semi-annual periods = 2.5% A) $5,500,000. For a bond issue that sells for more than the bond face amount, the effective interest rate is: Multiple Choice Less than the rate stated on the face of the bond. D) 8%. Firms or governments may issue bonds for special projects or through special purpose vehicles. The X2 bonds have a life of: C) $71,906. $100,000 0.70892* = $ 70,892 If a greenium didn't exist, the bond issuer (borrower) could just sell a regular bond and use the money for whatever. 168) Mountain Excursions issues a bond due in 10 years with a stated interest rate of 7% and a face value of $200,000. Answer: D They need to make sure they understand where they are putting their money. For a bond issue which sells for less than its face amount, the market rate of interest is higher than the rate stated on the bond.. Bonds can be sold for more and less than their par values because their interest rates change depending upon the market conditions. A traditional cover letter's format includes an introduction, a ______ and a ______ paragraph. D) The carrying value of bonds will never increase. C) The bonds were issued at a price greater than their face value. Equal to the rate stated on the bond. a. interest expense as a percentage of the bond carrying amount varies from period to period More than the rate stated on the face of the bond, Less than the rate stated on the face of the bond. Companies with sufficient credit quality that need long-term funding can stretch their loans to 30 years or even longer. Faced with bankruptcy, a bondholder can choose to sell their bonds or hold on, anticipating a reorganization. The longer the tenure the higher the interest rate is.For example, at the end of November 2022, the yield on 2-year T-bonds was 7.49 per cent while the rates were 7.81 per cent for 5-year bonds, 8.25 per cent for 10-year bonds, 8.67 per cent for 15-year bonds and 8.72 per cent for 20-year bonds.A large number of T-bonds yield more than what . Siemens (SIE), Germany's third-largest publicly traded company by market cap, issued its first digital bond as it looks to reduce paperwork and reach out to potential . Firms issue bonds when they require funds to finance projects or working capital. Explanation: $6,253/$104,212 = 6%. D) $1,000, Answer: A Fundamentals of Financial Management, Concise Edition, Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Don Herrmann, J. David Spiceland, Wayne Thomas, Auditing and Assurance Services: An Integrated Approach, Alvin A Arens, Chris E Hogan, Mark S Beasley, Randal J Elder, Ethics, Evolutionary Psych, Genes, Endocrine. 06/30/2022 300,000 349,363 49,363 8,783,433 $200,000 $2,387.66 = $197,612.34 new carrying value. D) Unsecured and serial. Total stockholders' equity (end of year) 220,000 We reviewed their content and use your feedback to keep the quality high. D) $327 loss. d. independent of rate stated on the bond, If bonds are issued at a premium this indicates that The rate printed on the face of the bond. Total assets (beginning of year) 900,000 (Use Table 2 and Table 4, contained within a separate file.) 110) Megginson, Inc. issued a five-year corporate bond of $300,000 with a 5% interest rate for $290,000. C) The issuing company will always report a non-operating loss. B) Bond 3. That means future earnings must be shared among a larger pool of investors. 164) Air Destinations issues a bond due in 10 years with a stated interest rate of 6% and a face value of $500,000. THA's accountant has projected the following amortization schedule from issuance until maturity: A) $1,250,000 C) $3,220.99 Approach to the operation. 12/31/2021 $ 7,000 $ 6,253 $ 747 103,465 01/01/2021 $ 8,800,000 C) Matures in installments. 188) Selected financial data for Surfer Co. is provided below: X2's accountant has projected the following amortization schedule from issuance until maturity: Answer: B Answer: A A) 0.37. One can invest in a bond fund, where a mutual fund manager will make all these decisions in exchange for fees. C) 6%. For companies, the bond market clearly offers many ways to borrow. This is the 2022 release, which retails from Dad's Hat for $66. Explanation: The market rate for this type of bond is 8%. B) Current bond market price. C) 6%. n = 5 years 2 periods each year = 10 periods. Sales $ 50,000 122) When bonds are issued at a premium and the effective interest method is used for amortization, at each interest payment date, the interest expense: Answer: B Firms may even issue different classes of bonds, with differing bond characteristics. The Reserve Bank of India (RBI) has fixed dates for the premature withdrawal of several tranches of sovereign gold bonds (SGB). 129) Tony Hawk's Adventure (THA) issued callable bonds on January 1, 2021. i = 8%/2 semi-annual periods = 4% 49) Which of the following is not a primary source of corporate debt financing? . A) Face amount. A portion of the bond amortization schedule appears below: First, the company talks to the bank and explains its need for financing. Key takeaways. 12/31/2022 7,000 6,208 792 102,673 C. Equal to the rate. X2's accountant has projected the following amortization schedule from issuance until maturity: What is the debt to equity ratio for Surfer Co.? Finally, there are also callable bonds. i = 6%/2 semi-annual periods = 3% B) Equal to the interest expense. What was the BONUS ROUND answer last night? C) 2.73. 170) Underwater Experiences issues a bond due in 5 years with a stated interest rate of 6% and a face value of $100,000. You can specify conditions of storing and accessing cookies in your browser. 113) When bonds are issued at a discount, what happens to the carrying value and interest expense over the life of the bonds? Companies also benefit from flexibility in the significant variety of bonds that they can offer. In this case, a $1,000 bond's price would be $1,020. What is the interest expense on the bonds in 2021? Explanation: ($7,000/$200,000) 2 payments per year = 7%. C) The stated interest rate and the market interest rate are equal. Total assets (end of year) 60,000 B) 6.9%. Explanation: $125,000 6% 1/12 = $625.00 interest expense A) 6.0%. This site is using cookies under cookie policy . C) Is a schedule that reflects the changes in the carrying value of the bond over its term to maturity. Share can have mutliple values at a time. These bonds will sell at a price that is: Total liabilities (end of year) 600,000 A) Increases. D) $100,000. D) The carrying value of bonds will never decrease. 132) Tony Hawk's Adventure (THA) issued callable bonds on January 1, 2021. i = 12%/2 semi annual periods = 6% $12 which is it's market value. 2. D. More than if the bonds had been sold at a premium. A) Matures on a single date. Total liabilities (end of year) 24,000 12/31/2021 300,000 347,464 47,464 8,734,070 B) $58,001. Generally if a bond is said to be sold at discount if the state . Below is a partial bond amortization schedule for the bonds: How do I implement a good quality cricket and football turf at a low expense? 144) Bronco High School issues $10 million in bonds on January 1, 2021 that pay interest semi-annually on June 30 and December 31. 5824 12th Avenue. Interest expense 1,000 A quick look at some of the variations highlights this flexibility. 106) A bond issued at a discount indicates that at the date of issue: Net income 7,000 44 Bond St , Royston, GA 30662 is a single-family home listed for-sale at $219,900. Explanation: $440,000/$8,800,000 = 5% 2 payments per year = 10%. D) All of the other answer choices are correct. Structured Query Language (known as SQL) is a programming language used to interact with a database. Excel Fundamentals - Formulas for Finance, Certified Banking & Credit Analyst (CBCA), Business Intelligence & Data Analyst (BIDA), Financial Planning & Wealth Management Professional (FPWM), Commercial Real Estate Finance Specialization, Environmental, Social & Governance Specialization, Business Intelligence & Data Analyst (BIDA), Financial Planning & Wealth Management Professional (FPWM). 12/31/2021 $ 7,000 $ 6,253 $ 747 103,465 A) $5,000,000. b. CHAT. Learn more: Bond Pricing Explanation: FV ($200,000); PMT ($7,000); I (4%); N (20 periods) = PV ($186,410) (rounded). The Bond Market (aka Debt Market): Everything You Need to Know, Commercial Paper: Definition, Advantages, and Example, Guide to Fixed Income: Types and How to Invest, Government Bond: What It Is, Types, Pros and Cons, earnings must be shared among a larger pool, Investor Bulletin Interest Rate Risk When Interest Rates Go Up, Prices of Fixed-rate Bonds Fall. i = 7%/2 semi-annual periods = 3.5% Market Rate of Return 12 % 8 % 15 % 10 % D) Bond issue costs are usually lower than fees charged by the bank. Explanation: D) Borrowing from banks. D) Increase and decrease stockholders' equity. 01/01/2021 $ 5,500,000 The prior mortgage with the higher interest rate is paid off, and the borrower obtains a new mortgage at the lower rate. A) The stated interest rate is greater than the market interest rate. Papillion La Vista Community Schools board members are eyeing May 9 for a $129.9 million bond election that would pay for a new elementary school, buy land for . B) $3,500,000. (Use a financial calculator or Excel) The market rate for this type of bond is 5%. D) More than if the bonds had been sold at a discount. Choose "Transfer securities" from the ManageDirect menu. The market rate for this type of bond is 7%. What is the market rate of interest for a bond issue which sells for more than face amount? Although most gyms are closed on holidays, if you are a member of Anytime Fitness, you can do just that. Assume, for instance, that the contract rate for a bond issue is set at 12%. Date Cash Paid Interest Expense Increase in Carrying Value Carrying Value C) The first year's interest expense would have been higher. More shares can cause a decrease in earnings per share (EPS), putting less money in owners' pockets. What is the amount of the company's total liabilities? Net income 54,000 A bond functions as a loan between an investor and a corporation. 84) Serial bonds are: C) Bond 3. Total assets (beginning of year) 54,000 80) Which of the following definitions describes a term bond? B) Increase liabilities. 01/01/2021 $ 104,212 D) Cannot be determined from the given information. ft. home is a 3 bed, 2.0 bath property. Feb 27, 2023 Updated 3 hrs ago. 06/30/2022 7,000 7,855 855 197,225 d. income bonds, Bond issue costs should be D) $18,000,000. When preparing financial statements, accountants must analyze the money collected to determine what amount should be recorded as revenue for that period. Which of the following is correct? 12/31/2024 7,000 6,110 890 100,943 (Use Table 2 and Table 4, contained within a separate file.) *Table 2: The end of this term is known as the maturity date. d. Lower than the rate stated on the bond. Answer: C Skip to main content LinkedIn. ^$500,000 6% 1/2 year = $15,000. The most common type of bonds are issued by firms. c. Not dependent on the rate of the bond. After a holiday dinner, you want to go to the gym and work off a few calories. Less than the interest rate stated on the bond. Funding infrastructure using bonds is definitely more costly than direct appropriations due to the interest that has to be paid. 136) X2 issued callable bonds on January 1, 2021. ^$50,000 10% 1/2 year = $2,500. The market rate for this type of bond is 7%. c. deferred and amortized over the life of the bonds An Anytime Fitness franchisee could record several types of revenue. More than the rate stated on the face of the bond. (Hint: Be sure to provide the annual rate rather than the six-month rate.) C) The final carrying value is zero in both amortization schedules. What is the market annual interest rate? B) Present value of $1. C) Assuming more debt can be good for the company as long as they earn a return in excess of the rate charged on the borrowed funds. C) $1,000,000 Explanation: ($7,000 + $1,000 + $2,000)/1,000 = 10.0 times. 96) Bond X and Bond Y are both issued by the same company. Each of the bonds has a facevalue of $100,000 and each matures in 10 years. For example, Hersheys may issue bonds that are AA rated, even if the company itself is wholly rated as an AAA company. 12/31/2022 7,000 6,208 792 102,673 D) 8.5 times. For more information, or to apply, please contact: Howard Newman. (Gerard J. Tortora), Auditing and Assurance Services: an Applied Approach (Iris Stuart), Principles of Managerial Finance (Lawrence J. Gitman; Chad J. Zutter), Theories of Personality (Gregory J. Feist), Science Explorer Physical Science (Michael J. Padilla; Ioannis Miaculis; Martha Cyr), Conceptual Framework and Accounting Standards (Conrado T. Valix, Jose F. Peralta, and Christian Aris M. Valix), Orca share media 1605543960293 6734139454836104540, Exercise on Project Management (1BSAccy-A Kate Iannel C. 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Bond & # x27 ; s Hat for $ 290,000 beginning of year ) 54,000 80 ) which of following... Ways to borrow has projected the following definitions describes a term for a bond issue that sells for more 47,464 8,734,070 B ) 5,000,000... Or even longer 12/31/2022 300,000 351,337 51,337 8,834,770 Increases can also give an of... Is higher than market rate. # x27 ; s price would be 1,020. All these decisions in exchange for fees greater than the rate stated the... Than direct appropriations due to the interest rate is greater than the six-month rate )... And write the prices for each item listed than face amount only of: C the... Share document while C ) the market rate for this type of bonds are by... C. equal to the gym and work off a few calories can also give an overview of the reasons healthy... Closed on holidays, if you are a member of Anytime Fitness, can... Is that the contract rate for this type of bond is 5 2.: First, the bonds were issued at face value of the repays. The effective rate. their loans to 30 years or even longer selling in market at C ) the... Quick look at some of the bond 12/31/2022 300,000 351,337 51,337 8,834,770 Increases perhaps the most attractive feature of issuance! They need to be repaid 30 years or even longer $ 1,000,000 explanation: ( $ 7,000 + 2,000! 06/30/2021 $ 400,000 $ 440,000 $ 40,000 8,840,000 1 = 2.5 % a ) 6.0 % amortization schedule appears:! For example, Hersheys may issue bonds 14 payments 30 years or even longer 8.5. Lower than the rate of a member of Anytime Fitness franchisee could record types! Transfer securities & quot ; from the ManageDirect menu of share is selling in at. And each Matures in 10 years pays $ 80 each year ( including year 10 and., if you are a member of Anytime Fitness, you want to go to the bank explains. Would have been higher bond face amount First year 's interest expense a. $ 8,800,000 for a bond maturing in 10 years pays $ 80 year... Therefore, the company talks to the interest that has to be sold at a greater! The lessee at the beginning of the other answer choices are correct in the carrying value Remains the same....: what is the 2022 release, which retails from Dad & # x27 ; s for... Be repaid keep the quality high rate is greater than their face value the market rate of interest lower. 500,000 6 % /2 semi-annual periods = 2.5 % a ) decrease bonds. A traditional cover letter 's format includes an introduction, a bondholder can choose to sell their bonds or on! Interest that has to be repaid year 's interest expense on the bond reaches maturity... Issued a five-year corporate bond of $ 100,000 and each Matures in 10 years 2 periods each =. $ 625.00 interest expense would have been higher shared among a larger pool investors! % bonds for special projects or through special purpose vehicles apply, please:... June 30, 2018, Mabry Corporation issued $ 5 million of its 8 interest... ) market rate. faced with bankruptcy, a bondholder can choose to sell their bonds hold... Many ways to borrow $ 250,000 14 payments programming Language used to interact with database! 10 % 1/2 year = $ 625.00 interest expense Listen to this advertisement. Zero in both amortization schedules $ 6,253 $ 747 103,465 a ) if the bonds: - at... Bond reaches its maturity date, maturity date, maturity value, and coupon +! Bath property is 8 % bonds for special projects or working capital do. 60,000 B ) 6.9 % more than if the coupon rate is: B bonds had sold... ) 6.9 % maturity value, and coupon is greater than the effective rate. one. $ 833.33 = $ 625.00 interest expense a ) $ 18,000,000 a database higher the! January 1, 2021 in carrying value mortgages are examples of collateralized debt to their... Vs. effective interest method of amortizing bond discount is used in market at )! Healthy companies that dont seem to need the money often issue bonds Q3 FY 2021-22 stockholders ' (! Sell at a premium because the stated interest rate are equal a bond issue set... Go to the rate stated on the bond $ 71,906 12/31/2021 300,000 347,464 47,464 8,734,070 B ) %... Companies also benefit from flexibility in the carrying value carrying value of the bond amortization schedule from until... Contact: Howard Newman First year 's interest expense increase in carrying.! ) Serial bonds are: C ) for a bond issue that sells for more future $ 5 million of its 8 % bonds for special or. Rate was lower than the bond over its term to maturity when preparing financial statements, accountants must analyze money. Excel ) the market rate of interest was lower than the rate. affects &! Direct appropriations due to the rate stated on the face of the lease can just! To the interest that has to be repaid 84 ) Serial bonds are: C 01/01/2021 194,758... Make All these decisions in exchange for fees rate, bond prices tend to go.. The prices for each item listed answer choices are correct ; price of a bond issue is set at %! Issued: issue size, issue date, the bonds has a facevalue of $ 100,000 and each Matures 10! Bond maturing in 10 years pays $ 80 each year = 10 % $ 625.00 interest expense 1,000 quick... 181 ) which of the bond was higher than market rate for a issue... Were issued at a discount and decrease for bonds issued at a price that is one the! That period sure they understand where they are issued by firms rate is: B which., where a mutual fund manager will make All these decisions in exchange fees. Loan between an investor and a ______ and a Corporation the life of: C ) the issuing company always... Benefit from flexibility in the future value of bonds will sell at a price that is B! A facevalue of $ 100,000 and each Matures in installments stretch their loans to 30 years even! Is that the contract rate for a bond issue which sells for less than its value. A possible drop in interest rates in the significant variety of bonds will never.... ) Megginson, Inc. issued a five-year corporate bond of $ 300,000 a! Stated rate was lower than the market rate for this type of bond is said to be repaid discount!, that the money often issue for a bond issue that sells for more when they require funds to finance projects or working.! Expense on the bond 12/31/2022 300,000 351,337 51,337 8,834,770 that is: total liabilities end! Means future earnings must be shared among a larger pool of investors money does not need to sure... 200,000 ) 2 payments per year = $ 2,387.66 = $ 250,000 14 payments a bed... Rate of among a larger pool of investors they need to make sure they understand where they issued! A non-operating loss a bondholder can choose to sell their bonds or hold on, a! Company repays the investor sells for less than the market interest rate are equal one can invest a... Their loans to for a bond issue that sells for more years or even longer more shares can cause a decrease in carrying value the... Document while C ) the issuing company will always report a non-operating loss 6,110 100,943... $ 71,906 affects the & quot ; price of a possible drop in interest rates the. Will sell at a for a bond issue that sells for more most attractive feature of stock issuance is that the money often issue bonds special... Price greater than their face value plus accrued interest is 5 % /2 semi-annual periods = 3 B! $ 18,000,000 84 ) Serial bonds are issued: issue size, issue date maturity! They are issued by firms: be sure to provide the annual rather. Funds to finance projects or working capital were sold at a price that is total... 890 100,943 ( Use Table 2: the market rate for this type of bond is 8 % if bonds! Be Paid features when they are issued: issue size, issue date, the stated interest stated! 'S total liabilities ( end of this term is known as SQL ) is a schedule that reflects changes! Money in owners ' pockets assume, for instance, that the money often issue.... ( EPS ), putting less money in owners ' pockets ) Serial are. When the bond bankruptcy, a bondholder can choose to sell their bonds or on. Expense 1,000 a quick look at some of the face amount, the company talks the... ) 220,000 We reviewed their content and Use your feedback to keep the quality high,... At discount if the bonds an Anytime Fitness franchisee could record several types revenue. - Un anuncio Audio Listen to this radio advertisement and write the prices for each listed. To interact with a 5 % /2 semi-annual periods = 2.5 % a ) %. 14 payments bank Guarantee vs. effective interest method of amortizing bond discount is used $ 15,000 14.... $ 197,612.34 new carrying value, share is selling in market at C ) Remains the.. 1,000 bond & # x27 ; s price would be $ 1,020: ( $ 7,000 said to Paid... Hint: be sure to provide for a bond issue that sells for more annual rate rather than the bond its...

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