CVS Caremark Corporation discloses the following as part of its long-term debt footnote in its 2012 10-K

Required

a. What is the average coupon rate (interest paid) and the average effective rate (interest expense) on the long-term debt?

b. Does your computation of the coupon rate in part \(a\) seem reasonable given the footnote disclosure relating to specific bond issues? Explain.

c. Explain how the amount of interest paid can differ from the amount of interest expense recorded in the income statement.

d. On its 2012 balance sheet, CVS reports current maturities of long-term debt of \(\$ 5\) million as part of short-term debt. Why is this amount reported that way? Is this amount important to our analysis of CVS? Explain.

e. The \(\$ 1,500\) million \(6.125 \%\) senior note due in 2039 is priced at \(117.49(117.49 \%\) of face value, or \(\$ 1,762.35\) million) as of 2013 , resulting in a yield to maturity of \(5.213 \%\). Assuming that the credit rating of CVS has not changed, what does the pricing of this \(6.125 \%\) coupon bond imply about interest rate changes since CVS issued the bond?

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In millions Commercial paper. 4.875% senior notes due 2014. 3.25% senior notes due 2015. 6.125% senior notes due 2016 5.75% senior notes due 2017. 6.6% senior notes due 2019. 4.75% senior notes due 2020 4.125% senior notes due 2021 6.25% senior notes due 2027 Trust Preferred Securities... 6.125% senior notes due 2039 5.75% senior notes due 2041 Enhanced Capital Advantage Preferred Securities due 2062 2.75% senior notes due 2022 ... Mortgage notes payable... Capital lease obligations. Less: Short-term debt (commercial paper) Current portion of long-term debt ... 2012 $ 690 $750 550 550 421 1,310 394 450 550 1,000 1,500 950 41 1,250 1 171 9,828 (690) (5) 2011 $9,133 550 550 700 1,750 1,000 450 550 1,000 50 1,500 950 42 - 4 168 10,014 (750) (56) $ 9,208