Question
A company issues bonds with a par value of $10,000,000 on January 1, 2013. The bonds have a coupon rate of 6%, pay interest semi-annually,
A company issues bonds with a par value of $10,000,000 on January 1, 2013. The bonds have a coupon rate of 6%, pay interest semi-annually, and will mature in 5 years. If the market rate of interest on the bonds is 4% per year, then what are the cash proceeds from the bond issue? [Note: the company uses the effective interest method of amortization.]
| a. | $10,723,210 | |
| b. | $10,902,464 | |
| c. | $10,898,259 | |
| d. | $11,122,627 | |
| e. | $10,000,000 |
A company issues bonds with a par value of $10,000,000 on January 1, 2013. The bonds have a coupon rate of 6%, pay interest semi-annually, and will mature in 5 years. If the market rate of interest on the bonds is 4% per year, then what is the annual interest expense that the company will report for the year ending December 31, 2014? [Note: the company uses the effective interest method of amortization.]
| a. | $412,822 | |
| b. | $434,289 | |
| c. | $427,595 | |
| d. | $600,000 | |
| e. | $430,975 |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Investments An Introduction
Authors: Herbert B Mayo
10th Edition
0538452099, 9780538452090
