Question
On January 1, 2021, Frontier World issues $41 million of 9% bonds, due in 20 years, with interest payable semiannually on June 30 and December
On January 1, 2021, Frontier World issues $41 million of 9% bonds, due in 20 years, with interest payable semiannually on June 30 and December 31 each year. The proceeds will be used to build a new ride that combines a roller coaster, a water ride, a dark tunnel, and the great smell of outdoor barbeque, all in one ride. Required: 1. If the market rate is 8%, will the bonds issue at face amount, a discount, or a premium? Calculate the issue price. 2. If the market rate is 9%, will the bonds issue at face amount, a discount, or a premium? Calculate the issue price. 3. If the market rate is 10%, will the bonds issue at face amount, a discount, or a premium? Calculate the issue price.
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