Question
The Chicago Cubs issued ten year, $2 million bonds on August 1, 2021 with a coupon rate of 3%, at $1,836,486. This price reflected the
The Chicago Cubs issued ten year, $2 million bonds on August 1, 2021 with a coupon rate of 3%, at $1,836,486. This price reflected the prevailing market interest rate on similar risk rated bonds of 4%. Interest is paid on a semi annual basis every August 1st and February 1st. The Chicago Cubs have a July 31 year end.
Instructions
(a) Is the bond being issued at a premium or discount? Why? (b) Record the issue of the bonds on August 1, 2021 |
(c) Record the payment of interest on Feb 1, 2022. |
(d) Record the accrual of interest on July 31, 2022. |
(e) Record the retirement of the bonds on August 1, 2031. |
Record the payment of interest on Feb 1, 2022 if the bond price was $2,171,686 and the coupon rate was 4% at issuance. What's the difference?
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