Toronto Inc. is short on cash and wishes to offer a 20 year $5,000,000,000 bond with a 6% contract rate of interest. Unfortunately for Toronto Inc., the current market rate for bonds of this magnitude is around an average of 10%. Interest of course is paid semi-annually. Please the following questions regarding Toronto’s bond offering.

NEED ANSWERS WITH CALCULATIONS ASAP:

1. Economists have forecasted the market rate of interest to decrease in a short period of time. In fact, as low as 4%, and Toronto wishes for you calculate the cash proceeds of the bond offering if the market rate of interest is 4%.

2. What is the initial journal entry to record this second bond fact pattern?

3. What is the total interest paid for each year on this second bond fact pattern?

4. What is the total interest listed as an expense on Toronto’s income statement?

5. Explain the following concept: As rate of interest rises bond prices fall and when rates of interest decrease bond prices rise?

We shall ignore risk factors in the question.