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On May 1, 2018, a company placed (sold) bonds for $ 90 million to 98 (at...

On May 1, 2018, a company placed (sold) bonds for $ 90 million to 98 (at a 2% discount). The coupon rate is 12%. The issue date was February 1, 2018 and they mature on January 31, 2038. Interest is paid semiannually on July 31 and January 31. What is the amount of the total liabilities originated by this issuance that the company owes on May 1, 2018 after having placed the bonds?

a) 88.2 million

b) 92.7 million

c) 90.9 million

d) 94.5 million

Solutions

Expert Solution

Issue price of bond = $90 Million

Interest for 3 months = $90*12%*3/12 = $2.7 Million

Total liability = $90 Million + $2.7 Million = $92.7 Million

Answer is b) 92.7 million

ekkarill92 answered 2 years ago
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