Question

In: Accounting

Bushman, Inc., issues $400,000 of 9% bonds that pay interest semiannually and mature in 10 years....

Bushman, Inc., issues $400,000 of 9% bonds that pay interest semiannually and mature in 10 years. Compute the bond issue price assuming that the bonds' market rate is:

a. 6% per year compounded semiannually.
(Use a calculator or Excel for your calculations. Round your answers to the nearest dollar.)

Present value of principal repayment $Answer
Present value of interest payments $Answer
Selling price of bonds $Answer

b. 8% per year compounded semiannually.
(Use a calculator or Excel for your calculations. Round your answers to the nearest dollar.)

Present value of principal repayment $Answer
Present value of interest payments $Answer
Selling price of bonds $Answer

Solutions

Expert Solution

for formulas and calculations, refer to the image below -


Related Solutions

Jones Inc. issues $5,000,000 of 5% bonds that pay interest semiannually and mature in 10 years....
Jones Inc. issues $5,000,000 of 5% bonds that pay interest semiannually and mature in 10 years. Compute the bonds’ issue price and write down the corresponding journal entries assuming that the bonds’ effective interest rate is: 1) 4% per year market rate semiannually and please tell whether the bond is issued at a premium or discount. Please write down the appropriate journal entries for this discount or premium. 2) 6% per year market rate semiannually and please tell whether the...
Suppose Liaw Company bonds will mature in 15 years. The bonds pay interest semiannually, have a...
Suppose Liaw Company bonds will mature in 15 years. The bonds pay interest semiannually, have a coupon rate of 3.85% and a par value of $1,000. Suppose the yield to maturity for these bonds is 2.25%. Graph the price of the bond as it moves towards maturity. (remember to reverse your x-axis because you move through time, the time to maturity decreases. For example, one year from today, the bond will have 14 years till maturity, two years from today...
Lupe has 5% bonds outstanding that mature in six years the bonds pay interest semiannually and...
Lupe has 5% bonds outstanding that mature in six years the bonds pay interest semiannually and have a face value of $1000 currently the barns are selling for $976 the current tax rate is 21% what is the firms pretax cost of debt? A 4.97% B 5.18% C 5.47% D 6.31% E 5.80% General Disco has 8.2% semi annual coupon bonds outstanding that mature in 11 years. The yield to maturity is 7.4% what price are these bonds selling for?...
Spartans has 6.5 percent bonds outstanding that mature in 18 years. The bonds pay interest semiannually...
Spartans has 6.5 percent bonds outstanding that mature in 18 years. The bonds pay interest semiannually and have a face value of $1,000. Currently, the bonds are selling for $985 each. What is the firm's pretax cost of debt? Multiple Choice 6.77 percent 6.64 percent 6.94 percent 7.11 percent 6.20 percent
Best Buy has some bonds outstanding. These bonds pay interest semiannually, mature in 5 years, and...
Best Buy has some bonds outstanding. These bonds pay interest semiannually, mature in 5 years, and have a 8 percent coupon. The current price of the bond is $1010. What is the yield to maturity?
1a. Thomas' Trains has bonds outstanding that mature in eleven years. The bonds pay interest semiannually...
1a. Thomas' Trains has bonds outstanding that mature in eleven years. The bonds pay interest semiannually and have a coupon rate of 7.82%. If the face value is $1,000 and the yield to maturity is 6.2%, what is the market price per bond?   1b. Jalen's Roses Inc. has outstanding bonds with a current market price of $704. The bonds have a 6.2% coupon rate (paid annually) and a face value of $1,000. The YTM is 10.4%. How many years until...
1-Novak Corporation issues $530,000 of 9% bonds, due in 10 years, with interest payable semiannually. At...
1-Novak Corporation issues $530,000 of 9% bonds, due in 10 years, with interest payable semiannually. At the time of issue, the market rate for such bonds is 10%. Compute the issue price of the bonds.   Issue price of the bonds $ 2-The Sheffield Company issued $320,000 of 8% bonds on January 1, 2017. The bonds are due January 1, 2022, with interest payable each July 1 and January 1. The bonds are issued at face value. Prepare Sheffield’s journal entries...
Giant Tech bonds have 17 years until they mature and pay 12% interest semiannually on a...
Giant Tech bonds have 17 years until they mature and pay 12% interest semiannually on a par value of $1,000. The yield on Atwitter Tech bonds is currently 14%. What will be the percentage price increase in Groot bonds if the yield falls to 10%?
Coronado Corporation issues $410,000 of 9% bonds, due in 9 years, with interest payable semiannually. At...
Coronado Corporation issues $410,000 of 9% bonds, due in 9 years, with interest payable semiannually. At the time of issue, the market rate for such bonds is 10%. Compute the issue price of the bonds. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,971.) Issue price of the bonds   
Wildhorse Corporation issues $560,000 of 9% bonds, due in 9 years, with interest payable semiannually. At...
Wildhorse Corporation issues $560,000 of 9% bonds, due in 9 years, with interest payable semiannually. At the time of issue, the market rate for such bonds is 10%. Compute the issue price of the bonds. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,971.) Issue price of the bonds
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT