Question

Flounder Inc. has issued three types of debt on January 1, 2017, the start of the company’s fiscal year.

(a)		$10 million, 9-year, 15% unsecured bonds, interest payable quarterly. Bonds were priced to yield 10%.
(b)		$27 million par of 9-year, zero-coupon bonds at a price to yield 10% per year.
(c)		$16 million, 9-year, 8% mortgage bonds, interest payable annually to yield 10%.

Prepare a schedule that identifies the following items for each bond: (1) maturity value, (2) number of interest periods over life of bond, (3) stated rate per each interest period, (4) effective-interest rate per each interest period, (5) payment amount per period, and (6) present value of bonds at date of issue. (Round stated and effective rate per period to 2 decimal places, e.g. 10.25%. 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.)

				Unsecured Bonds			Zero-Coupon Bonds			Mortgage Bonds
(1)		Maturity value		$			$			$
(2)		Number of interest periods
(3)		Stated rate per period			%						%
(4)		Effective rate per period			%			%			%
(5)		Payment amount per period		$			$			$
(6)		Present value		$			$			$

Answer 1

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