M2 3. (a) Lexington Homes plans to issue $1 million inunsecured, non-callable bond. This debt pays anannual interest payment of $55 and matures 6years from now. The face value is $1,000.Alternatively, it plans to issue $1 million inunsecured, callable bond. All other terms are thesame. Which kind of bond is more attractive toinvestors? Please explain briefly.(b) Green Roof Inns bonds will mature in 9and have a coupon rate of 3 percent. If the marketrate of interest decreases in the next year, whatchange are you expecting for the market price andthe current yield of the bond?years

Comment- We’ll answer the first question since the exact one wasn’t specified. Please submit a new…

3. (a) Lexington Homes plans to issue $1 million in unsecured, non-callable bond. This debt pays an annual interest payment of $55 and matures 6 years from now. The face value is $1,000. Alternatively, it plans to issue $1 million in rod allable bend AILothor ms are the

3. (a) Lexington Homes plans to issue $1 million in unsecured, non-callable bond. This debt pays an annual interest payment of $55 and matures 6 years from now. The face value is $1,000. Alternatively, it plans to issue $1 million in rod allable bend AILothor ms are the

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter13: Long-term Liabilities

Section: Chapter Questions

Problem 3EA: Krystian Inc. issued 10-year bonds with a face value of $100,000 and a stated rate of 4% when the...

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Concept explainers

Real Estate

Real estate means ownership of land along with the assets and natural resources that exist on the land. These properties are in real/physical form which is tangible. Real estate simply means land or addition made to land permanently like constructing a residence or different buildings. People invest in real estate to either reside or for wealth creation. Many people investing in real estate further lend the place for occupation or businesses in return for a monthly payment.

Question

3. (a) Lexington Homes plans to issue $1 million in
unsecured, non-callable bond. This debt pays an
annual interest payment of $55 and matures 6
years from now. The face value is $1,000.
Alternatively, it plans to issue $1 million in
unsecured, callable bond. All other terms are the
same. Which kind of bond is more attractive to
investors? Please explain briefly.
(b) Green Roof Inns bonds will mature in 9
and have a coupon rate of 3 percent. If the market
rate of interest decreases in the next year, what
change are you expecting for the market price and
the current yield of the bond?
years

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