Answered: A company issued 5%, 10-year bonds with…

A company issued 5%, 10-year bonds with a face amount of $80 million. The market yield for bonds of similar risk and maturity is 5%. Interest is paid semiannually. At what price did the bonds sell?

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter13: Long-term Liabilities

Section: Chapter Questions

Problem 14Q: A company issued $100,000, 5-year bonds, receiving $97,000. What is the balance sheet presentation...

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Question

Bond valuation

A company issued 5%, 10-year bonds with
face amount of $80 million. The market yield
for bonds of similar risk and maturity is 5%.
Interest is paid semiannually. At what price did
the bonds sell?

Definition Definition Calculates the present value of a bond's expected future periodic coupon payments. Bond valuation determines the theoretical fair value of a particular bond and helps investors estimate what rate of return they could expect. The bond's theoretical fair value is computed by discounting the future cash flows or coupon payments by an applicable discount rate.

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