Answered: ABC Trucking has issued a 14 %, 10-year…

ABC Trucking has issued a 14 %, 10-year bond that pays interest semiannually. If the market prices the bond to yield an effective annual rate of 13 %. What is the price of the bond?

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter13: Long-term Liabilities

Section: Chapter Questions

Problem 2PA: On July 1, Somerset Inc. issued $200,000 of 10%, 10-year bonds when the market rate was 12%. The...

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ABC Trucking has issued a 14 %, 10-year bond that pays interest semiannually. If the market prices the bond to yield an effective annual rate of 13 %. What is the price of the bond?

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On July 1, Somerset Inc. issued $200,000 of 10%, 10-year bonds when the market rate was 12%. The bonds paid interest semi-annually. Assuming the bonds sold at 58.55, what was the selling price of the bonds? Explain why the cash received from selling this bond is different from the $200,000 face value of the bond.
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