Horngren's Financial & Managerial Accounting, The Managerial Chapters, Student Value Edition Plus MyLab Accounting with Pearson eText -- Access Card Package (6th Edition)
6th Edition
ISBN: 9780134642871
Author: Tracie L. Miller-Nobles, Brenda L. Mattison, Ella Mae Matsumura
Publisher: PEARSON
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Chapter 12, Problem 12.3SE
Determining
Bond prices depend on the market rate of interest, stated rate of interest, and time. Determine whether the following bonds payable will be issued at face value, at a premium, or at a discount:
a. The market interest rate is 8%. Idaho issues bonds payable with a stated rate of 7.75%.
b. Austin issued 9% bonds payable when the market interest rate was 8.25%.
c. Cleveland's Cars issued 10% bonds when the marker interest rate was 10%.
d. Atlanta's Tourism issued bonds payable that pay the stated interest rate of 8.5%. At issuance, the market interest rate was 10.25%.
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Bond prices depend on the market rate of interest, stated rate of interest, and time.
Read the requirements.
Requirement 1. Compute the price of the following 5% bonds of Country Telecom.
a. The price of the $500,000 bond issued at 75.75 is
Requirements
1.
2.
Compute the price of the following 5% bonds of Country Telecom.
a. $500,000 issued at 75.75
b. $500,000 issued at 103.50
c. $500,000 issued at 95.75
d. $500,000 issued at 102.50
Which bond will Country Telecom have to pay the most to retire at maturity?
Explain your answer.
Print
Done
- X
Assume bonds payable are amortized using the straight-line amortization method unless stated otherwise.
Determining bond prices
Bond prices depend on the market rate of interest, stated rate of interest, and time. Determine whether the following bonds payable will be issued at face value, at a premium, or at a discount:
The market interest rate is 8%. Idaho issues bonds payable with a stated rate of 7.75%.
Austin issued 9% bonds payable when the market interest rate was 8.25%.
Cleveland’s Cars issued 10% bonds when the market interest rate was 10%.
Atlanta’s Tourism issued bonds payable that pay the stated interest rate of 8.5%. At issuance, the market interest rate was 10.25%.
Bonds with an 8% stated interest rate were issued when the market rate of interest was 5%.This bond was issued ata. face value.b. par value.c. a premium.d. a discount.
Chapter 12 Solutions
Horngren's Financial & Managerial Accounting, The Managerial Chapters, Student Value Edition Plus MyLab Accounting with Pearson eText -- Access Card Package (6th Edition)
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- Assume bonds payable are amortized using the straight-line amortization method unless stated otherwise. Pricing bonds Bond prices depend on the market rate of interest, stated rate of interest and time. Requirements Compute the price of the following 8% bonds of Country Telecom. a. $100,000 issued at 75.25 $100,000 issued at 94.50 b. $100,000 issued at 103 50 c. $100,000 issued at 94.50 d. $100,000 issued at 103.25 2. Which bond will Country Telecom have to pay the most to retire at maturity? Explain your answer.arrow_forwardCalculate the value of each bond and discuss whether it sells at par, discount, or premium. (Annual interest rate) O A. Bond Bond Value A B C O B. Bond A B C O C. Bond A B с O D. Bond A B C $1,149.39 Discount $1,000.00 Par $85.60 Premium Bond Value Sells at par/discount/premium Bond Value $1,149.39 Premium $1,000.00 Par $85.60 Discount Sells at par/discount/premium Bond Value Sells at par/discount/premium $1,149.39 Premium $1,000.00 Par $85.60 Premium Sells at par/discount/premium $1,049.39 Premium $1,100.00 Premium $85.60 Discount Bond Par value Coupon interest Years to rate maturity JA B IC $1000 14% $1000 18% $100 10% 120 16 18 Required return 12% 8% 13%arrow_forwardIf bonds are issued at 101.25, this means thata. a $1,000 bond sold for $1,012.50.b. a $1,000 band sold for $101.25.c. the bonds sold at a discount.d. The bond rate of interest is 10.125% of the market rate of interest.arrow_forward
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