# A corporation issues \$26,000,000 of 9% bonds to yield interest at the rate of 7%. (a) Was the amount of cash received from the sale of the bonds greater or less than \$26,000,000? (b) Identify the following amounts as they relate to the bond issue: (1) face amount, (2) market or effective rate of interest, (3) contract rate of interest, and (4) maturity amount.

### Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124

Chapter
Section

### Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124
Chapter 14, Problem 4DQ
Textbook Problem
86 views

## A corporation issues \$26,000,000 of 9% bonds to yield interest at the rate of 7%. (a) Was the amount of cash received from the sale of the bonds greater or less than \$26,000,000? (b) Identify the following amounts as they relate to the bond issue: (1) face amount, (2) market or effective rate of interest, (3) contract rate of interest, and (4) maturity amount.

(a)

To determine

Identify the amount of cash received from sales of the bond.

### Explanation of Solution

Bonds: Bonds are long-term promissory notes that are issued by a company while borrowing money from investors to raise fund for financing the operations.

Contract interest rate: It refers to the interest rate that is stated on the face of the bonds.

Market interest rate: It refers to the interest rate that the lenders expect, or demands from the borrower to part with their money as loan to them...

(b)

(1)

To determine

Identify the amounts of face value.

(2)

To determine

Identify the market or effective rate of interest.

(3)

To determine

Identify the contract rate of interest.

(4)

To determine

Identify the maturity amount.

### Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

#### The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

Find more solutions based on key concepts
What is motivation?

Foundations of Business (MindTap Course List)

MIRR A project has the following cash flows: This project requires two outflows at Years 0 and 2, but the remai...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)

Define the price elasticity of demand and the income elasticity of demand.

Principles of Macroeconomics (MindTap Course List)

Describe organizational governance.

Pkg Acc Infor Systems MS VISIO CD

Why is historical experience often a poor basis for establishing standards?

Cornerstones of Cost Management (Cornerstones Series)