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Q4SE_1

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Horngren'S Financial And Managerial Accounting
Found in: Page 656

Short Answer

Bond prices depend on the market rate of interest, stated rate of interest, and time.

Requirements

1. Compute the price of the following 8% bonds of Country Telecom.

a. $100,000 issued at 75.25

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.

Answer:

(a) $75,250 (b) $103,500 (c) $94,500 (d) $103,250

See the step by step solution

Step by Step Solution

Step 1: Definition of bonds

Bonds are the loans issued by the company to the investors on which regular interest payment are made by the company.

Step 2: Price of the bonds

a. In this case, the bonds are issued at a discount

b. In this case, the bonds are issued at a premium

c. In this case, the bonds are issued at a discount

d. In this case, the bonds are issued at a premium

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