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Unformatted text preview: A. Occurs when a company issues bonds with a contract rate less B. Occurs when a company issues bonds with a contract rate mor C. Increases the Bond Payable account. D. Decreases the total bond interest expense. E. Is not allowed in many states to protect creditors. & Problem ( 60 points ) SHOW ALL WORK !!!!!! . On January 1, a company issues bonds with a par value of $300,000. The bonds mature in 5 years and pay 8% annual interest each June 30 and December 31. On the issue date, the market rate of interest is 6%. Compute the price of the bonds on their issue date. The following information is taken from present value tables: The bond price equals present value (PV) of interest and principal. $300,000 x 8% = $24,000 Semiannual interest = $12,000 Rate = 6%/2 = 3% Price of bonds = ($12,000 x 8.5302) + ($300,000 x .7441) = $325,592.40 Outstanding! &...
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This note was uploaded on 11/11/2011 for the course AC 202 taught by Professor Nancyeverett during the Spring '09 term at Park.
- Spring '09