Homework Answers
If the contractual interest rate is higher than the market interest rate, the bond is sold at premium since higher contractual interest rate increases the value of the bond. In other words, it offsets the difference in the interest rates.
The cost of borrowing is decreased when the bonds are issued at premium, since a part of the interest expense can be met by the premium amount collected at issue time, amortised over the life of the bond
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2) If a firm issues bonds with a contractual interest rate that is higher than the...
if the market rate of interest is greater than the contractual rate of interest, bonds will...
if the market rate of interest is greater than the contractual rate of interest, bonds will sell
1. If the market interest rate is 9% when Dolphin Corp. issues its bonds, will the bonds be price...
1. If the market interest rate is 9% when Dolphin Corp. issues its bonds, will the bonds be priced at par, at a premium, or at a discount? Explain. If the market interest rate is 11% when Dolphin Corp. issues its bonds, will the bonds be priced at par, at a premium, or at a discount? Explain. Assume that the issue price of the bonds is 96. Journalize the following bonds payable transactions a. Issuance of the bonds on February...
If interest expense is less than the contractual interest payment, then A. the note was issued...
If interest expense is less than the contractual interest payment, then A. the note was issued at a premium. B. the note was issued at a discount. C. the note was issued at par. D. the company should refinance the note to get a better interest rate.
0 Requirements hod. 1. If the market interest rate is 7% when ACU issues its bonds,...
0 Requirements hod. 1. If the market interest rate is 7% when ACU issues its bonds, will the bonds be priced at face value, at a premium, or at a discount? Explain. 2. If the market interest rate is 9% when ACU issues its bonds, will the bonds be priced at face value, at a premium, or at a discount? Explain. 3. The issue price of the bonds is 95. Journalize the following bond transactions: a. Issuance of the bonds...
Your company issues bonds with a face value of $500,000. The stated rate is 4%, interest is paid semi- annually, and the...
Your company issues bonds with a face value of $500,000. The stated rate is 4%, interest is paid semi- annually, and the bonds mature in 10 years. The bonds are issued with an effective yield of 4.125% The bonds are issued at a [ Select ] ["Discount", "Premium", "Par"] The bonds are sold for [...
A company issues term bonds totaling $300,000 on January 1, 2014. The bonds have a coupon...
A company issues term bonds totaling $300,000 on January 1, 2014. The bonds have a coupon rate of 5%, pay interest semi-annually on January 1st and July 1st of each year, and mature in 10 years. Calculate the bond issue price assuming that the prevailing annual market rate of interest is: 5%, 4% As applicable, prepare a bond discount or bond premium amortization schedule based on the effective-interest method. As applicable, record the applicable journal entries in 2014 (1/1/2014, 7/1/14,...
Jules issues 4.5%, five-year bonds dated January 1, 2009, with a $230,000 par value. The bonds...
Jules issues 4.5%, five-year bonds dated January 1, 2009, with a $230,000 par value. The bonds pay interest on June 30 and December 31 and are issued at a price of $235,160. The annual market rate is 4% on the issue date. Required: Is this bond trading at a discount or premium A.discount B. premium Explain why the bond in question is trading at a discount/premium (answer should be less than 20 words).
Bond prices depend on the market rate of interest, stated rate of interest
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%. Denton issues bonds payable with a stated rate of 7.75%.b. Starkville issued 8% bonds payable when the market interest rate was 8.25%.c. Houston issued 6% bonds when the market interest rate was 10%.d. Federal issued bonds payable that pay the...
Question 16 (0.5 points) If the contractual (stated) interest rate is 9% and the market (effective)...
Question 16 (0.5 points) If the contractual (stated) interest rate is 9% and the market (effective) interest rate is 11% on the day the bonds are sold, the bonds will sell at face value. O a discount. O a premium.
Match the following definitions with the terms below: 45. The stated interest rate is more than...
Match the following definitions with the terms below: 45. The stated interest rate is more than the market interest rate. 46. The stated interest rate is less than the market interest rate. 47. The rate quoted in the bond contract used to calculate the cash payments for interest. 48. The stated interest rate equals the market interest rate 49. The true interest rate used by investors to value a bond. 50. The mixture of liabilities and stockholders' equity a business...
1. If the market interest rate is 9% when Dolphin Corp. issues its bonds, will the bonds be priced at par, at a premium, or at a discount? Explain. If the market interest rate is 11% when Dolphin Corp. issues its bonds, will the bonds be priced at par, at a premium, or at a discount? Explain. Assume that the issue price of the bonds is 96. Journalize the following bonds payable transactions a. Issuance of the bonds on February...
0 Requirements hod. 1. If the market interest rate is 7% when ACU issues its bonds, will the bonds be priced at face value, at a premium, or at a discount? Explain. 2. If the market interest rate is 9% when ACU issues its bonds, will the bonds be priced at face value, at a premium, or at a discount? Explain. 3. The issue price of the bonds is 95. Journalize the following bond transactions: a. Issuance of the bonds...
Question 16 (0.5 points) If the contractual (stated) interest rate is 9% and the market (effective) interest rate is 11% on the day the bonds are sold, the bonds will sell at face value. O a discount. O a premium.
Match the following definitions with the terms below: 45. The stated interest rate is more than the market interest rate. 46. The stated interest rate is less than the market interest rate. 47. The rate quoted in the bond contract used to calculate the cash payments for interest. 48. The stated interest rate equals the market interest rate 49. The true interest rate used by investors to value a bond. 50. The mixture of liabilities and stockholders' equity a business...
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