Computing the Issue Price of a Bond with Analysis of Income and Cash Flow Effects
Imai Company issued a $1 million bond that matures in 10 years. The bond has a 10 percent stated rate of interest. When the bond was issued, the market rate was 8 percent. The bond pays interest each six months. Record the issuance of the bond on June 30. Notice that the company received more than $1 million when it issued the bond. How will this premium affect future income and future cash flows?
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