Computation of value of the bond and the total interest

Assignment Help Finance Basics

Reference no: EM1311464

Computation of value of the bond

Zombie Industries issues $400,000 face value, 8.5% coupon, 15-year bonds on January 1, 2008. Interest is paid annually on December 31.

1. At what price (where par = 100%) would these bonds be issued, if the market rate of interest on January 1, 2008 is 10%?

2. Prepare the journal entry to record the sale of the bonds on January 1, 2008 if the market rate of interest on January 1, 2008 is 10%?

3. Prepare the journal entry to record interest expense and the interest payment on these bonds on December 31, 2008, using the effective interest rate method if the market rate of interest on January 1, 2008 is 10%?

4. What is the book value of these bonds on January 1, 2009 under the effective interest rate method if the market rate of interest on January 1, 2008 is 10%?

5. What is the market value of these bonds on January 1, 2009 if the market rate of interest on January 1, 2008 is 10% and the market rate of interest on January 1, 2009 has increased to 12%?

6. What is the total interest expense recorded on these bonds over the fifteen years if the market rate of interest on January 1, 2008 is 10%?

7. At what price (where par = 100%) would these bonds have been issued, if the market rate of interest on January 1, 2008 had been 7% rather than 10%?

Reference no: EM1311464

Questions Cloud

Probabilities of a random experiment : A certain random experiment can result in one of four different possible outcomes, which we'll call A, B, C and D.

Describing potential gdp with diagrams : Consider economy that is above full-employment equilibrium (natural rate of output) because of an increase in AD. Prices of productive resources have'nt changed. With the help of graph

What is the scale reading while an elevator accelerates : A solid cylinder with mass and radius, rotating with angular speed about an axis throughout its center, is set on the horizontal surface for which the kinetic friction coefficient is.

Prepare a new contribution format income statement : Prepare a new contribution format income statement under each of the following conditions - the sales volume increases by 100 units.

Computation of value of the bond and the total interest : Computation of value of the bond and What is the total interest expense recorded on these bonds over the fifteen years if the market rate of interest

Computing probability of debt for randomly selected borrower : Compute the probability that debt for a randomly selected borrower with good credit is more than $18,000?

The concept of time dilation : Find out how fast a GPS satellite is moving relative to someone on the ground and from that how much slower time runs where it is in orbit relative to someone on the ground.

What is the increase in temperature of the bullet : An intergalactic rock star bangs his drum every 1.52 s. A person on earth measures that time between beats is 2.10 s. How fast is the rock star moving relative to the earth.

Purpose a brief comment to management : Purpose a brief comment to management on the results of operations. What recommendations would you make to management to improve profitability?

User Account

All Pages