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Question - Convertible Bonds - On January 1, 2020, MANGO Corp. issues $100 million of convertible bonds at par value. The bonds have a stated annual interest rate of 4%, pay interest semiannually, and come due December 31, 2024. The bonds are convertible at any time after issuance at the rate of 25 shares of common stock for each $1,000 of the face value of the convertible bonds. Issuance costs total $300,000. The current annual market interest rate for nonconvertible bonds with similar maturity is 6%.
Required -
1 - Prepare the journal entries to record the issuance of the convertible bonds (round to the nearest dollar).
2 - Determine the amount of expense related to the convertible bonds that the company should recognize each year (round to the nearest dollar) and prepare the journal entries for the first year only.
Hubbard argues that the Fed can control the Fed funds rate, but the interest rate that is important for the economy is a longer-term real rate of interest. How much control does the Fed have over this longer real rate?
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Your Corp, Inc. has a corporate tax rate of 35%. Please calculate their after tax cost of debt expressed as a percentage. Your Corp, Inc. has several outstanding bond issues all of which require semiannual interest payments.
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