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Determine the selling price of the bonds

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Question - Katarina Witt, Inc. manufactures skating equipment. Recently the Vice President of Operations of the company has requested construction of a new plant to meet the increasing needs for the company's skates. After a careful evaluation of the request, the board of directors has decided to raise funds for the new plant by issuing $2,000,000 of 11% term corporate bonds on January 1, 2008, due on January 1, 2018, with interest payable each January 1 and July 1. At the time of issuance, the market interest rate for similar financial instruments is 10%.

a. As the controller of the company, determine the selling price of the bonds.

b. Did the bonds sell at a premium or discount?

c. Determine the amount of Premium/Discount at date of issuance.

Reference no: EM132432205

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