What is the accrued interest on the bond

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Reference no: EM13287276

1. Bell Corp. issues a bond with the following features:
Principal $ 1,000
Coupon 0%
Maturity 5 years
The current interest rate on comparable debt is 7 percent, so the bond initially sells for $ 713. What is the accrued interest on the bond for each of the next five years?

2. You purchase a 6 percent $ 10,000 bond for $ 9,180 plus $ 156 in accrued interest for a total outlay of $ 9,336. Subsequently you receive a $ 300 interest payment. You are in the 20 percent income tax bracket. How much tax do you owe on the interest payment?

3. You sell a 6 percent $ 10,000 bond for $ 9,180 plus $ 156 in accrued interest for a total of $ 9,336. Soon thereafter the company makes a $ 300 interest payment. You are in the 20 percent income tax bracket.
a) How much tax do you owe on the interest?
b) Compare your answers for Problems 2 and 3. Why do they differ?

Reference no: EM13287276

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