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problem: On January 1, 2008, the Junco Company issued $500,000 face amount ten (10) year, 10 percent stated rate bond when the market interest rates were 11 percent. The bonds pay interest semiannually each June 30th and December 31st & mature on December 31, 2018.

Required:

[A]      Determine the effective interest rate?

[B]      Using the present value tables contained on the following pages, compute the proceeds [issue price] of the Junco Company's bonds on January 1, 2008 suppose that the bonds were sold to provide a market rate of return to the investor.

[C]      What will be the cash interest payment made on June 30th, 2008

[D]      Apply the effect interest rate method; estimate the interest that will be recognized on the income statement on June 30th, 2008.

[E]      What will be the new carrying price for the bond on June 30th, 2008?

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M919688

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