Exercise 14-8A Computing bond interest and price; recording bond issuance LO C2,

Question

Exercise 14-8A Computing bond interest and price; recording bond issuance LO C2, P3

Citywide Company issues bonds with a par value of $79,000 on their stated issue date. The bonds mature in seven years and pay 12% annual interest in semiannual payments. On the issue date, the annual market rate for the bonds is 10%. (Table B.1, Table B.2, Table B.3, and Table B.4) (Use appropriate factor(s) from the tables provided.)

1. What is the amount of each semiannual interest payment for these bonds?
2. How many semiannual interest payments will be made on these bonds over their life?
3. Use the interest rates given to select whether the bonds are issued at par, at a discount, or at a premium.

What is the amount of each semiannual interest payment for these bonds? How many semiannual interest payments will be made on these bonds over their life? Use the interest rates given to select whether the bonds are issued at par, at a discount, or at a premium. Semiannual Rate Semiannual caslh interest payment Par(maturity) value Number of payments Whether the bonds are issued at par, at a discount, or at a premium?

Explanation / Answer

1, 2, & 3.

4.

5.

Par (maturity) value Semiannual Rate Semiannual cash interest payment 79000 x 6% = 4740 Number of payments 14 Whether the bonds are issued at par, at a discount, or at a premium? Premium

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