4 issues bonds with a par value of $150,000 on their stated issue date. T Citywi

Question

4 issues bonds with a par value of $150,000 on their stated issue date. T Citywide annual interest in semian and Jable 8.4) (Use appropriate fectorts) from the tables provided.) he bonds mature in five years and pay 10% On the issue date, the annual market rate for the bonds is 8% ?????. fable82. Table 10 1. What is the amount of each semiannual interest payment for these 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 4. Compute the price of the bonds as of their issue date 5. Prepare the journal entry to record the bonds issuance Print Complete this question by entering your answers in the tabs below Req 1 to 3 Req 4 Rea 5 the price of the bonds as of their issue date 4 of 7s Next>

Explanation / Answer

Solution 1:

Amount of each semiannual interest payment = $150,000 * 10% * 6/12 = $7,500

Solution 2:

Total maturity period = 5 years

Nos of semi annual interest payments to be made on these bonds over their life = 5*2 = 10

Solution 3:

As annual market rate of bond is lower than coupon rate, therefore bond are issued at premium

Solution 4:

Solution 5:

Computation of bond price Table values are based on: n= 10 i= 4% Cash flow Table Value Amount Present Value Par (Maturity) Value 0.675564 $150,000.00 $101,335 Interest (Annuity) 8.110896 $7,500.00 $60,832 Price of bonds $162,166

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