Flint Inc. has issued three types of debt on January 1, 2017, the start of the c
ID: 2561054 • Letter: F
Question
Flint Inc. has issued three types of debt on January 1, 2017, the start of the company's fiscal year. (a) $10 million, 9-year, 13% unsecured bonds, Interest payable quarterly. Bonds were priced to yield 10%. (b) $29 milion par of 9-year, zero-coupon bonds at a price to yield 10% per year. (c) $16 milion, 9-year, 8% mortgage bonds, interest payable annually to yield 10%. Prepare a schedule that identifies the following items for each bond: (1) maturity value, (2) number of interest periods over life of bond, (3) stated rate per each interest period, (4) effective-interest rate per each interest period, (5) payment amount per period, and (6) present value of bonds at date of issue. (Round stated and effective rate per period to 2 decimal places, e.g. 10.25%. Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to o decimal places e.g. 58,971.) Unsecured Zero-Coupon Mortgage Bonds Bonds Bonds (1) Maturity value 10000000 29000000 16000000 (2) Number of interest periods (3) Stated rate per period EEP >>- (4) Effective rate per period (5) Payment amount per period 325000 XPAA (6) Present value 8421993 12298900 17999004Explanation / Answer
Unsecured Bonds
Zero-Coupon Bonds
Mortgage Bonds
(1)
Maturity value
$10,000,000
$29,000,000
$16,000,000
(2)
Number of interest
36
9
9
periods
(3)
Stated rate per period
3.25% (
13%
)
0
8%
4
(4)
Effective rate per period
2.5% (
10%
)
10%
10%
4
(5)
Payment amount per period
$325,000(a)
0
$2,000,000(b)
(6)
Present value
$10,456,497(c)
$12,296,200(d)
$22,493,800(e)
(a)$10,000,000 X 13% X 1/4 = $325,000
(b)$16,000,000 X 8% = $2,000,000
(c)Present value of an annuity of $325,000
discounted at 3% per period for
(d)Present value of $29,000,000 discounted
at 10% for 9 periods
(e)Present value of an annuity of $2,000,000 discounted
at 8% for 9 periods
Unsecured Bonds
Zero-Coupon Bonds
Mortgage Bonds
(1)
Maturity value
$10,000,000
$29,000,000
$16,000,000
(2)
Number of interest
36
9
9
periods
(3)
Stated rate per period
3.25% (
13%
)
0
8%
4
(4)
Effective rate per period
2.5% (
10%
)
10%
10%
4
(5)
Payment amount per period
$325,000(a)
0
$2,000,000(b)
(6)
Present value
$10,456,497(c)
$12,296,200(d)
$22,493,800(e)
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