Calculate the value of each bond and discuss whether it sells at par, discount, or premium. (Annual interest rate)O A. Bond BondValueABCO B. BondABCO C. BondABсO D. BondABC$1,149.39 Discount$1,000.00 Par$85.60 PremiumBondValueSells at par/discount/premiumBondValue$1,149.39 Premium$1,000.00 Par$85.60 DiscountSells at par/discount/premiumBondValueSells at par/discount/premium$1,149.39 Premium$1,000.00 Par$85.60 PremiumSells at par/discount/premium$1,049.39 Premium$1,100.00 Premium$85.60DiscountBond Par value Coupon interest Years toratematurityJABIC$100014%$1000 18%$10010%1201618Requiredreturn12%8%13%

Calculate the value of each bond and discuss whether it sells at par, discount, or premium. (Annual interest rate) Bond Par value Coupon interest rate A B IC $1000 $1000 18% $100 10% 14% Years to maturity 20 16 18 Required return 12% 18% 13%

Calculate the value of each bond and discuss whether it sells at par, discount, or premium. (Annual interest rate) Bond Par value Coupon interest rate A B IC $1000 $1000 18% $100 10% 14% Years to maturity 20 16 18 Required return 12% 18% 13%

Financial Accounting: The Impact on Decision Makers

10th Edition

ISBN:9781305654174

Author:Gary A. Porter, Curtis L. Norton

Publisher:Gary A. Porter, Curtis L. Norton

Chapter10: Long-term Liabilities

Section: Chapter Questions

Problem 10.1E

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Question

Calculate the value of each bond and discuss whether it sells at par, discount, or premium. (Annual interest rate)
O A. Bond Bond
Value
A
B
C
O B. Bond
A
B
C
O C. Bond
A
B
с
O D. Bond
A
B
C
$1,149.39 Discount
$1,000.00 Par
$85.60 Premium
Bond
Value
Sells at par/discount/premium
Bond
Value
$1,149.39 Premium
$1,000.00 Par
$85.60 Discount
Sells at par/discount/premium
Bond
Value
Sells at par/discount/premium
$1,149.39 Premium
$1,000.00 Par
$85.60 Premium
Sells at par/discount/premium
$1,049.39 Premium
$1,100.00 Premium
$85.60
Discount
Bond Par value Coupon interest Years to
rate
maturity
JA
B
IC
$1000
14%
$1000 18%
$100
10%
120
16
18
Required
return
12%
8%
13%

Expert Solution

Introduction

Bonds are debt instruments that are issued by the government and corporate entities to raise funds. They can be issued at a premium, discount, or par value. Despite the issuance value, bonds are redeemed at par value. Bonds pay periodic coupon payments to the bondholders as a token or compensation for bearing the risk of lending money.

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