Bond:
The bond is a kind of security which is used for debt investment. The investor finances a certain amount of money for a determined time period and interest rate. The amount which is paid as an interest on the time of issuance of the bond is known as the bond interest expense.
The meaning of bond traded at
Explanation of Solution
Option b, the bond trades at $975 per $1,000 is correct.
b. The bond traded at
a. The bond pays
c. The meaning of the bond trading at
d.
The bond trading at
e. The bond’s interest rate is
Thus, the option b. is correct.
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Chapter 10 Solutions
FINANCIAL ACCT.FUND.(LOOSELEAF)
- For a three year bond of $2,600 at a simple interest rate of 11% per year, find the semiannual interest payment and the total interest earned over the life of the bond. The semiannual interest on the bond is $ 143. (Simplify your answer. Type an integer or a decimal. Round to the nearest cent as needed.) The total interest on the bond is $ (Simplify your answer. Type an integer or a decimal. Round to the nearest cent as needed.)arrow_forwardThe saleemi corporation’s is $1,000 bonds pay 9 percent interest rate annually and have 9 years until maturity. You can purchase the bond for $935. A. What is the yield to maturity on this bond? B. Should you purchase the bond if the yield to maturity on a comparable-risk bond is 9 percent ? A. The yield to maturity on the saleemi bonds is Round to two decimal placesarrow_forwardA bond has a face value of $1,000 with a maturity date 15 years from today. The bond pays semiannually at a rate of 6% nominal per year based on face value. The interest rate paid on similar corporate bonds has decreased to a current rate of 3%. Determine the market value of the bond.arrow_forward
- If bonds are issued at 101.25, this means thata. a $1,000 bond sold for $1,012.50.b. a $1,000 band sold for $101.25.c. the bonds sold at a discount.d. The bond rate of interest is 10.125% of the market rate of interest.arrow_forwardA bond pays $50,000 per year and has a face value of $500,000 at theend of 8 years when it has to be redeemed. If its current discounted priceis $390,000, what true interest could be earned on the bond? Ans. (14.9%)arrow_forwardA bond pays P342 interest per year and has face value of P9,813 at the end of 6 years, when it has to be redeemed. If the interest of the bond is 0.19. What is the current value of the bond?arrow_forward
- For a one year bond of $2,600 at a simple interest rate of 11% per year, find the semiannual interest payment and the total interest earned over the life of the bond. The semiannual interest on the bond is $ (Simplify your answer. Type an integer or a decimal. Round to the nearest cent as needed.) The total interest on the bond is $ (Simplify your answer. Type an integer or a decimal. Round to the nearest cent as needed.)arrow_forwardSan Miguel Company's 18-year, $1,000 par value bonds pay 6.5 percent interest annually. The market price of the bond is $1,105, and your required rate of return is 8.5 percent. a. Compute the bond's expected rate of return. b. Determine the value of the bond to you given your required rate or return. c. Should you purchase the bond? Why or why not? (*You must show your calculation process as well.)arrow_forwardThe Garraty Company has two bond issues outstanding. Both bonds pay $100 annual interest plus $1,000 at maturity. Bond L has a maturity of 15 years, and Bond S a maturity of 1 year. a. What will be the value of each of these bonds when the going rate of interest is (1) 5 percent, (2) 8 percent, and (3) 12 percent? Assume that there is only one more interest payment to be made on Bond S. b. Why does the longer-term (15-year) bond fluctuate more when interest rates change than does the shorter-term bond (1 year)?arrow_forward
- The saleemi corporation’s $1,000 bonds pay 6 percent interest annually and have 11 years until maturity. You can purchase the bond for $875. A. What is the yield to maturity on this bond? B. Should you purchase the bond if the yield to maturity on a comparable-risk bond is 6 percent? A. The yield to maturity on the saleemi bonds is Round to two decimal placesarrow_forwardThe Garraty Company has two bond issues outstanding. Both bonds pay$100 annual interest plus $1,000 at maturity. Bond L has a maturity of15 years, and Bond S has a maturity of 1 year.a. What will be the value of each of these bonds when the going rate ofinterest is (1) 5%, (2) 8%, and (3) 12%? Assume that there is only onemore interest payment to be made on Bond S.b. Why does the longer-term (15-year) bond fluctuate more when interestrates change than does the shorter-term bond (1 year)?arrow_forwardA bond issue with a face amount of $1,000,000 bears interest at the rate of 8%. The current market rate of interest is 9%. These bonds will sell at a price that is: The answer cannot be determined from the information provided. More than $1,000,000. Less than $1,000,000. Equal to $1,000,000.arrow_forward
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