Question: Dow Chemical is one of the largest chemical companies in
Dow Chemical is one of the largest chemical companies in the world. Among its long-term liabilities was a bond due in 2011 that carried a face interest rate of 6.125 percent. This bond sold on the New York Stock Exchange at 104 5/8. Did this bond sell at a discount or a premium? Assuming the bond was originally issued at face value, did interest rates rise or decline after the date of issue? Would you have expected the market rate of interest on this bond to be more or less than 6.125 percent? Did the current market price affect either the amount that the company paid in semiannual interest or the amount of interest expense for the same period? Explain your answers.
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