When the market rate of interest was at an annual rate of 12%, King company issued $5,000,000, 10-year, 11% bonds payable. The interest on the bonds is to be paid semi-annually.

1. Calculate the selling price of the bonds

2. Calculate the interest expense for the first period using the effective interest method

3. Calculate the interest expense for the first period using the straight line method

As additional security for the bondholders, King has agreed to make ten annual sinking fund deposits of $325,000. The deposits will be made at the end of each year into an account paying 9% annual interest.

How much money will being in the fund at the end of the ten years?

Answer rating: 100% (QA)

To calculate the selling price of the bonds we need to use the present value formula The present value of a bond is the sum of the present values of i... View the full answer