The initial proceeds per bond, the size of the issue, the initial maturity of the bond, and
Question:
The initial proceeds per bond, the size of the issue, the initial maturity of the bond, and the years remaining to maturity are shown in the following table for a number of bonds.
In each case the bond has a $1,000 par value, and the issuing firm is in the 40% tax bracket.
Bond Proceeds Size Initial Maturity Years Remaining
Per Bond of Issue of Bond to Maturity
A $ 985 10,000 20 Years 15 Years
B 1,025 20,000 25 16
C 1,000 22,000 12 9
D 960 5,000 25 15
E 1,035 10,000 30 16
a. indicate whether each bond was sold at a discount, at a premium, or at its par value.
b. Determine the total discount or premium for each issue.
c. Determine the annual amount of discount or premium amortized for each bond.
d. Calculate the unamortized discount or premium for each bond.
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...
Step by Step Answer:
Introduction to Corporate Finance What Companies Do
ISBN: 978-1111222284
3rd edition
Authors: John Graham, Scott Smart