A corporation issues $5,000,000 of 7% bonds to yield interest at the rate of 5%. (a) Was the amount of cash received from the sale of the bonds greater or less than $5,000,000? (b) Identify the following terms related to the bond issue:(1) Face amount, (2) Market or effective rate of interest, (3) Contract rate of interest, and (4) Maturity

A corporation issues $5,000,000 of 7% bonds to yield interest at the rate of 5%.
(a) Was the amount of cash received from the sale of the bonds greater or less than $5,000,000?
(b) Identify the following terms related to the bond issue:
(1) Face amount,
(2) Market or effective rate of interest,
(3) Contract rate of interest, and
(4) Maturity amount.

Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
Maturity
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...

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22nd Edition

Authors: Carl S. Warren, James M. Reeve, Jonathan E. Duchac

ISBN: 978-0324401844