A $5,000 bond had a coupon rate of 5.75% with interest paid semi-annually. Brett purchased this bond when there were 9 years left to maturity and when the market interest rate was 6.00% compounded semi-annually. He held the bond for 3 years, then sold it when the market interest rate was 5.50% compounded semi-annually.

Principles of Accounting Volume 1
19th Edition
ISBN:9781947172685
Author:OpenStax
Publisher:OpenStax
Chapter13: Long-term Liabilities
Section: Chapter Questions
Problem 3EA: Krystian Inc. issued 10-year bonds with a face value of $100,000 and a stated rate of 4% when the...
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A $5,000 bond had a coupon rate of 5.75% with interest paid semi-annually. Brett
purchased this bond when there were 9 years left to maturity and when the market
interest rate was 6.00% compounded semi-annually. He held the bond for 3 years, then
sold it when the market interest rate was 5.50% compounded semi-annually.
a. Calculate the purchase price of the bond.
Round to the nearest cent
b. Calculate the amount that Brett received when he sold the bond.
Round to the nearest cent
Transcribed Image Text:A $5,000 bond had a coupon rate of 5.75% with interest paid semi-annually. Brett purchased this bond when there were 9 years left to maturity and when the market interest rate was 6.00% compounded semi-annually. He held the bond for 3 years, then sold it when the market interest rate was 5.50% compounded semi-annually. a. Calculate the purchase price of the bond. Round to the nearest cent b. Calculate the amount that Brett received when he sold the bond. Round to the nearest cent
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