An investor purchased a 14-year 5% semiannual coupons bond with face amount $100 that is callable on any coupon date in the 9th to 14th years: (i) In the 9th to 12th year, the bond is callable at redemption amount of $104. (ii) In the 13th and 14th year, the bond is callable at redemption amount of $109. The highest price this investor should pay in order to ensure a minimum nominal annual rate of interest of 6% convertible semiannually is: A 92.63 B 95.84 C 101.45 D 94.55 E 93.50

An investor purchased a 14-year 5% semiannual coupons bond with face amount $100 that is callable on any coupon date in the 9th to 14th years: (i) In the 9th to 12th year, the bond is callable at redemption amount of $104. (ii) In the 13th and 14th year, the bond is callable at redemption amount of $109. The highest price this investor should pay in order to ensure a minimum nominal annual rate of interest of 6% convertible semiannually is: A 92.63 B 95.84 C 101.45 D 94.55 E 93.50

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Company I issues a $40,000,000 bond on January 1, 2020 with a coupon rate of 7%. The present value of the bond is $37,282,062 and the market rate of interest was 8%. The bond has a 10-year life and will make semiannual interest payments and will use the straight line amortization method. A) Is the bond issued at a face value, a discount, or premium? B) What is the amount of the semi-annual interest payments? C) What is the amount that will be recorded to interest expense each time an interest payment is made? D) What is the carrying value of the bond on December 31, 2021?
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