Debt Valuation: Interest-Bearing Debentures. At the beginning of the year, Marshall Square, Inc. issued s100 million (maturity value) of 20-year debentures. The debentures carry a 4.75 percent annual coupon rate (compounded semi-annually) and interest payments are made semi-annually. The market rate of interest at the time the debentures were issued was 5 percent. P9.26 T Required Calculate the proceeds received by Marshall Square when the bonds were sold. 2. Explain why the Marshall Square bonds were sold at a discount. Calculate the market value of the bonds if, after five years, the market yield rate is four percent per period (i.e., 8% annually). 1. 3.

Debt Valuation: Interest-Bearing Debentures. At the beginning of the year, Marshall Square, Inc. issued s100 million (maturity value) of 20-year debentures. The debentures carry a 4.75 percent annual coupon rate (compounded semi-annually) and interest payments are made semi-annually. The market rate of interest at the time the debentures were issued was 5 percent. P9.26 T Required Calculate the proceeds received by Marshall Square when the bonds were sold. 2. Explain why the Marshall Square bonds were sold at a discount. Calculate the market value of the bonds if, after five years, the market yield rate is four percent per period (i.e., 8% annually). 1. 3.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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PROBLEMS
Debt Valuation: Interest-Bearing Debentures. At the beginning of the year, Marshall Square, Inc. issued
$100 million (maturity value) of 20-year debentures. The debentures carry a 4.75 percent annual coupon rate
(compounded semi-annually) and interest payments are made semi-annually. The market rate of interest at the
time the debentures were issued was 5 percent.
P9.26
TA 2, 3
MBC
Required
1. Calculate the proceeds received by Marshall Square when the bonds were sold.
2. Explain why the Marshall Square bonds were sold at a discount.
Calculate the market value of the bonds if, after five years, the market yield rate is four percent per period
(i.e., 8% annually).
Calculate the cost of retiring the Marshall Square bonds after 15 years assuming that the market yield rate
is three percent per period (six percent annually) at the time of retirement. Calculate the resulting gain or
loss. Where will the gain/loss be reported on the company's statement of cash flows?
3.
4.
no jooued $150 milion
ТА З

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