Insouciance, Inc. (President, John Carefree) issued $200,000, 8% coupon bond on January 1, 2010, due on December 31, 2014. The prevailing market interest rate on January 1, 2010 was 10%, and the bond pays interest on December 31 of each. Consider the following (incomplete) table for the bond's carrying value (CV) Dec 31, 2012 ? Dec 31, 2013 ? CV Required: a. Calculate the price of the bond b. Calculate the missing CV c. How much interest expense did Insouciance record in 2013?
Insouciance, Inc. (President, John Carefree) issued $200,000, 8% coupon bond on January 1, 2010, due on December 31, 2014. The prevailing market interest rate on January 1, 2010 was 10%, and the bond pays interest on December 31 of each. Consider the following (incomplete) table for the bond's carrying value (CV) Dec 31, 2012 ? Dec 31, 2013 ? CV Required: a. Calculate the price of the bond b. Calculate the missing CV c. How much interest expense did Insouciance record in 2013?
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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![Insouciance, Inc. (President, John Carefree)
issued $200,000, 8% coupon bond on
January 1, 2010, due on December 31, 2014.
The prevailing market interest rate on January
1, 2010 was 10%, and the bond pays interest
on December 31 of each.
Consider the following (incomplete) table for
the bond's carrying value (CV)
Dec 31, 2012
?
Dec 31, 2013
CV
Required:
a. Calculate the price of the bond
b. Calculate the missing CV
c. How much interest expense did Insouciance
record in 2013?
d. Now assume semi-annual compounding so
that the bond pays interest on June 30 and
December 31 of each year. Repeat (a), (b), and
(c).](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F674da6da-c83a-4f9b-81f6-4be8e0be8095%2Fe1867c7f-dbdf-40d3-bf49-a0e98cbd1ab7%2Fbqju5xa_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Insouciance, Inc. (President, John Carefree)
issued $200,000, 8% coupon bond on
January 1, 2010, due on December 31, 2014.
The prevailing market interest rate on January
1, 2010 was 10%, and the bond pays interest
on December 31 of each.
Consider the following (incomplete) table for
the bond's carrying value (CV)
Dec 31, 2012
?
Dec 31, 2013
CV
Required:
a. Calculate the price of the bond
b. Calculate the missing CV
c. How much interest expense did Insouciance
record in 2013?
d. Now assume semi-annual compounding so
that the bond pays interest on June 30 and
December 31 of each year. Repeat (a), (b), and
(c).
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