**Transcription for an Educational Website**---**Title: Understanding Bond Cash Flows and Market Value**Krystan Inc. issued 12-year bonds with a face value of $110,000 and a stated rate of 5% when the market rate was 7%. Interest was paid semi-annually.**A. Calculate the cash flows the purchaser of the bonds (the investor) will receive throughout the bond term.** *Note: The requirement is referring to total interest and principal.*A text box is shown with an "X" indicating an incorrect answer.**B. Would an investor be willing to pay more or less than face value for this bond?**"Less than" has a check mark indicating the correct answer.---**Explanation:**- **Bond Details:** The bond has a face value of $110,000 with a stated rate of 5%. This means that the bond will pay interest at a rate of 5% annually on the face value. - **Interest Payment:** Since the interest is paid semi-annually, the investor would receive two payments per year. Each payment would be 2.5% of $110,000.- **Market Consideration:** The market rate is 7%, which is higher than the stated rate of 5%. This impacts the value investors are willing to pay. Generally, if the market rate exceeds the stated rate, the bond will be sold at a discount (less than face value).- **Investor Decision:** The text indicates that investors would pay less than the face value due to the higher market interest rate.This educational snippet helps learners understand how the relationship between market rates and stated bond rates affects investor decisions on bond pricing.

Bonds payable means bonds have been issued to generate cash. As the cash borrowed is to be paid the…

Krystian Inc. issued 12-year bonds with a face value of $110,000 and a stated rate of 5% when the market rate was 7%. Interest was paid semi-annually. A. Calculate the cash flows the purchaser of the bonds (the investor) will receive throughout the bond term. NOTE: The requirement is referring to total interest and principal. X

Krystian Inc. issued 12-year bonds with a face value of $110,000 and a stated rate of 5% when the market rate was 7%. Interest was paid semi-annually. A. Calculate the cash flows the purchaser of the bonds (the investor) will receive throughout the bond term. NOTE: The requirement is referring to total interest and principal. X

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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A 14. Subject:- finance
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