On 1 July 2018 BMW Ltd issues $2 million in 10-year debentures that pay interest each six months at a coupon rate of 10 per cent. At the time of issuing the securities, the market requires a rate of return of 12 per cent. Interest expense is determined using the effective-interest method. Formula for PV of $1 in n periods =1/(1+k)" 1-1/(1+k)" Formula for present value of annuity of $1 per period for n periods : k where, k is the discount rate expressed in decimal

On 1 July 2018 BMW Ltd issues $2 million in 10-year debentures that pay interest each six months at a coupon rate of 10 per cent. At the time of issuing the securities, the market requires a rate of return of 12 per cent. Interest expense is determined using the effective-interest method. Formula for PV of $1 in n periods =1/(1+k)" 1-1/(1+k)" Formula for present value of annuity of $1 per period for n periods : k where, k is the discount rate expressed in decimal

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter2: The Domestic And International Financial Marketplace

Section: Chapter Questions

Problem 4P

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On 1 July 2018 BMW Ltd issues $2 million in 10-year debentures that pay interest each six months at a coupon rate of 10 per cent. At the time of issuing the securities, the market requires a rate of return of 12 per cent. Interest expense is determined using the effective-interest method. Formula for PV of $1 in n periods =1/(1+k)" Formula for present value of annuity of $1 per period for n periods = where, k is the discount rate expressed in decimal Required: (1) Determine the issue price of the debenture. (H) Provide the journal entries at 1 July 2018 and 30 June 2019.
On 1 July 2018 BMW Ltd issues $2 million in 10-year debentures that pay interest each six months at a coupon rate of 10 per cent. At the time of issuing the securities, the market requires a rate of return of 12 per cent. Interest expense is determined using the effective-interest method. Formula for PV of $1 in n periods =1/(1+k)n Formula for present value of annuity of $1 per period for n periods = (1-1/ (1+k)n ) ÷ k where k is discount rate expressed in decimal Required: (i) Determine the issue price of the debenture. (ii) Provide the journal entries at 1 July 2018 and 30 June 2019.
On 1 july 2018 Bombo ltd issues 2 million in six year debentures that pay interset each six months at a coupon rate of 8 percent. At the time of issuing the securities, the market requires a return of 6 percent.Interest expense is determined using the effective interest method.Provide journal entries at 1 July 2018,30june 2019 and 30 june 2020.
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