On January 1, Nic Inc. issued $100,000 of ten-year, 10% bonds that pay interest semiannually on June 30 and 31st. The bonds are sold to yield 8%. A. Using the information provided in this problem, as well as your time value of money tables to calculate the issue price of the bond.  B. Was the bond issued at a premium or a discount, explain your answer

Essentials Of Investments
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Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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Chapter1: Investments: Background And Issues
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On January 1, Nic Inc. issued $100,000 of ten-year, 10% bonds that pay interest semiannually on June 30 and 31st. The bonds are sold to yield 8%.

A. Using the information provided in this problem, as well as your time value of money tables to calculate the issue price of the bond. 

B. Was the bond issued at a premium or a discount, explain your answer.

Expert Solution
Step 1

Bond:

  • A bond represents a financial instrument that is issued by the issuer for raising debt capital.
  • The price of a bond is estimated by discounting its interest/coupon payments and the par value over its life.

 

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