Pearl Inc. has issued three types of debt on January 1, 2020, the start of the company's fiscal year. (a) $10 million, 11-year, 14% unsecured bonds, interest payable quarterly. Bonds were priced to yield 12%. (b) $28 million par of 11-year, zero-coupon bonds at a price to yield 12% per year. (c) $17 million, 11-year, 10% mortgage bonds, interest payable annually to yield 12%. Prepare a schedule that identifies the following items for each bond: (1) maturity value, (2) number of interest periods over life of bond, (3) stated rate per each interest period, (4) effective-interest rate per each interest period, (5) payment amount per period, and (6) present value of bonds at date of issue. (Round stated and effective rate per period to 2 decimal places, e.g. 10.25%. Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,971.) (1) (2) (3) (5) (6) Maturity value Number of interest periods Stated rate per period Effective rate per period Payment amount per period Present value $ $ LA Unsecured Bonds % % $ $ $ Zero-Coupon Bonds % % $ $ $ Mortgage Bonds %6 %
Pearl Inc. has issued three types of debt on January 1, 2020, the start of the company's fiscal year. (a) $10 million, 11-year, 14% unsecured bonds, interest payable quarterly. Bonds were priced to yield 12%. (b) $28 million par of 11-year, zero-coupon bonds at a price to yield 12% per year. (c) $17 million, 11-year, 10% mortgage bonds, interest payable annually to yield 12%. Prepare a schedule that identifies the following items for each bond: (1) maturity value, (2) number of interest periods over life of bond, (3) stated rate per each interest period, (4) effective-interest rate per each interest period, (5) payment amount per period, and (6) present value of bonds at date of issue. (Round stated and effective rate per period to 2 decimal places, e.g. 10.25%. Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,971.) (1) (2) (3) (5) (6) Maturity value Number of interest periods Stated rate per period Effective rate per period Payment amount per period Present value $ $ LA Unsecured Bonds % % $ $ $ Zero-Coupon Bonds % % $ $ $ Mortgage Bonds %6 %
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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Transcribed Image Text:Pearl Inc. has issued three types of debt on January 1, 2020, the start of the company's fiscal year.
(a)
(b)
(c)
Prepare a schedule that identifies the following items for each bond: (1) maturity value, (2) number of interest periods over life of
bond, (3) stated rate per each interest period, (4) effective-interest rate per each interest period, (5) payment amount per period, and
(6) present value of bonds at date of issue. (Round stated and effective rate per period to 2 decimal places, e.g. 10.25%. Round present value
factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,971.)
(1)
(2)
(3)
(4)
(5)
$10 million, 11-year, 14% unsecured bonds, interest payable quarterly. Bonds were priced to yield 12%.
$28 million par of 11-year, zero-coupon bonds at a price to yield 12% per year.
$17 million, 11-year, 10% mortgage bonds, interest payable annually to yield 12%.
(6)
Maturity
value
Number of
interest
periods
Stated rate
per period
Effective
rate per
period
Payment
amount per
period
Present
value
IA
$
69
$
$
69
Unsecured
Bonds
1
%
%
69
$
tA
$
Zero-Coupon
Bonds
%
%
$
$
LA
$
Mortgage
Bonds
%
%
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