Rivera Inc. is considering the issuance of $500,000 face value, ten-year term bonds. The bonds will pay 10% interest each December 31. The current market rate is 10%; therefore, the bonds will be issued at face value.I need help calculating the issue price of the bonds given interest is paid annually but that the market rate of interest is 8%; the nominal rate is still 10%. Factors that Affect the Bond Issue PriceRivera Inc. is considering the issuance of $500,000 face value, ten-year term bonds. The bonds will pay 10% interest each December 31.The current market rate is 10%; therefore, the bonds will be issued at face value.Required:1. For each of the following situations, indicate whether you believe the company will receive a premium on the bonds or will issue themat a discount or at face value.a. Interest is paid semiannually instead of annually.Face value vb. Assume interest is paid annually but that the market rate of interest is 8%; the nominal rate is still 10%.Premium2. For each situation in part (1), prove your statement by determining the issue price of the bonds given the changes in (a) and (b). If>required, round all calculations to the nearest dollar.Here are some time value of money factors:Present value of an annuity, n=10, i=8%, PV=6.71008Present value of an annuity, n=20, i=5%, PV=12.46221Present value of a single amount, n=10, i=8%, PV=0.46319Present value of a single amount, n=20, i=5%, PV=0.37689Proof: Bond Priceа.500,000b.

Bonds Payable: A bond is a debt instrument, and so it requires its issuing company to pay periodic…

Answered: Rivera Inc. is considering the issuance…

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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Rivera Inc. is considering the issuance of $500,000 face value, ten-year term bonds. The bonds will pay 10% interest each December 31. The current market rate is 10%; therefore, the bonds will be issued at face value.

I need help calculating the issue price of the bonds given interest is paid annually but that the market rate of interest is 8%; the nominal rate is still 10%.

Factors that Affect the Bond Issue Price
Rivera Inc. is considering the issuance of $500,000 face value, ten-year term bonds. The bonds will pay 10% interest each December 31.
The current market rate is 10%; therefore, the bonds will be issued at face value.
Required:
1. For each of the following situations, indicate whether you believe the company will receive a premium on the bonds or will issue them
at a discount or at face value.
a. Interest is paid semiannually instead of annually.
Face value v
b. Assume interest is paid annually but that the market rate of interest is 8%; the nominal rate is still 10%.
Premium
2. For each situation in part (1), prove your statement by determining the issue price of the bonds given the changes in (a) and (b). If
>
required, round all calculations to the nearest dollar.
Here are some time value of money factors:
Present value of an annuity, n=10, i=8%, PV=6.71008
Present value of an annuity, n=20, i=5%, PV=12.46221
Present value of a single amount, n=10, i=8%, PV=0.46319
Present value of a single amount, n=20, i=5%, PV=0.37689
Proof: Bond Price
а.
500,000
b.

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