White & Decker Corporation's 2024 financial statements included the following information in the long-term debt disclosure note: ($ in millions) 2024 $ 260 Zero-coupon subordinated debentures, due 2039: The disclosure note stated the debenture bonds were issued late in 2019 and have a maturity value of $510 million. The maturity val ndicates the amount that White & Decker will pay bondholders in 2039. Each individual bond has a maturity value (face amount) of $1,010. Zero-coupon bonds pay no cash interest during the term to maturity. The company is "accreting" (gradually increasing) the ssue price to maturity value using the bonds' effective interest rate computed on an annual basis. Required: 1. Determine the effective interest rate on the bonds. 2 Determine the issue price in late 2019 of a single $1010 maturity-value bond
White & Decker Corporation's 2024 financial statements included the following information in the long-term debt disclosure note: ($ in millions) 2024 $ 260 Zero-coupon subordinated debentures, due 2039: The disclosure note stated the debenture bonds were issued late in 2019 and have a maturity value of $510 million. The maturity val ndicates the amount that White & Decker will pay bondholders in 2039. Each individual bond has a maturity value (face amount) of $1,010. Zero-coupon bonds pay no cash interest during the term to maturity. The company is "accreting" (gradually increasing) the ssue price to maturity value using the bonds' effective interest rate computed on an annual basis. Required: 1. Determine the effective interest rate on the bonds. 2 Determine the issue price in late 2019 of a single $1010 maturity-value bond
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:White & Decker Corporation's 2024 financial statements included the following information in the long-term debt disclosure note:
($ in millions)
2024
$ 260
Zero-coupon subordinated debentures, due 2039:
The disclosure note stated the debenture bonds were issued late in 2019 and have a maturity value of $510 million. The maturity value
indicates the amount that White & Decker will pay bondholders in 2039. Each individual bond has a maturity value (face amount) of
$1,010. Zero-coupon bonds pay no cash interest during the term to maturity. The company is "accreting" (gradually increasing) the
issue price to maturity value using the bonds' effective interest rate computed on an annual basis.
Required:
1. Determine the effective interest rate on the bonds.
2. Determine the issue price in late 2019 of a single, $1,010 maturity-value bond.
Note: For all requirements, round your answers in millions to 2 decimal places. For example, $555.55 million should be entered as
555.55. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)
1. Effective interest rate
2. Issue price
%
million
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