Lump sum issue of shares and bonds: A corporation may issue units, which may consist of a combination of shares and bonds. The bonds carry an interest rate and the shares are traded in the stock market. When such units are sold for a lump sum amount, the amount has to be allocated to bonds and shares on a predetermined basis. The methods used for such allocation is proportional method and incremental method. To determine the allocation of lump sum amount. Given information: Units: 10,000. Par: $500. Rate: 12%. Shares: 10. Par: $5.

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Chapter 15, Problem 4E

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Lump sum issue of shares and bonds: A corporation may issue units, which may consist of a combination of shares and bonds. The bonds carry an interest rate and the shares are traded in the stock market. When such units are sold for a lump sum amount, the amount has to be allocated to bonds and shares on a predetermined basis. The methods used for such allocation is proportional method and incremental method.

To determine the allocation of lump sum amount.

Given information:

Units: 10,000.

Par: $500.

Rate: 12%.

Shares: 10.

Par: $5.

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