Issuing Zero-Coupon Bonds.
On July 28, 2020, Bolton Corporation, a biotechnology company located in Virginia, completed a private placement of zero-coupon convertible subordinated debentures. The zero-coupon debentures were issued at a price of $551.26 per $1,000 principal amount at maturity. Although the zero-coupon bonds paid no periodic interest payments, interest was assumed to be compounded semiannually. The bonds mature on July 28, 2040.
Estimate the yield rate on the zero-coupon bonds at the time of issuance.
Yield rate: ( )% Note: Round the percentage to two decimal points (i.e. show 14.445% as 14.45%).
Calculate Bolton’s implicit interest expense for the first 6 months: $ ( ) Note: Round to two decimal points. Use rounded amount in any future calculations.
Calculate Bolton’s implicit interest expense for the second 6 months: $ ( ) Note: Round to two decimal points.
