Question

a company issues 10% bonds with a par value of $180,000 at par on january 1. the market rate on the date of issuance was 9%. the bonds pay interest semiannually on january 1 and july 1. the cash paid on july 1 to the bondholder(s) is:

Answer 1

The cash paid on july 1 to the bondholder(s) is: 105700-102000= 3700 (gain)

The par value of the bond= is 180000

coupon rate= of 10%

market rate= 9%

Interest paid on July 1 (for 6 months) = par value of bond* coupon rate

= 180000*10%/2= 9000

Debt to equity ratio= total debt / total equity

Total debt= 15925000

Total equity= 12250000

Debt to equity ratio= 15925000/12250000= 1.3

Gain or loss on retirement of bond= Carrying value (-) amount payable on retirement

carrying value= 105700

the amount payable on retirement= 102000

gain or loss on retirement = 105700-102000= 3700 (gain).

Notes are issued as tradable bonds. The bond issuer is the borrower and the bondholder or buyer is the lender. Upon maturity of the Notes, the issuer of the Notes shall return to the Noteholders the par value of any Bookkeeping Notes or Bank Notes under this Agreement, and Section 2.5(a) in return for the purchase of the

Notes hereunder, by any Investor or Bondholders, receive periodic interest payments known as coupons. Quarterly, semi-annual, or yearly coupon payments are intended to provide investors with regular and predictable income.

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