Question

Enviro Company issues 8%, 10-year bonds with a par value of $250,000 and semiannual interest payments. On the issue date, the annual market rate for these bonds is 5%, which implies a selling price of 123.375. The straight-line method is used to allocate interest expense. 1. Using the implied selling price of 123.375, what are the issuer's cash proceeds from issuance of these bonds

Answer 1

Answer:

$308,438

Explanation:

The computation of the issuer cash proceeds from the issuance of these bond are as follows

= Par value of the bond × implied selling price

= $250,000 × 123.375%

= $308,438

By multiplying the par value with the implied selling price we can get the cash proceeds and the same is to be shown in the calculation part