the price of regular bonds, Financial Accounting

Flying High Inc. plans to raise $5,000,000 external financing by issuing bonds, and is considering two options: regular bonds & zero couple bonds.  The regular bonds will have coupon rate at 10%, payable semi-annually, with face value of $1,000 each and maturity of 5 years.  The zero coupon bonds will be the similar as the regular bonds except that there is no coupon attached to these bonds, i.e. no interest payment throughout the life of the zero coupon bond.

Present market interest rate for 5-year bond of same bond issuers like Flying High Inc. is 8%.  Suppose there is no issuance cost.

Requirements: Show your calculation

a. Determine the price of regular bonds at the time of issuance.

b. Based on $1,000 face value for each bond, what is the minimum number of regular bonds to be issued to raise the required external financing of $5,000,000?

c. Determine the price of zero coupon bonds at the time of issuance.

 

 

Posted Date: 3/16/2013 8:48:12 AM | Location : United States







Related Discussions:- the price of regular bonds, Assignment Help, Ask Question on the price of regular bonds, Get Answer, Expert's Help, the price of regular bonds Discussions

Write discussion on the price of regular bonds
Your posts are moderated
Related Questions
For several firms trade payables - suppliers of goods and services - represent the major component of current liabilities the amounts owed by the company which have to be repaid wi

what is the process to complete my debtor management project.

MAINTENANCE Trustees may pay to the parent or guardian out of income of a fund held on the trust for an infacnt reasonable sums for his maintenance and education, having regard

Calculation of Liquidity ratios Current Ratio and Acid-Test Ratio -               2008 2009 2010 A

The Rohr Company's old equipment for making subassemblies is worn out. The company is considering two alternatives: a) Completely replacing the old equipment with new equipment

Calculate the DuPont Model, given the following information: cash=$16,080; accounts receivable= $9,500; prepaid = $3,150; supplies =$675; equipment =$25,200; accumulated depreciati

Terry Marks is a well-known architect. He wants to start his own business and convinces Rob Norris, his cousin and a civil engineer, to contribute capital. Together, they form a pa

What can a financial institution often do for a deficit economic unit (DEU)that it would have difficulty doing for itself if the DEU were to deal directly with an SEU?

LIMITATIONS O F FINANCIAL ACCOUNTING 1. Simply transactions which can be calculated in terms of money can be recorded in the books of accounts. Actions, though important t

Ely purchased a patent (with a remaining legal life of ten years) from Backo on January 1, 2010 for $300,000. Ely expected to use the patent for five years. The carrying value on B