10 Nov Factors That Affect the Bond Issue PriceBecca Comp
Factors That Affect the Bond Issue PriceBecca Company is considering the issue of $100,000 face value, ten-year term bonds. The bondswill pay 6% interest each December 31. The current market rate is 6%; therefore, the bonds willbe issued at face value.Required1. For each of the following situations, indicate whether you believe the company will receive apremium on the bonds or will issue them at a discount or at face value. Without using numbers,explain your position.a. Interest is paid semiannually instead of annually.b. Assume instead that the market rate of interest is 7%; the nominal rate is still 6%.2. For each situation in (1), prove your statement by determining the issue price of the bondsgiven the changes in (a) and (b).
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