Question

Under what circumstances will bonds be issued at discount or at premium?

Under what circumstances will bonds be issued at discount or at premium?

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Bond will be issued at premium if the coupon rate on such bond is higher than prevailing market interest rate.For example It meansif currently the market is giving 5% return , our bond will give 6% return. So we will charge extra amount from the investors.

Vice- versa , if the bond coupon rate is lower than market interest rate we wil have to issue it at discount. Because since we are giving less return we have to sell it at a lower price , otherwise no one will purchase our bond. Instead everyone would like to invest in market.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
On the maturity date of bonds issued at a premium: A) the Premium on Bonds Payable...
On the maturity date of bonds issued at a premium: A) the Premium on Bonds Payable account is zero B) the carrying value of the bonds is greater than face value C) the carrying value of the bonds is less than face value D) both a and b are correct
Explain the difference between discount bonds and premium bonds. When do bonds trade at face value?...
Explain the difference between discount bonds and premium bonds. When do bonds trade at face value? How do discount bonds behave? How do premium bonds behave? What is the nature of the returns from discount bonds vs. those from premium bonds?
What are the various types of chemical bonds, the circumstances under which each forms, and the...
What are the various types of chemical bonds, the circumstances under which each forms, and the relative strengths of each type?
CSX issued 5-year bonds. If the bonds were issued at a discount, then the A. Nominal...
CSX issued 5-year bonds. If the bonds were issued at a discount, then the A. Nominal rate < stated rate B. Effective rate > stated rate C. Nominal rate > stated rate D. Effective rate < effective yield
Under what circumstances the trade deficit is really bad and under what circumstances the trade deficit...
Under what circumstances the trade deficit is really bad and under what circumstances the trade deficit is not too bad? Explain.
On June 1, 2019 Adelphi Corporation issued $240,000 of 6%, 5-year bonds.  The bonds which were issued...
On June 1, 2019 Adelphi Corporation issued $240,000 of 6%, 5-year bonds.  The bonds which were issued at 99, pay interest on January 1 and June 1. Use this information to calculate the amount of bond discount or premium that is amortized with each interest payment. If this is discount amortization enter as a positive number. If this is premium amortization enter as a negative number.
Cassius Corporation issued $2,000,000, 10 year, 6% bonds on January 1, 2019. The bonds pay interest...
Cassius Corporation issued $2,000,000, 10 year, 6% bonds on January 1, 2019. The bonds pay interest annually on January 1. 1. What is the annual interest payment? 2. How many interest payment periods are there? 3 If the bonds sold at 98% of face value? 4. Did they sell at a discount or premium? 5. What is the discount or premium amount? 6. How much of the discount or premium would be amortized on each interest payment period? 7 If...
Are bonds held by Facebook traded at a premium or discount? Discuss why this would occur
Are bonds held by Facebook traded at a premium or discount? Discuss why this would occur
1. Discount on bonds payable and Premium on bonds payable are examples​ of: A.equity accounts. B.estimated...
1. Discount on bonds payable and Premium on bonds payable are examples​ of: A.equity accounts. B.estimated accounts. C.contraminus−accounts. D.companion accounts. 2.​$300,000 of​ 10%, 20−year bonds were sold for​ $325,000 on January 1. The bonds require semiannual interest payments on June 30 and December 31. The entry to record the June 30 interest payment on the bonds would be​ to: (Round your final answer to the nearest​ dollar.) A.debit Interest Expense​ $14,375; credit​ Cash, $14,375. B.debit Interest Expense​ $15,625; credit Premium...
When bonds are issued at a premium, the interest rate used to calculate interest expense will...
When bonds are issued at a premium, the interest rate used to calculate interest expense will be the contractual rate. amortized cost of the bonds will increase with successive amortization. interest paid to bondholders will increase after each interest payment date. amount of premium amortized will get larger with successive amortization.
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT