Question

# Headland Inc. has issued three types of debt on January 1, 2017, the start of the...

Headland Inc. has issued three types of debt on January 1, 2017, the start of the company’s fiscal year. (a) \$11 million, 10-year, 13% unsecured bonds, interest payable quarterly. Bonds were priced to yield 10%. (b) \$27 million par of 10-year, zero-coupon bonds at a price to yield 10% per year. (c) \$17 million, 10-year, 8% mortgage bonds, interest payable annually to yield 10%. Prepare a schedule that identifies the following items for each bond:

(1) maturity value, (2) number of interest periods over life of bond, (3) stated rate per each interest period, (4) effective-interest rate per each interest period, (5) payment amount per period, and (6) present value of bonds at date of issue.

 Unsecured Bonds Working Zero - coupon Bonds Working Mortgage Bonds Working 1 Maturity value \$   11,000,000.00 \$        27,000,000.00 \$       17,000,000.00 2 Number of interest periods 40 10 10 3 Stated rate per period 3.25% =13%/4 0 8% 4 Effective rate per period 2.50% =10%/4 10% 10% 5 Payment amount per period \$        357,500.00 (11M x 3.25%) 0 \$         1,360,000.00 (17M x 8%) 6 Present value 9217295.21 (357500 x 25.1028)+(11000000*0.3724) \$   10,408,500.0000 (27000000 x 0.3855) \$ 14,910,156.0000 (1530000 x 6.1446) + (17000000 x 0.3855)

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