In January 1 20x1 abc company issued a 1000000 10 year bond with a stated interest rate of 9% payable annually every December 31st the market interest rate is 7% the bonds price is 1140160. g) If they use straight-lineamortization, how muchwill be their interestexpense for 20X1?h) If they use straight-lineamortization, will interestexpense for 20X2 be thesame as, higher or lowerthan interest expense for20X1?i) If they use effectiveinterest amortization howmuch will their interestexpense be in 20X1?[Choose ][Choose ][Choose ]

Bonds :Bonds is a long-term debts issued by the government and companies to raise funds for their…

Answered: In January 1 20x1 abc company issued a…

In January 1 20x1 abc company issued a 1000000 10 year bond with a stated interest rate of 9% payable annually every December 31st the market interest rate is 7% the bonds price is 1140160.

Financial Accounting Intro Concepts Meth/Uses

14th Edition

ISBN:9781285595047

Author:Weil

Publisher:Weil

ChapterA: Appendix - Time Value Of Cash Flows: Compound Interest Concepts And Applications

Section: Chapter Questions

Problem 4Q

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Question

In January 1 20x1 abc company issued a 1000000 10 year bond with a stated interest rate of 9% payable annually every December 31st the market interest rate is 7% the bonds price is 1140160.

g) If they use straight-line
amortization, how much
will be their interest
expense for 20X1?
h) If they use straight-line
amortization, will interest
expense for 20X2 be the
same as, higher or lower
than interest expense for
20X1?
i) If they use effective
interest amortization how
much will their interest
expense be in 20X1?
[Choose ]
[Choose ]
[Choose ]

Definition Definition Calculates the present value of a bond's expected future periodic coupon payments. Bond valuation determines the theoretical fair value of a particular bond and helps investors estimate what rate of return they could expect. The bond's theoretical fair value is computed by discounting the future cash flows or coupon payments by an applicable discount rate.

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