A Bond Payable Is Dated January 1, 2015, and Is

question 5

Essay

A bond payable is dated January 1, 2015, and is issued on that date. The face value of the bond is $120,000, and the face rate of interest is 6%. The bond pays interest semiannually. The bond will mature in five years.
REQUIRED:
1. What will be the issue price of the bond if the market rate of interest is 6% at the time of issuance?
2. What will be the issue price of the bond if the market rate of interest is 10% at the time of issuance?

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Definitions:

Policy Changes

Modifications or adjustments to existing rules, regulations, or laws enacted by a governing body.

Agricultural Adjustment Act

A U.S. federal law of the New Deal era designed to boost agricultural prices by reducing surpluses.

Agricultural Prices

The amount of money required to purchase agricultural products, which can fluctuate based on factors like supply, demand, weather conditions, and market trends.

Supply

The total amount of a product or service available for purchase at any given price level in a given market.