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Bond prices depend on the market rate of interest, stated rate of interest, and time

Accounting

Bond prices depend on the market rate of interest, stated rate of interest, and time. Read the requirements Requirement 1. Compute the price of the following 5% bonds of Allied Telecom a. The price of the $500,000 bond issued at 76.50 is $ b. The price of the $500,000 bord issued at 103.25 is $ Fnter and now
nd is andise 1. Compute the price of the following 5% bonds of Allied Telecom. a. $500,000 issued at 76.50 b. $500,000 issued at 103.25 c. $500,000 issued at 94.25 d. $500,000 issued at 102.50 2. Which bond will Allied Telecom have to pay the most to retire at maturity? Explain your answer. Allied elds ar Print Done

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Solution 1:

a. Bond Price = $500,000 * 76.50% = $382,500

b. Bond price = $500,000 * 103.25% = $516,250

c. Bond price = $500,000 * 94.25% = $471,250

d. Bond price = $500,000 * 102.50% = $512,500

Solution 2:

Bond issued at 76.50 will allied telecom have to pay the most to retire at maturity, because in this bond market rate of interest is higher than stated rate and company will end to pay higher interest expense.

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