On january 1, 2021. ABC Co. contemplates on acquiring 10%, 3,000,000 bonds as investment. Principal on the bonds will mature in four semi-annual installments as follows July 1, 2021 1,200,000 December 31, 2021 800,000 July 1, 2022 December 31, 2022 600,000 400,000 Total 3,000,000 Interest on the outstandinng principal balance is also due semi-annually. The effective rate as of January 1, 2021 is 8%.
Questions:
1. How much is the estimated purchase price of the bonds on January 1, 2021?
2. Compute the interest income for 2021.
3. Compute for the interest income for 2022.
4. Write all necessary
Since you have posted a question with multiple sub-parts, we will solve the first three sub-parts for you. To get the remaining sub-part solved please repost the complete question and mention the sub-parts to be solved.
The bonds can be defined as the units of corporate debt that it issued to raise the fund. The bond is tradable securities. The bonds carried a fixed coupon rate which is the interest rate for making interest payments. The companies issued bonds generally for the long term. The interest can be annually or semiannually etc.
Step by step
Solved in 4 steps with 6 images
