Debt Valuation: Interest-Bearing Debentures
At the beginning of the year, Global Minds Inc. issued $100 million (maturity value) of 20-year debentures.
The debentures carried a 4% per period coupon rate, were subject to semiannual compounding, and had been issued at a time when the yield rate was 6% per period.
Required
1. Calculate the proceeds received by Global Minds when the bonds were sold.
Use Excel or a financial calculator for your computations. Do not round until your final answer. Round your answer to the nearest dollar.
3. Calculate the market value of the bonds if, after 10 years, the market yield rate is 10% per period.
Use Excel or a financial calculator for your computations. Do not round until your final answer. Round your answer to the nearest dollar.
4. Calculate the financial effects to each account as a result of retiring the Global Minds bonds after 15 years assuming that the market yield rate is 10% per period at the time of retirement.
Use Excel or a financial calculator for your computations. Do not round until your final answer. Round your answer to the nearest dollar.
Enter an increase to an account as a positive number, and decreases to an account as a negative number.
Bonds Payable
Bond discount
Cash
Gain/(Loss)