Question: Determining bond prices and interest expense Havens is planning to issue $530,000 of 6%, fifteen-year bonds payable to borrow for a major expansion. The owner, Shane Havens, asks your advice on some related matters.
Requirements: 1. Answer the following questions:
a. At what type of bond price will Havens have total interest expense equal to the cash interest payments?
b. Under which type of bond price will Havens's total interest expense be greater than the cash interest payments?
c. If the market interest rate is 9%, what type of bond price can Havens expect for the bonds?
2. Compute the price of the bonds if the bonds are issued at 90.
3. How much will Havens pay in interest each year? How much will Havens's interest expense be for the first year?