Iqualuit Inc.issued a 20-year, $100,000 bond with a semi-annual coupon rate of 4% when market interest rates were 6%.What were the proceeds of the bond at the time of issue?

Question

Quizplus · Accepted Answer

The bond was issued at a discount because the coupon rate (4%) is lower than the market interest rate (6%). The proceeds are calculated by discounting the bond's cash flows (coupon payments and principal) at the market rate, resulting in $76,885.