Cornell & Company approached an underwriter to discuss the possibility of issuing bonds.Cornell needs to raise $2,000,000 for expansion purposes.The terms of the bond issue have been finalized as follows:
$$\begin{array} { l l }
\text { Principal amount } & \$ 2,000,000 \
\text { Contract interest rate } & 9.5 \% \
\text { Length of time } & 10 \text { years } \
\text { Issue date } & \text { January 2, 2017 } \
\text { Interest payment dates } & \text { July 1 and December 31 }
\end{array}$$ Assume the bonds were issued on January 2,2017,when the market interest rate was 10%.
a_Determine the issue price of the bonds.
b_Did Cornell & Company receive the $2,000,000 it needed for expansion? Why or why not?

Question

Cornell & Company approached an underwriter to discuss the possibility of issuing bonds.Cornell needs to raise $2,000,000 for expansion purposes.The terms of the bond issue have been finalized as follows:
 $$\begin{array} { l l } 
\text { Principal amount } & \$ 2,000,000 \
\text { Contract interest rate } & 9.5 \% \
\text { Length of time } & 10 \text { years } \
\text { Issue date } & \text { January 2, 2017 } \
\text { Interest payment dates } & \text { July 1 and December 31 }
\end{array}$$ Assume the bonds were issued on January 2,2017,when the market interest rate was 10%.
a_Determine the issue price of the bonds.
b_Did Cornell & Company receive the $2,000,000 it needed for expansion? Why or why not?

Quizplus · Accepted Answer

The Answer of Cornell & Company approached an underwriter to discuss the possibility of issuing bonds.Cornell needs to raise $2,000,000 for expansion purposes.The terms of the bond issue have been finalized as follows:
 $$\begin{array} { l l } 
\text { Principal amount } & \$ 2,000,000 \
\text { Contract interest rate } & 9.5 \% \
\text { Length of time } & 10 \text { years } \
\text { Issue date } & \text { January 2, 2017 } \
\text { Interest payment dates } & \text { July 1 and December 31 }
\end{array}$$ Assume the bonds were issued on January 2,2017,when the market interest rate was 10%.
a_Determine the issue price of the bonds.
b_Did Cornell & Company receive the $2,000,000 it needed for expansion? Why or why not?

Cornell & Company Approached an Underwriter to Discuss the Possibility