What’s the correct answer and why?? On January 1, 2017, Lindsey bonds that pay i

Question

What’s the correct answer and why?? On January 1, 2017, Lindsey bonds that pay interest annually on maturity are paying 7% y Sales and Leasing Corp issues $600,000 of 9% 15 year December 31st each year. Bonds of similar risk and 23. How much cash will Lindse interest payment? y Sales and Leasing pay the bondholders for one A. $600,000 B. $63,837 $54,000 D. $49,651 24. How much cash will Lindsey Sales and Leasing receive in total from the bond issuance? A. $503,272 B. $600,000 C. $658,742 $709,297 25. How much interest expense will Lindsey Sales and Leasing recognize on December 31, 2017 when they make the first interest payment? A. $63,837 B. $54,000 C) $49,651 $45,294

Explanation / Answer

23) Cash payment   = face value * coupon rate    = 600000 * 0.09 = $54,000.

    Answer - C) $54,000

24) Cash receipt from bond issuance = (54000*9.10791)+(600000*0.36245) = $709,297

    Answer - D) $709,297

25) Interest expense = 709297 * 0.07 = $49,651

   Answer   - c) $49,651

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