# Sourcing Globally.

May 31st, 2016
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Investments1JKInstructor Charles BensonInvestmentsDecember 7, 2015InvestmentsInvestments1. Bell Corp. issues a bond with the following features: Principal \$1,000 Coupon 0%Maturity 5 years The current interest rate on comparable debt is 7 percent, so the bondinitially sells for \$713. What is the accrued interest on the bond for each of the next fiveyears?Year 1 \$713.00 x 0.07 = \$49.91Year 2 \$762.91 x 0.07 = \$53.40Year 3 \$816.31 x 0.07 = \$57.14Year 4 \$873.46 x 0.07 = \$61.14Year 5 \$934.60 x 0.07 = \$65.42Maturity: \$934.60 +65.42 = \$1000.2. You purchase a 6 percent \$10,000 bond for \$9,180 plus \$156 in accrued interest for atotal outlay of \$9,336. Subsequently you receive a \$300 interest payment. You are in the 20percent income tax bracket. How much tax do you owe on the interest payment?\$300 x 20% = \$60.3. You sell a 6 percent \$10,000 bond for \$9,180 plus \$156 in accrued interest for a total of\$9,336. Soon thereafter the company makes a \$300 interest payment. You are in the 20percent income tax bracket.a) How much tax do you owe on the interest?b) Compare your answers for Problems 2 and 3. Why do they differ?2Investments3I received \$156 in interes

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