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May 31st, 2016
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Management of International Business. Business. GEB4361. Work6.

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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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