Interest Expense and Price of Bonds
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5. On June 30, 2011, Gunderson Electronics issued 8% stated rate bonds with a face
amount of $300 million. The bonds mature on June 30, 2031 (20 years). The market
rate of interest for similar bond issues was 10% (5% semiannual rate). Interest is paid
semiannually (4%) on June 30 and December 31, beginning on December 31, 2011.
Required:
a. Determine the price of the bonds on June 30, 2011.
b. Calculate the interest expense Gunderson reports in 2011 for these bonds.
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