# Collins Corp. sells $400,000 of bonds to private investors. The bonds are due in five years, have... ## Question: Collins Corp. sells$400,000 of bonds to private investors.

The bonds are due in five years, have a 6% coupon rate and interest is paid semiannually.

The bonds were sold to yield 8%.

What proceeds does Collins receive from the investors?

A. $400,000 B.$367,555

C. $434,119 D.$388,000

E. None of the above

## Issuing bonds at a discount or a premium:

When bonds are sold at a discount, it means that the net proceeds from the bond issuance is less than the face amount of the bonds. When bonds are sold at a premium, it means that the net proceeds from the bond issuance is greater than the face amount of the bonds.

## Answer and Explanation: 1

Become a Study.com member to unlock this answer! Create your account

What proceeds does Collins receive from the investors?

• Answer: B. \$367,555

See detailed computation below:

Step 1. Determine the present value of...

See full answer below.

Issuing Bonds at a Discount or a Premium

from

Chapter 10 / Lesson 10
6.4K

In this lesson, we'll define a bond and discuss how bonds are issued at a premium and discount. You'll also learn the advantages and disadvantages of each.