On April 1, 2014, Cruz Corp. purchased 50 of Chapman Inc.'s 8%, $1,000 bonds that mature in 15 years at a price that yielded a 7% rate of return. Interest is paid April 1 and October 11.
- How much will Cruz pay for these bonds?
- Provide three reasons why the market rate for this bond might have changed from the stated rate at issue.
3-2. Rose Corp. leased equipment under a lease calling for variable payments made at the end of each of three years, which is the asset's life [so this is a capital lease]. The first payment was $4,000, and the second and third payments were $5,000 each. If Rose were to borrow the money to buy the equipment today, it would be charged a 5% interest rate annually. Determine the amount at which the leased asset should be recorded on Rose's books today.