Williams_Issue of bonds payable

 Question 4

Williams is planning to issue $620,000 of 5%, five-year bonds payable to borrow
for a major expansion. The owner, Williams Robinson, asks your advice on some
related matters.

Requirements:

1. (a) At what type of bond price will Williams have total interest expense
equal to the cash interest payments?
2. Under which type of bond price will Williams’ total interest expense be
greater than the cash interest payments?
3. If the market interest rate is 6%, what type of bond price can Williams
expect for the bonds?
4. Compute the price of the bonds if the bonds are issued at 95.
5. How much will Williams pay in interest each year? How much will Williams’
interest expense be for the first year?