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Baker Company issued $6 million of five-year 12% bonds on January 1 with interest payable...

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Accounting

Baker Company issued $6 million of five-year 12% bonds on January 1 with interest payable on June 30 and December 31 each year. The bonds sold to yield 16%. Baker Company's banker is Ted who provides bond valuation as a part of her banking services

(a) Calculate the value of the bond when it was sold.

(b) What do you call the difference between the bond face value and the amount it was issued for?

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