Question

Questions – Bonds A company issues term bonds totaling $300,000 on January 1, 2014. The bonds have a coupon rate of 5%, pay interest semi-annually on January 1st and July 1st of each year, and mature in 10 years.

Answer 1

date Вб Н K I/Y= $277,683.79 300,000 N= 3.00% PV= PMT= 7,500 FV= 3 the bond issue price equals: $277,683.79 bond carrying discount interest interest date amortized value payment expense 1/1/2014 $277,683.79 7/1/2014 $7,500.00 $8,330.51 $ 1/1/2015 $7,500.00 $8,355.43 $ 7/1/2015 $7,500.00 $8,381.09 $ 1/1/2016 $7,500.00 $8,407.52 $ 7/1/2016 $7,500.00 $8,434.75 $ 1/1/2017 $7,500.00 $8,462.79 $ 7/1/2017 $7,500.00 $8,491.68 $ 1/1/2018 $7,500.00 $8,521.43 $ 1,021.43 $285,068.99 7/1/2018 $7,500.00 $8,552.07 $ 1,052.07 $286,121.06 1/1/2019 $7,500.00 $8,583.63 $ 1,083.63 7/1/2019 $7,500.00 $8,616.14 $ 1,116.14 $288,320.84 1/1/2020 $7,500.00 $8,649.63 $ 1,149.63 $289,470.46 7/1/2020 $7,500.00 $8,684.11 1/1/2021 $7,500.00 $8,719.64 7/1/2021 $7,500.00 $8,756.23 $ 1,256.23 $293,130.44 1/1/2022 $7,500.00 $8,793.91 7/1/2022 $7,500.00 $8,832.73 1/1/2023 $7,500.00 $8,872.71 $ 1,372.71 $297,129.80 7/1/2023 $7,500.00 $8,913.89 $ 1,413.89 $298,543.69 1/1/2024 $7,500.00 $8,956.31 830.51 $278,514.30 9 $279,369.73 855.43 10 881.09 $280,250.82 907.52 $281,158.35 11 12 $282,093.10 934.75 13 962.79 $283,055.89 14 $284,047.57 991.68 15 16 17 $287,204.70 18 19 $ 1,184.11 $ 1,219.64 20 $290,654.58 $291,874.21 21 22 1,293.91 | $294,424.35 $ 1,332.73 23 24 $295,757.08 25 26 27 $ 1,456.31 $300,000.00 28

For formulas and calculations, refer to the image below -

fe date Вб B Н K 1 |=6%/2 =F4 PMT==300000*5%/2 FV= 300000 =10*2 I/Y= N= PV= |=PV(6%/2,10*2,-300000*5%/2,-300000,0) the bond issue price equals: discount interest date interest payment bond carrying value amortized expense 6. 41640 =F4 41821 =300000*5%/2 42005 =300000*5%/2 42186 =300000*5%/2 42370 =300000*5%/2 42552 =300000*5%/2 42736 =300000*5%/2 42917 =300000*5%/2 43101 =300000*5%/2 43282 =300000*5%/2 43466 =300000*5%/2 43647 =300000*5%/2 43831 =300000*5%/2 44013 =300000*5%/2 44197 =300000*5%/2 44378 =300000*5%/2 44562 =300000*5%/2 44743 =300000*5%/2 44927 =300000*5%/2 45108 =300000*5%/2 45292 =300000*5%/2 =F7*6%/2 =F8*6%/2 =F9*6%/2 =F7+E8 8. =D8-C8 =F8+E9 9. =D9-C9 10 =D10-C10 =F9+E10 =F10*6%/2 =F11*6%/2 =F12*6%/2 =F13*6%/2 =F14*6%/2 =F15*6%/2 =F16*6%/2 =F17*6%/2 =F18*6%/2 =F19*6%/2 |=F20*6%/2 =F21*6%/2 =F22*6%/2 =F23*6%/2 11 =D11-C11 =F10+E11 =F11+E12 =F12+E13 12 =D12-C12 =D13-C13 13 14 =D14-C14 =F13+E14 15 =D15-C15 =F14+E15 =F15+E16 =F16+E17 16 =D16-C16 =D17-C17 17 =F17+E18 18 =D18-C18 =D19-C19 19 =F18+E19 20 =D20-C20 =F19+E20 =F20+E21 =F21+E22 =F22+E23 21 =D21-C21 =D22-C22 =D23-C23 22 23 =D24-C24 =F23+E24 24 =F24*6%/2 =F25*6%/2 =F26*6%/2 25 =F24+E25 =D25-C25 26 =D26-C26 =F25+E26 =D27-C27 =F26+E27 27 28

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