Homework Answers
| 1 | Computation of value of bond | ||||||
| Life of the bond (in years) | 20 | ||||||
| Coupon rate | 4.00% | ||||||
| Coupon rate for semi annual period | 2.00% | ||||||
| Coupon payment | 3,000,000 | ||||||
| Coupon payment for semi annual period | 1,500,000 | ||||||
| Face value | 75,000,000 | ||||||
| Sale value of bond | 45,310,905 | ||||||
| Required rate of return | 8.00% | ||||||
| Required rate of return for semi annual | 4.00% | ||||||
| Required rate of return for semi annual | |||||||
| - | |||||||
| Interest expenses at Effective interest rate | |||||||
| Period end | Cash interest paid | Bond interest expenses | Discount amortization | Carrying value | |||
| January 1 | 45,310,905 | ||||||
| June 30 | 1,500,000 | 1,812,436 | (312,436) | 45,623,341 | |||
| December 31 | 1,500,000 | 1,824,934 | (324,934) | 45,948,275 | |||
| Total | 3,637,370 | ||||||
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