Question

 On June 30, 2021, Singleton Computers issued 6% stated rate bonds with a face amount of $200 million. The bonds mature on June 30, 2036 (15 years). The market rate of interest for similar bond issues was 4% (2.0% semiannual rate). Interest is paid semiannually (3.0%) on June 30 and December 31, beginning on December 31, 2021. EV of SI. PV of SL EVA Of SI. PVA Ol SL FVAD of S] and PVAD (Use appropriate factor(s) from the tables provided.)

 Required:

 1. Determine the price of the bonds on June 30, 2021.

 2. Calculate the interest expense Singleton reports in 2021 for these bonds using the effective interest method.

Answer 1

	Bond Price are sum of present values of all cash outflows
	from the bond. The cash outflows are basically coupon payments
	plus the present value of the par value at maturity.
1	Table Values are based on:
	n =	30	(15 years * 2 times each year)
	I   =	2%	(4% / 2)
	Cash Flow	Amount	Present Value
	Interest	6,000,000	134379000	{6000000*pvifa(30, 2%)}
	Principal	200,000,000	110420000	200000000*pvif(30,2%)
	Price of bonds		244799000
2	Period End	Cash Interest Paid	Bond Interest Expense	Premium Amortization	Carrying Value
	6/30/2021				244799000
	12/31/2021	6,000,000	4895980	1,104,020	243,694,980
			(244799000*0.02)