$15 million, 10-year, 10% unsecured bonds, interest payable semi-annually to yield 12%. Interest, is payable on...
$15 million, 10-year, 10% unsecured bonds, interest payable semi-annually to yield 12%. Interest, is payable on January 1.
Instructions:
Prepare Bond Amortization Schedules for the bond using Effective Interest Method.
Homework Answers
Solution:
| Computation of bond price | |||
| Table values are based on: | |||
| n= | 20 | ||
| i= | 6.00% | ||
| Cash flow | Table Value | Amount | Present Value |
| Par (Maturity) Value | 0.31180 | $15,000,000.00 | $4,677,071 |
| Interest (Annuity) | 11.46992 | $750,000.00 | $8,602,441 |
| Price of bonds | $13,279,512 | ||
| Bond Amortization Schedule - Effective interest method | |||||
| Semiannual interest period | Interest paid | Interest Expense | Discount Amortization | Unamortized Discount |
Book value of bonds End of period |
| Issue date | $1,720,488 | $13,279,512 | |||
| 1 | $750,000 | $796,771 | $46,771 | $1,673,717 | $13,326,283 |
| 2 | $750,000 | $799,577 | $49,577 | $1,624,140 | $13,375,860 |
| 3 | $750,000 | $802,552 | $52,552 | $1,571,589 | $13,428,411 |
| 4 | $750,000 | $805,705 | $55,705 | $1,515,884 | $13,484,116 |
| 5 | $750,000 | $809,047 | $59,047 | $1,456,837 | $13,543,163 |
| 6 | $750,000 | $812,590 | $62,590 | $1,394,247 | $13,605,753 |
| 7 | $750,000 | $816,345 | $66,345 | $1,327,902 | $13,672,098 |
| 8 | $750,000 | $820,326 | $70,326 | $1,257,576 | $13,742,424 |
| 9 | $750,000 | $824,545 | $74,545 | $1,183,031 | $13,816,969 |
| 10 | $750,000 | $829,018 | $79,018 | $1,104,013 | $13,895,987 |
| 11 | $750,000 | $833,759 | $83,759 | $1,020,253 | $13,979,747 |
| 12 | $750,000 | $838,785 | $88,785 | $931,469 | $14,068,531 |
| 13 | $750,000 | $844,112 | $94,112 | $837,357 | $14,162,643 |
| 14 | $750,000 | $849,759 | $99,759 | $737,598 | $14,262,402 |
| 15 | $750,000 | $855,744 | $105,744 | $631,854 | $14,368,146 |
| 16 | $750,000 | $862,089 | $112,089 | $519,765 | $14,480,235 |
| 17 | $750,000 | $868,814 | $118,814 | $400,951 | $14,599,049 |
| 18 | $750,000 | $875,943 | $125,943 | $275,008 | $14,724,992 |
| 19 | $750,000 | $883,499 | $133,499 | $141,509 | $14,858,491 |
| 20 | $750,000 | $891,509 | $141,509 | $0 | $15,000,000 |
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