Question

Sunland Inc. has issued three types of debt on January 1, 2020, the start of the company’s fiscal year.

(a)		$10 million, 12-year, 14% unsecured bonds, interest payable quarterly. Bonds were priced to yield 10%.
(b)		$29 million par of 12-year, zero-coupon bonds at a price to yield 10% per year.
(c)		$15 million, 12-year, 8% mortgage bonds, interest payable annually to yield 10%.

Prepare a schedule that identifies the following items for each bond: (1) maturity value, (2) number of interest periods over life of bond, (3) stated rate per each interest period, (4) effective-interest rate per each interest period, (5) payment amount per period, and (6) present value of bonds at date of issue.

Unsecured Bonds Zero-Coupon Bonds Mortgage Bonds (1) Maturity value 10,000,000 ,000 $ 29,000,000 15,000,000 ū Number of interest periods - 48 (3) Stated rate per period 35 00 2.5 10 10 (4) Effective rate per period Payment amount per period 350,000 " $ 000 1,200,000 (6) Present value $ 3,056,712 3,056,712 $ 11180755 11180755 $ 4779462 4779462

Answer 1

Calculation of Present Value of Bonds:

Maturity Value	10000000
PVIF @ 2.5% for 48 Period (Qtr)	0.3057
PV of Maturity Value (A)	30,56,712
Quarterly Interest Payment	350000
PVIFA @2.5% for 48 Period Qtr)	27.7732
PV of Interest Payments (B)	97,20,604
Total Present Value of 14% Unsecured Bond (A) + (B)	1,27,77,315

Maturity Value	29000000
PVIF @ 10% for 12 Years	0.3186
PV of Maturity Value (A)	92,40,294
Interest Payment	0
PV of Interest Payments (B)	-
Total Present Value of Zero Coupon Bonds(A) + (B)	92,40,294

Maturity Value	15000000
PVIF @ 10% for 12 years	0.3186
PV of Maturity Value (A)	47,79,462
Annual Interest Payment	1200000
PVIFA @ 10% for 12 years	6.8137
PV of Interest Payments (B)	81,76,430
Total Present Value of 8% Mortgage Bond (A) + (B)	1,29,55,892