Question

Tahoe Tent Lud ssued bonch with a par value of $82,000 on Jenusry t,2012 The annuel conerect ate on the bonds s t800% and the nteres is pad semansually The bonds mature after treee years The annual market a What is the anoust of the ongnal premium on these bonds? (use financial calculator for caloulating Ps) b. how much total bornd intorest experse wll -se we be recogntred over re ite areese booolDo not round inermediato calculations. Round the nnal answer to the nearest whole dollar) the interest and omortiang the premum (Do not round intermediate calculations. Round the final answers to the nearest whole od of Enter all the amounts as positive values.) Premium Carrying ne 3019 Dec 3บา9

Answer 1

a.	Premium	$         37,538
	Working:
	Cash proceeds on the issuance of Bonds					$       8,49,538
	Less Face Value of Bonds					$       8,12,000
	Premium					$           37,538
b.	Total Interest Expense			$ 4,00,942
	Working:
	Total Interest paid			812000*(18%*6/12)*(3*12/6)			=	$       4,38,480
	Face Value at the end of life of bond							$       8,12,000
	Total								$       12,50,480
	Less Cash proceeds on the issuance of bond								$          8,49,538
	Total Interest Expense								$          4,00,942
c.
	Amortization Table:
	Period Ending		Cash Interest Paid		Period Interest Expense		Premium Amort.		Unamortized Premium		Carrying Value
	Jan 1/17			0		0	0		$             37,538		$ 8,49,538
	June 30/17			$     73,080		$           67,963	$    5,117		$             32,421		$ 8,44,421
	Dec 31/17			$     73,080		$           67,554	$    5,526		$             26,895		$ 8,38,895
	June 30/18			$     73,080		$           67,112	$    5,968		$             20,926		$ 8,32,926
	Dec 31/18			$     73,080		$           66,634	$    6,446		$             14,480		$ 8,26,480
	June 30/19			$     73,080		$           66,118	$    6,962		$                7,519		$ 8,19,519
	Dec 31/19			$     73,080		$           65,562	$    7,518		$                        0		$ 8,12,000
	Total			$ 4,38,480		$       4,00,942	$ 37,538
	Working:
	Semi annual cash interest paid				=	Face Value * Semi annual Interest rate
					=	$       8,12,000	*	18%*6/12
					=	$           73,080
	Interest Expense for the period ending June 30/17				=	Beginning of the period carrying value * semi annual market interest rate
					=	$       8,49,538	*	16%*6/12
					=	$           67,963