Question

The Chestnut Street Company plans to issue a bond semiannually on March 31st and September 30th. The Controller has asked you to calculate Information about the bond assuming two different market interest rates in the Excel Simulation below. The present value factor tables are Included in the first four tabs of the Excel Simulation. Use the information included in the Excel Simulation and the Excel functions described below to complete the task. • Cell Reference: Allows you to refer to data from another cell in the worksheet. From the Excel Simulation below, if in a blank cell, "=C6" was entered, the formula would output the result from cell C6, or 10 in this example. Multi-Tab Cell Reference: Allows you to refer to data from another cell in a separate tab in the worksheet. When using the multi-tab cell reference, type the equal sign first, then click on the other tab and then click on the cell you want to reference. The syntax of a multi-tab cell reference looks different than a normal cell reference, since it includes the tab name surrounded by apostrophes and also an exclamation point before the cell location. From the Excel Simulation below, if in a blank cell on the Sheet1 tab "=Future Value of $1'!C13" was entered, the formula would output the result from cell C13 in the Future Value of $1 tab, or 1.10462 in this example. • Basic Math functions: Allows you to use the basic math symbols to perform mathematical functions. You can use the following keys: + (plus sign to add),- (minus sign to subtract), * (asterisk sign to multiply), and / (forward slash to divide). From the Excel Simulation below, if in a blank cell "=C6+C8" was entered, the formula would add the values from those cells and output the result, or 12 in this example. If using the other math symbols the result would output an appropriate answer for its function. • IF function: Allows you to test a condition and return a specific value is the result is true and different value of the result is false. The syntax of the IF function is "=IF(test_condition value_if_true,value_if_false)" and specific considerations need to be made when using this function. The test_condition argument is an evaluation of the status of a cell, such as if the value of a cell is greater than, less than, or equal to another number or cell. The value_if_true and value_if_false arguments will return any specific result for each option, such as another cell reference, a value, or text. Throughout the entire equation, if text is being used in the test_condition, value_if_true, or value_it_false arguments then the text itself should be entered in quotations so that Excel will recognize the text as a "string of text" instead of another function. From the Excel Simulation below, if in a blank cell "=IF(C6>2,"Long-Term Bond","Short-Term Bond") was entered, the formula would output the result of the value_if_true since the test_condition would be result as true, or in this case the text "Long-Term Bond”. Excel processes the IF function by separating it out into separate parts. First the test_condition - Excel thinks, find cell C6 and determine if the value is greater than 2 Once Excel determines if the result of that test_condition is TRUE or FALSE, it will return the value_if_true or value_if_false. • VLOOKUP Function: Allows you find a value inside of a sorted data table by referencing the column and row labels. The syntax of the VLOOKUP function is "=VLOOKUP(lookup_value, table_array.col_index_num.range_lookupl" and results in a value found from a data table. The lookup_value argument is the value to be found in the first column of the table. The table_array is the cell reference for the data table, usually shown as a range. The col_index_num argument is the column number in the data table (table_array) where the matching value should be found. The range_lookup argument is a logical value of TRUE or FALSE, where TRUE represents the value found in the first column should be a closest match, and FALSE represents the value found in the first column should be an exact match. From the Excel Simulation below. If in a blank cell =VLOOKUP(C6. Future Value of $1!B3:T27,2,FALSE)" was entered the formula would output the result of 1.10462 in this example. Excel processes the VLOOKUP function by using each argument to find the cross-section of the column and row reference in the data table. In the example, Excel looked at the first column of the table_array on the Future Value of $1 tab cells B3.127 and found the lookup_value of the Sheet1 cell C6 reference, or 10 periods in this example. That position in the first column is stored in Excel to know what row the final result will be found in. Remember that the first column used is the first column of the table_array and not the first column of the worksheet tab. Then the col_index_num is used by Excel to determine what column of the table_array the final result is Included, or in this case the second column. Excel then finds the cross-section of those two values using the row and column references and outputs the final result from the data table.

Answer 1

1) Bond Amortization schedule if market interest rate is 8%:

FV of note/bond Payable Interest Rate FV of interest Market Interest Rate (r) PV Factor for note/bond payable (1/(1+(r/m)^n*m PV Factor for interest (1-(1+(r/m))-(n*m))/(r/m) Number of years (n) Payment per annum (m) PV of note/bond payable (rounded off to 0 decimal places) PV of interest (rounded off to 0 decimal places) Total PV t/m) 825000 A 7% B 28875 C=A*B 8%D 0.4564 13.5903 F 10 G 2H 376,519.00 I=A*E 392,421.00 J=C*F 768,940.00 K=I+) Amortisation of Bond Premium or (Discount) Date Cash Payment Interest Expense L=outstanding balance * D/H MEC-L 1-Oct 31-Mar 30-Sep 31-Mar 30-Sep 31-Mar 30-Sep 31-Mar 30-Sep 31-Mar 30-Sep 31-Mar 30-Sep 31-Mar 30-Sep 31-Mar 28,875 28,875 28,875 28,875 28,875 28,875 28,875 28,875 28,875 28,875 28,875 28,875 28,875 28,875 28,875 30,758 30,833 30,911 30,993 31,077 31,165 31,257 31,352 31,451 31,554 31,662 31,773 31,889 32,010 32,135 (1,883) (1,958) (2,036) (2,118) (2,202) (2,290) (2,382) (2,477) (2,576) (2,679) (2,787) (2,898) (3,014) (3,135) (3,260) Outstanding Balance outstanding balance - M 768,940 770,823 772,781 774,817 776,935 779,137 781,427 783,809 786,286 788,862 791,541 794,328 797,226 800,240 803,375 806,635 30-Sep 31-Mar 30-Sep 31-Mar 30-Sep 28,875 28,875 28,875 28,875 28,875 32,265 32,401 32,542 32,689 32,843 (3,390) (3,526) (3,667) (3,814) (3,968) 810,025 813,551 817,218 821,032 825,000 577,500 633,560 (56,060)

a) Total payment or periods will this bond pay interest = 20 (i.e.) 10*2. Excel formulae has to be "<=c6*c8>"

b) & c) In the screenshot provided, excel row details like A,B,C.... or excel col details like 1,2,3,.... and other worksheet wherein the future value factor are provided, not available; thus not able to provide formulae to use in the yellow fields for most of the answers.

d) Amount of interest that will be paid on March 31st = $ 28,875 (i.e.) $ 825,000 *7%. Excel formulae has to be "<=c5*c7>"

e) Interest payment arrived at to calculate bond selling price - $ 56060

f) selling price of bond = $ 768,940. Excel formulae to use"<=c5-g31>"

g) In this case, market rate is more than stated rate, thus bond is issued at discount. Excel formulae to use in the answer cell "<=ifg33>c5,"Premium","Discount">"

2.Bond Amortization schedule if market interest rate is 6%:

FV of note/bond Payable Interest Rate FV of interest Market Interest Rate (r) PV Factor for note/bond payable (1/(1+(r/m)^n*m PV Factor for interest ((1-(1+(r/m))-(n*m))/(r/m) Number of years (n) Payment per annum (m) PV of note/bond payable (rounded off to 0 decimal places) | PV of interest (rounded off to 0 decimal places) Total PV 825000 A 7% B 28875 C=A*B 6% D 0.5537 14.8775 F 10 G 2 H 456,782.00 1=A*E 429,587.00 J=C*F 886,369.00 K=l+J Amortisation of Bond Premium or (Discount) Date Cash Payment Interest Expense L=outstanding balance * D/H M=C-L 1-Oct 31-Mar 30-Sep 31-Mar 30-Sep 31-Mar 30-Sep 31-Mar 30-Sep 31-Mar 30-Sep 31-Mar 30-Sep 31-Mar 30-Sep 31-Mar 28,875 28,875 28,875 28,875 28,875 28,875 28,875 28,875 28,875 28,875 28,875 28,875 28,875 28,875 28,875 26,591 26,523 26,452 26,379 26,304 26,227 26,148 26,066 25,982 25,895 25,806 25,714 25,619 25,521 25,420 2,284 2,352 2,423 2,496 2,571 2,648 2,727 2,809 2,893 2,980 3,069 3,161 3,256 3,354 3,455 Outstanding Balance outstanding balance - M 886,369 884,085 881,733 879,310 876,814 874,243 871,595 868,868 866,059 863,166 860,186 857,117 853,956 850,700 847,346 843,891 30-Sep 31-Mar 30-Sep 31-Mar 30-Sep 28,875 28,875 28,875 28,875 28,875 25,317 25,210 25,100 24,987 24,870 3,558 3,665 3,775 3,888 4,005 840,333 836,668 832,893 829,005 825,000 577,500 516,131 61,369

a. & b. In the screenshot provided, excel row details like A,B,C.... or excel col details like 1,2,3,.... and other worksheet wherein the future value factor are provided, not available; thus not able to provide formulae to use in the yellow fields for most of the answers.

c) Amount of interest that will be paid on March 31st = $ 28,875 (i.e.) $ 825,000 *7%. Excel formulae has to be "<=c5*c7>"

d) Interest payment arrived at to calculate bond selling price= $ 61369

e) selling price of bond = $ 886,369. Excel formulae to use"<=c5+g53>"

f) In this case, market rate is less than stated rate, thus bond is issued at premium. Excel formulae to use in the answer cell "<=ifg55>c5,"Premium","Discount">"