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Scottie Adams Bird Supplies issued 9% bonds, dated January 1, with a face amount of $220,000 on January 1, 2021. The bonds ma
On June 30, 2021, L. N. Bean issued $13 million of its 8% bonds for $12 million. The bonds were priced to yield 10%. Interest
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Answer #1

Answer to Question 1:

Face Value of Bonds = $220,000

Annual Coupon Rate = 9.00%
Semiannual Coupon Rate = 4.50%
Semiannual Coupon = 4.50% * $220,000
Semiannual Coupon = $9,900

Time to Maturity = 10 years
Semiannual Period = 20

Annual Interest Rate = 8.00%
Semiannual Interest Rate = 4.00%

Issue Price of Bonds = $9,900 * PV of Ordinary Annuity (4.00%, 20) + $220,000 * PV of $1 (4.00%, 20)
Issue Price of Bonds = $9,900 * 13.59033 + $220,000 * 0.45639
Issue Price of Bonds = $234,950

Answer to Question 2:

Issue Price of Bonds = $12,000,000

Annual Interest Rate = 10.00%
Semiannual Interest Rate = 5.00%

Interest Expense = $12,000,000 * 5.00%
Interest Expense = $600,000

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