Create Your Free W. my math lab Connect accour Hel 10 (30pts) QS 10-8 Straight-L

Question

Create Your Free W. my math lab Connect accour Hel 10 (30pts) QS 10-8 Straight-Line: Bond computations LO P3 Enviro Company Issues 8%,10-year bonds with a par value of $250,000 and semiannual interest payments. On the issue date, the annual market rate for these bonds is 5%, which implies a selling price of 123 ½. The straight-line method is used to allocate interest expense 1, Using the implied seling price of 123 %, what are the issuer's cash proceeds from issuance of these bonds? 2. What total amount of bond interest expense will be recognized over the life of these bonds? payments of Par value at maturity amount borrowed (from part 1) Total bond intenest expense

Explanation / Answer

1) issue price 250,000* 123 3/8 308438 2) Amount repaid 20 payments of 10000 200000 par value at maturity 250,000 total repayments 450000 less amount borrowed in part 1 308,438 total bond interest expense 141,562 3) bond interest expense premium on bonds amortized (308,438-250000)/20 2921.9 interest expense = 10,000-2922 7078

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