Legacy issues $580,000 of 8.0%, four-year bonds dated January 1, 2013, that pay

Question

Legacy issues $580,000 of 8.0%, four-year bonds dated January 1, 2013, that pay interest semiannually on June 30 and December 31. They are issued at $507,959 and their market rate is 12% at the issue date.

2. Complete the below table to calculate the total bond interest expense to be recognized over the bonds' life. (Do not round intermediate calculations.) Total bond interest expense over life of bonds: Amount repaid payments of Par value at maturity Total repaid Less amount borrowed Total bond interest expense

Explanation / Answer

YTM of the Bond (using Finace Calci ) = 6% for 6 months

= 12% p.a.

..

Amount Repaid as Coupons (580,000*8%*0.5)*8 = 185,600

Amount repaid om Maturity = 580,000

Less:-Amount Borrowed = 507,959

ToTal Bond Interest Expense = $257,641

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