newconnect.mheducatio ering heis AD. ? SHREYACHAND l- ts) t.htm B-hoes for women

Question

newconnect.mheducatio ering heis AD. ? SHREYACHAND l- ts) t.htm B-hoes for women 1..-Reliable Oo-To-d- Create Your Free w- @mymath lab Connect QS 10-6 Straight-Line: Bond computations LO P2 Enviro Company issues 8% 10-year bonds with a par value of $250,000 annual market rate for these bonds is 10%, which implies a selling price of 87 at expense. and semiannual interest payments. On the issue date, the 1. Using the implied selling price of 87 %, what are the issuer's cash proceeds from issuance of these bonds? 2. What total amount of bond interest expense wll be recognized over the lie of these bonds? Amount repaid Par value at maturity amount borrowed from part 1) al bond interest expense G Search or type URL /w

Explanation / Answer

Req 1: Par value of Bonds 250,000 Issue price 87.5 Therefore, Issue price of bonds (250,000*87.50%): $ 218,750 Req 2: Total Interest expense over life of bonds Amount repaid 20 payments of $ 10,000 200,000 Par value of Maturity 250,000 Total repayments 450,000 Less: Amount borrowed 218,750 Total Interest expense over life of bonds 231,250 Note: Interest paid on Semi annual rest = 250,000*8%*6/12 = $ 10,000 Req 3: Par value of Bonds 250,000 Less: Issue price of bonds 218,750 Total discouont on bonds 31,250 Numbe rof periods 20 Discount amortized 1562.5 Semi annual cash interest 10,000 (250,000*8%*6/12) Interest expense for first periodd 11,562.50

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