x Dve Thurs Bond Practice o On January 1, 2013, Northern Idaho Transportation In

Question

x Dve Thurs Bond Practice o On January 1, 2013, Northern Idaho Transportation Inc. issued $100,000 12%, five-year bonds. The market rate of interest is 15%. o The company pays interest on April 30, August 31 and December 31. o Solve the above problem using the following Effective Interest Rate Method o On January 1, 2013, Northern Idaho Transportation Inc. issued $100,000, 15%, five-year bonds. The market rate of interest is 12%. o The company pays interest on April 30, August 31 and December 31. o Solve the above problem using the following Effective Interest Rate Method

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12% 5 YEAR BOND OF $100,000 No of N=Bonds                        1,000 One Bond (assumed) 100 Semi Annual Interest Rate 6.00%                     6.00 Market rate semi annual 7.5% n period 10 getting interest $6 each six month Value of a bond=6*(PVIF,7.5%,10)+100*(PVIF,7.5%,10) Value of Bond=6*6.864081+100*.485194                         -   Total Value of bonds                      89.704 Issue Price                      89.704 no of Bonds                  1,000.00 Total Issue Value                      89,704 Total Face vluae of the Issue                  1,00,000 Discount on Face value of the Bonds =100000-89704                      10,296 Amortisation at each period of six month=10296/10                        1,030 Bonds Initial Sales Price                      89,704 Stated Interest Rate 12% Maturity in year 10 No of Payment per year 2 Market Interest Rate 15%

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