Question

A corporation issued bonds on January 1, 2018 with the following terms:            Face Value: $500,000            Coupon...

A corporation issued bonds on January 1, 2018 with the following terms:

           Face Value: $500,000

           Coupon Rate of Interest 8%,

           Term: 10 years

           Interest: Semi-annual payments on June 30 and December 31

           Market Rate of Interest 10%

What is the amount of unamortized discount or premium (after the interest payment is made) on June 30, 2019?

A.

$39,627
B.

$56,312
C.

$60,373
D.

$54,128
E.

$62,260
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Homework Answers

Answer #1
Price of Bonds:
Semi annual cash interest =500,000*8%*6/12 = 20000
n = 20
I = 5%
Cashflows Amount PVf Present Value
Semi annual cash interest 20000 12.462 249240
Maturity value 500000 0.377 188500
Price of bonds 437740
Amort Chart:
Date Cash Int. Int. exp. Discount Unamortize Carrying
amortized Disscount Value of bonds
01.01.18 62260 437740
30.06.18 20000 21,887 1,887 60,373 4,39,627
31.12.18 20000 21,981 1,981 58,392 4,41,608
30.06.19 20000 22,080 2,080 56,312 4,43,688
Answer is B. $ 56312.
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