Question

Marin Inc. has issued three types of debt on January 1, 2020, the start of the company’s fiscal year.

(a)		$11 million, 10-year, 13% unsecured bonds, interest payable quarterly. Bonds were priced to yield 11%.
(b)		$27 million par of 10-year, zero-coupon bonds at a price to yield 11% per year.
(c)		$20 million, 10-year, 9% mortgage bonds, interest payable annually to yield 11%.

Prepare a schedule that identifies the following items for each bond: (1) maturity value, (2) number of interest periods over life of bond, (3) stated rate per each interest period, (4) effective-interest rate per each interest period, (5) payment amount per period, and (6) present value of bonds at date of issue. (Round stated and effective rate per period to 2 decimal places, e.g. 10.25%. Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,971.)

				Unsecured Bonds			Zero-Coupon Bonds			Mortgage Bonds
(1)		Maturity value		$			$			$
(2)		Number of interest periods
(3)		Stated rate per period			%			%			%
(4)		Effective rate per period			%			%			%
(5)		Payment amount per period		$			$			$
(6)		Present value		$			$			$

PLEASE PROVIDE STEPS AND EXPLANATION WITH ANSWERS. THANK YOU!

Answer 1

		Unsecured Bonds	Zero-Coupon Bonds	Mortgage Bonds
1	Maturity value	$11,000,000	$27,000,000	$20,000,000
2	Number of interest periods	40 (10 * 4)	10	10
3	Stated rate per period	3.25% (13% /4)	0%	9%
4	Effective rate per period	2.75% (11% / 4)	11%	11%
5	Payment amount per period	$357,500 (11,000,000 * 3.25%)	0 (27,000,000 * 0%)	$1,800,000 (20,000,000 * 9%)
6	Present value	$12,324,271	$9,508,860	$16,946,214
		(357,500 * 24.0781) + (11,000,000 * 0.33785)	(27,000,000 * 0.35218)	(1,800,000 * 5.88923) + (20,000,000 * 0.31728)

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