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The state of Florida issues zero coupon bonds as part of its Florida College Savings Bond...

The state of Florida issues zero coupon bonds as part of its Florida College Savings Bond series. This bond series had different maturity dates and the different maturities led to very different prices. Supposed that in the late 2012, the state issued 3,000 such bonds with a total $30 million maturity value. Each bond had a maturity value $10,000 and bonds ranged in price from $8,500 for a 5-year bond $5,051 for an 7-year bond. Consider one of the 7-year zero coupons bonds issues on December 31, 2012, for $5,051. Assume that the interest rate is compounded semiannually.

1. Compute the market interest rate for the 7-year zero coupon bond.

2. Is this higher or lower than the rate on the 5 year bonds?You can answer the question by asking what the price of the 5-year bond would be at exactly the 7-year rate and comparing that number with the actual sales price

3. Prepare the state's journal entry for one 7 year bond at issuance. Do not use a discount account.

4. Prepare the sate's journal entry for the recording interest expense on the 7 year bonds for the first 6 months of 2013. Rounded to the nearest dollar.

5.Compute the liability that Florida would show on its balance sheet for the bond on June 30, 2013.

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