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On January 1, Year 1, a company issues $440,000 of 9% bonds, due in 20 years,...

On January 1, Year 1, a company issues $440,000 of 9% bonds, due in 20 years, with interest payable semiannually on June 30 and December 31 each year.

Assuming the market interest rate on the issue date is 8%, the bonds will issue at $483,544.

A) Complete the first three rows of an amortization table.

B) Record the bond issue on January 1, Year 1, and the first two semiannual interest payments on June 30, Year 1, and December 31, Year

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Answer #1

Face Value of Bonds = $440,000
Issue Value of Bonds = $483,544

Annual Coupon Rate = 9.00%
Semiannual Coupon Rate = 4.50%
Semiannual Coupon = 4.50% * $440,000
Semiannual Coupon = $19,800

Annual Interest Rate = 8.00%
Semiannual Interest Rate = 4.00%

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